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Accenture

Streamlining the revenue cycle and combining financial processes with an EHR can significantlyimprove a hospital’s financial performance.

Health industry leaders agree that an EHR and the integrated information system by which records will be accessed, modified and used to better inform treatment decisions are powerful and essential tools. These tools will improve patient safety, enhance the quality of services delivered to patients and make the most efficient use of beds, medical staff and other hospital resources. This can yield qualitative and quantitative benefits of reduced length of stay, staffing efficiencies, improved compliance with established medical practices, easier regulation reporting and simplified physician referrals and prescriptions. Revenue cycle enhancements can help build a persuasive business case to justify the expense of implementing an EHR.

Background and Current State

The federal government, recognizing the need for a nationwide EHR, and aware of the expense and complexity of such a project, has outlined The President’s Health Information Technology Plan, an ambitious agenda to assure that the EHR will include most Americans within the next 10 years. The plan calls for the design and adoption of standards by which medical information will be stored and shared electronically while assuring privacy and security. The Department of Health and Human Services has been collaborating with the private sector to develop voluntary standards and a comprehensive medical vocabulary that are prerequisites for a nationwide EHR. The government’s proposed fiscal year 2005 budget assigns $100 million toward funding demonstration projects that will enhance healthcare technology. What’s more, the federal government — one of the largest buyers of healthcare — plans to create incentives and opportunities for healthcare providers to use electronic records. The plan’s developers envision a future when each patient’s comprehensive health information is available at any point of service where the patient authorizes access.

Hospitals are beginning to realize that an EHR implementation can directly enhance the revenue cycle by streamlining key processes such as admission and scheduling, eliminating many repetitive tasks and dramatically improving charge capture, billing and collections. These revenue cycle improvements can have substantial dollar value, increasing the ROI of an EHR implementation. For example:

• Both clinical and financial benefits from an EHR implementation in a small practice were demonstrated by Bergen Medical Alliance. Using EHR software that automatically reminds providers when they omit entries for visit documentation, such as associated diagnoses that payers require for claims processing, Bergen Medical Alliance improved its overall financial performance by saving costs for manpower and transcription while enhancing revenues by timely billing and thorough charge capture.[1]
• Small-practice benefits of EHR implementation include reducing drug costs and preventing adverse drug events.[2] Additional gains are reaped from the accuracy and completeness of notes, which give physicians more confidence that charges are justified by documentation, sparing huge fines from Medicare for coding or charging irregularities.[3]

Overall Implications of EHR To Revenue Cycle Functions

EHR offers the potential for health organizations to simplify registration, scheduling, eligibility, charge capture and claims management processes. By redesigning processes to take advantage of new technology, a hospital can streamline and accelerate the entire revenue cycle. Many tedious and labor-intensive processes such as transcribing, requesting and entering patient information, coding and billing can be eliminated or dramatically simplified. Reducing staff time needed for these tasks can mean retraining the hospital staff for more sophisticated, fulfilling and potentially revenue-generating jobs.

EHR can contribute bottom-line results in terms of reduced days in accounts receivable, lower denial rates and reduced writeoffs. An electronic financial history will become part of each patient’s health record and will foster similar gains in efficiency and enhanced financial return.With comprehensive financial and eligibility information available at the point of service, patient interactions will change from information gathering to opportunities for information analysis and conferring about treatment options. More highly trained patient-facing employees can help patients review and evaluate their own records. Patients have the capability for self-registration in many cases, and in general are able to take a more active role in their own healthcare.

Specific Functional Enhancements To the Revenue Cycle

Let’s look more specifically at the revenue cycle processes that could be streamlined or improved by implementing an electronic health record.

• Scheduling;
• Medical necessity check;
• Registration;
• Coding and charge capture; and
• Billing and collections.

Scheduling

One of the ways EHR would enhance the revenue cycle is by streamlining and shortening the time it takes to schedule a new patient or a repeat patient. Since the information is electronic and linked among related functions and processes, the scheduling staff is able to schedule an event, compiling a core standard set of patient-level and visit-specific data. The reason for the visit or the diagnosis as well as the insurance information would be collected and entered into the system. This comprehensive information, available at the time of scheduling, would be available for others to utilize in their plan for patient care (e.g., forecast utilization, create diagnosis-specific plans of care, etc.). Physicians’ office staff, too, can use the system to schedule a patient for a hospital visit. Either way, the core set of data, including the reason for care/ diagnosis is known to all at the very beginning.

Medical Necessity Check

Knowing the diagnosis up front also means knowing in advance if the treatment will be paid and if so, by whom. There needs to be a medical reason for every patient’s treatment, based on a list of diagnoses that are deemed payable (or not) as an outpatient or an inpatient. Integrating the medical necessity check into the process clarifies in advance whether the treatment will be covered and what tests and documentation are needed to support the diagnosis. Defining financial responsibility in advance greatly increases the efficiency of the claims process, minimizes denials and results in a more satisfactory patient experience.

