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Can Your Revenue
Cycle Survive COVID-19?

Many patients have yet to return to hospitals to complete their healthcare delayed by COVID-19; as a result, margins are tighter than ever. While much of the focus has been on clinical care, the revenue cycle also cannot be allowed to suffer at the hands of a pandemic. Intelligent revenue cycle management and efficient billing processes are critical, with every healthcare dollar becoming vital to a hospital’s survival. In this edition, we highlight some essential areas of potential under-performance to focus on and the opportunities for operational improvement.

The benchmarks presented here are industry standard and provide a guide to optimal performance within several areas of Revenue Cycle operations. Measured against these thresholds your organization can begin to see operational
management and improvement opportunities revealed, allowing for identification and correction of root causes.

System reporting and analytics – employed properly and consistently – are powerful tools in providing a comprehensive view of a hospital’s financial operations. To discuss the full listing of 120 Key Performance Indicators and 200+ Processes across the 13 Functional Areas in the Revenue Cycle, please contact us at (816) 874-4751.

1. Low patient volume & a shift from inpatient to outpatient care Hospitals experienced EBITDA margin declines of - 9.4% due to softening patient volumes (August 2019).

2. Heavy reliance on government payers However, government programs only pay hospitals about 87 cents for every dollar of their costs.

3. High cost of drugs Resulted in roughly $1.8 million in new spending for the average hospital. (January 2019).

4. Lack of Medicaid expansion Over the last 10 years, states that have refused to expand Medicaid experienced the most rural hospital closures (75% of the total).

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1. BEST PRACTICE - PATIENT ACCESS

Pre-Registration
(Excludes unscheduled visits i.e. emergency/urgent care)

 

  • Accurate completion of all patient data fields required for registration: 98%


Insurance Verification
(Includes non-scheduled encounters verified within one day
of service or date of admission)

  • Scheduled encounters verified prior to or at time of service: 98%


Patient Collections
(Collecting patient payments)

 

  • Inpatient patient-pay balances prior to discharge: 65%

  • Outpatient patient-pay balances prior to service: 75%

  • ER patient-pay balances prior to departure: 50%
     

Financial Counseling
(Payment arrangements made prior to service)

 

  • Screening of uninsured IPs & high balance OPs for financial aid: 98%

  • Arrangements for non-charity eligible IPs & high balance OPs: 98%

  • Discount percentages for prompt-payment: 5% - 20%

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2. BEST PRACTICE - CLAIM SUBMISSION

Billing is one of the most crucial components in the healthcare business equation, requiring timely submission, corrections and consistent follow-up in order to receive timely payment.
 

  • HIPAA-compliant electronic claim submission rate: 100%

  • Discharged/Not Final-Billed (DNFB) backlog: < 1 A/R Day

  • Medicare Secondaries & supplements billed following adjudication: < 2 business days

  • Commercial COB billing following Primary payment: < 2 business days

  • Medicare RTP (Return to Provider) rate: < 3%

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3. BEST PRACTICE - ERROR REDUCTION

Some estimates say more than 50% of all bills contain errors contributing to denials and up to 15% of claims are fully denied. 90% of these denials are
preventable.

The opportunity for errors in billing is astronomical, due to the number of people involved in creating a single bill.

And commercial payers have developed proprietary programs designed almost
specifically to generate denials.

 

  • Missing HCPCS or CPT-4 code: zero tolerance

  • Missing/Invalid/Incorrect modifier: zero tolerance

  • Incorrect Item pricing: zero tolerance

  • Item description is “Miscellaneous”: zero tolerance

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4. BEST PRACTICE - DENIAL MANAGEMENT

An estimated $262 billion (9%) of the roughly $3 trillion in claims submitted by hospitals last year were initially denied. Only 35% of providers appeal denials, even though 66% of these claims are recoverable. However, on average, each appeal costs providers around $118 per claim. Nationwide, this amounts to $8.6 billion in administrative costs annually.
 

  • Missing HCPCS or CPT-4 code: zero tolerance

  • Missing or Invalid CPT/HCPCS codes: zero tolerance

  • Missing/Invalid/Incorrect modifier: zero tolerance

  • Incorrect Item pricing: zero tolerance

  • Item description is “Miscellaneous”: zero tolerance


Registration and Eligibility are cited as the leading causes of denials (23.9%)
followed by Missing or Invalid Claim Data (14.6%). This combined 38.5% of
denials are “Soft” denials, which are typically paid upon correction. “Hard”
denials (Non-Covered, Untimely Filing, etc.) must be written off.

 

  • Overall initial denial rate (% of gross revenue): < 4%

  • Clinical initial denial rate (i.e., medical necessity): (% of gross revenue): < 5%

  • Technical denial rate (fulfillment of requests by payer): (% of gross revenue): < 3%

  • Appealed denial overturned rate: 40% - 60%

  • Underpayments additional collection rate: < 75%

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5. BEST PRACTICE A/R

Cash is the lifeblood of any business and healthcare services are no different. The AMA’s Administrative Burden Index (ABI) calculates that healthcare
providers spend up to 14% of their revenue to get paid for services. So, maintaining a healthy accounts receivable (A/R) balance is indispensable for a strong financial performance.

  • Insurance A/R < 90 days from service or discharge (percent of total Ins A/R): < 15% - 20%
     

  • Insurance A/R < 180 days from service or discharge (percent of total Ins A/R): < 5%
     

  • Insurance A/R < 365 days from service or discharge (percent of total Ins A/R): < 2%
     

  • Bad debt write offs (as a percentage of gross revenue): < 3%
     

  • Charity write offs (as a percentage of gross revenue): < 3%
     

  • Net A/R Days: < 50 days
     

  • Cost-to-Collect (as a percent of net patient revenue): < 3%

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We welcome your comments and questions

contact Donald Tapella at Medical Recovery Services

Email: dtapella@mrsa1.net

Phone: (816) 229-4887, ext.112

Fax: (816) 229-4787

visit our website at http://www.mrsa1.net/