Registration

An EHR implementation can link disparate revenue cycle information and functions so that accurate and current patient information is available for use by physicians, clinicians and administrative personnel. As each has a different use for this information, the EHR can consolidate and compare information from different sources, centralizing it in a comprehensive database. Many revenue problems occur in the registration process; current information about the patient’s demographics, insurance information and coverage rules can remedy most of them. Each patient’s correct primary and secondary medical insurance can be quickly verified. If the patient’s physician is within the health system, the registration process can quickly determine the reason for the patient’s visit, what authorizations or referrals are necessary based on the diagnosis code and insurance plan and whether the patient has insurance coverage for the prescribed treatment.

In an electronic environment, the patient can have real-time access to his or her own demographic information and can view and update the record. This helps transform patients from passive consumers of health services, not involved in helping to determine what’s best for them, into active planners who take more ownership of their health information and care. Today few patients even see their health records. That is rapidly changing.

Coding and Charge Capture

Charge capture likely offers the single most significant opportunity for leveraging an EHR to enhance the revenue cycle. In an outpatient clinical setting, providing appropriate documentation for the desired level of care poses a major challenge. In general, the more expensive medical interventions — identified by their codes — require the most stringent documentation. Physicians often lack the confidence in their documentation to support reimbursement for the actual service provided and, as a result, sometimes “downcode,” choosing a reimbursement code with less stringent documentation requirements. Since what is coded becomes the charge that is billed to the insurance carrier, under-coding results in lower compensation to the provider.With an electronic record and accompanying templates, physicians are better able to document with certainty the services they provide. In some instances, the computer system automatically creates the correct codes based on the available documentation and templates.When the fear of compliance is gone because the right documentation exists to support the correct coding, the provider’s revenue increases as the coding reflects the intensity of services provided. Other care providers can use the templates as well. Specifically, documenting surgical supplies, implantables and procedures is facilitated by electronic documentation. As many high-dollar surgical supplies are “carved out” and paid for separately, comprehensive documentation is essential.

Central Utah Multi-Specialty Clinic, a 59-physician group with practices in nine locations treating 200,000 patients annually, earned significant additional revenue by using its EHR templates to recommend the appropriate evaluation and management (E/M) codes based on the level of care that was documented.[4]

In an electronic environment, there’s no waiting to find information necessary for coding and capturing charges. In some cases, once the physician enters an order into the system, it gets linked to a charge description, then to a master charge list and the charge is added automatically to the patient’s bill. No additional personnel are required to manually enter charges or to remove them if the procedure is changed or cancelled. The hospital can eliminate many steps and handoffs required to distribute and process paper charts. By linking EHR with their billing systems, hospitals can quickly and expeditiously submit claims to payers electronically. The claim goes out clean with appropriate coding and documentation to the payers, who pay more promptly, improving cash flow. Hospitals are also better able to match ancillary service claims to hospital-based outpatient visits.

An EHR implementation also improves coding for inpatient diagnoses and treatments. An important measure of accounts receivable performance is the amount of funds in DNFB (discharged not final billed). In this situation, the patient has been discharged, but the hospital is unable to bill for services rendered because of missing information. Usually, what’s missing is verification of the patient’s insurance coverage or coding of the patient’s chart. The chart hasn’t been coded for one of two reasons; either there wasn’t enough information to add codes, or the transcription of the discharge summary or the operative note has not occurred.With an electronic record, transcription costs go down and the timeliness increases. In addition, the time needed to add appropriate codes is reduced, since both coding templates and the patient record are close at hand. Little time is lost in finding, transporting and filing paper charts. Claims get submitted more quickly and contain fewer errors and better supporting documentation, so they get paid more promptly.

In a paper environment, hospitals expend a great deal of effort transcribing information, double-checking it, calling up information from patient charts, filling in information gaps and then resolving denied claims when they get rejected by the payer for incomplete information. EHR makes the process of submitting a clean claim almost automatic. A case in point is the Virginia Mason Medical Center, which before the implementation of EHR sent out bills to patients on an average of 4.3 days after they were discharged. After implementation, patients and their bills left the hospital simultaneously. This brought revenue into the hospital faster and earned the hospital a significant bonus equal to the time value of the expedited revenue.

Finally, a physician benefit of better inpatient coding is more accurate physician profiles. Payers profile physicians based on their Medicare diagnosis related group (DRG) assignments of the patients they treat. Payers use this information to track trends and evaluate physicians on compliance and performance issues. The electronic record allows physicians to feel more comfortable that what the payer is seeing is accurate and realistically depicts their clinical judgments.

Billing and Collections

Electronic billing results in accurate bills submitted to patients quickly — in many cases, the same day the patient is discharged. The number of steps between a physician ordering a medical intervention, the hospital calculating the patient’s financial responsibility and billing for it and the patient paying for it are much fewer than in a paper environment and cost much less to complete. Since the patient’s financial responsibility was determined upon scheduling or registration, the patient receives no unpleasant surprises that can lead to collection problems. Bills get paid sooner with fewer complications. Both collection expenses and write-offs to bad debt decrease substantially.

Impacts of Streamlined Processes

The technology-enabled revenue cycle is able to streamline revenue processes; reduce the number of people involved in coding, preparing and submitting reimbursement claims to payers and bills to patients; and allow the hospital to bill faster and more cleanly.

One important cost-reducing impact to the hospital’s bottom line is reduced denials. Medical claims may be denied for technical reasons, such as for containing information that is incomplete or inaccurate, or simply missing from the documentation. Having the patient’s clinical and financial data available and templates to ensure that correct documentation is submitted with each claim reduces technical denials.

Likewise, an EHR implementation can reduce medical necessity denials by ensuring that claims are submitted with the right supporting documentation for the corresponding diagnoses.Medical necessity checks are performed at the time of scheduling. A denial is the payer’s way of saying, “You haven’t given us enough information to justify doing this test or procedure on our member.” With an electronic record at hand, it’s relatively easy for the scheduler or physician to determine right away whether or not the documentation and diagnosis justifies the treatment.When coverage rules preclude paying for the service on the basis of the provider’s diagnosis and documentation, the patient will need to know that he or she will be responsible for paying the full charges for the test or treatment.

An integrated, electronic revenue cycle, with its capability to submit cleaner claims to payers quickly, can also reduce denials caused by failing to submit claims in a timely manner.Without EHR, hospitals routinely get up to 15 percent of their claims initially rejected by payers. Upon resubmission with information added and corrected, hospitals hope to achieve a 1 to 3 percent denial rate. The EHR can help achieve this minimum denial rate on the first go-around.

Denials of any kind are labor-intensive and expensive to remedy. Processing denied claims requires considerable time from highly trained and highly compensated staff to research each denied claim, confer with the payer, correct the claim and/or append appropriate documentation to the claim, and then resubmit it, often more than once. Substantial costs in manpower and time are spent in accounts receivable, often focusing on rework due to errors at the beginning of the cycle.

Example: The Ohio State University EHR has built-in compliance features and automatically supports Medicare compliance by prompting charge entry clerks when a modifier needs to be added to a particular charge and an advanced beneficiary notice needs to be implemented to inform a patient that Medicare will not pay for a specific test.[5]

A streamlined, integrated revenue cycle also reduces repayments to payers and, in the case of Medicare, fines levied against providers for submitting claims with noncompliant documentation or for ineligible services.

Example: Healthcare provider Heritage Behavioral Health’s EHR implementation helped reduce repayments to payers for noncompliant documentation or ineligible services from $49,477 in 1994 to $774 in 2001.[6]

More accurate coding in outpatient clinics can help providers obtain higher reimbursements and receive fewer fines due to noncompliance.

Example: Primary Care Associates, a 120 patient-per-day practice in Cape Coral, Fla., saved $152,000 in fines from the Centers for Medicare & Medicard Services due to incorrect coding of claims.

Example: Central Utah Multi-Specialty Clinic, the largest independent multispecialty group in the state with 59 physicians and nine locations, was able to increase reimbursements by an average of $26 per patient, increasing revenue by $1.7 million over five years.[7]

Example: Three Rivers Dermatology in Fort Wayne, Ind., achieved a 30 percent increase in total billings as a result of more accurate coding for outpatient procedures.

Fast and accurate billing means that patient bills spend less time in accounts receivable.

Example: Reid Hospital and Health Care Services, a not-forprofit 240-bed hospital in Richmond, Ind., reduced average days a bill spent in accounts receivable from the upper 60s to the lower 50s after implementing an EHR.

Summary

The value of an EHR implementation to improve patient safety, enhance the quality of care and create efficiencies in the use and deployment of clinical resources is now well-documented and wellunderstood. Less well-understood but more quantifiable in terms of dollars saved or additional dollars earned are the financial benefits of an integrated, electronic revenue cycle to the provider’s bottom line. Recent studies are demonstrating that streamlining the revenue cycle and combining financial processes with an electronic health record can significantly improve a hospital’s financial performance.

Endnotes

1. Masiello J; Optimizing Practice Efficiencies, presented at Bergen Medical Alliance, 2003.
2. Bates DW, Ebell M, Gotlieb E, Zapp J, Mullins HC; “A proposal for electronic medical records in US primary care,” JAMIA, Vol 10(1), Jan/Feb 2003.
3. Rogoski RR: “Having it Your Way,” Health Management Technology, May 2003.
4. Barlow S, Johnson J, Steck J; “The Economic Effect of Implementing an EMR in an Outpatient Clinical Setting,” Journal of Healthcare Information Management, Vol 18(1).
5. Nicholas E. Davies Symposium Proceedings 2001. Ohio State: “The design and implementation of a computerized patient record at the Ohio State University Health System — A success story.” HIMSS Chicago, IL.
6. Nicholas E. Davies Symposium Proceedings 2001. Award for behavioral health, Heritage Health Center Inc. HIMSS Chicago, IL.
7. Barlow S, et al. Ibid.