Revenue-cycle case study: Reducing denials requires team approach


A surprising number of hospitals think many revenue-cycle problems are just part and parcel of doing business (particularly in a bad economy). But hospitals that identify issues and work across departments to correct those issues can generate significant improvements, says Rayanna Moore, BSHM, MSOM, the revenue-cycle system director at Appalachian Regional Healthcare System, a three-hospital health system based in Boone, N.C.

When Moore came on board in 2008, Appalachian's average days in accounts receivable (A/R) had reached a high of 77. "Not only were our days in A/R high, but our cash on hand was low," adds Moore. "So we weren't collecting the money that we needed to be collecting on our accounts."

The main culprit: 99 percent of the hospital's claims rejected on the first try. "We weren't doing any account follow-up because our staff were spending all their time trying to clean up the claims to get them out the door so we could even begin to get paid," says Moore.

Fast forward to 2010, Appalachian's A/R days have plummeted by about 40 days to the 37 range, says Moore.  Similarly, cash on hand has almost tripled. In addition, Appalachian has done an about-face with denials. "We are down on any given day to an average of about 3 percent," she stresses. With the first-pass denial rate cleaned up, only 1.5 staff members handle the hospital's billing. "We now have eight people doing follow-up with accounts. These staff members all used to help with the billing to some degree, but we've been able to completely move them over."

Steps that Appalachian took to achieve this turnaround include:

Counting the errors. "We really had no idea what our true denials were," says Moore. To find out, employees counted every error for two full weeks. "Sometimes you don't really realize that a particular item is causing you a big headache until you have it in black and white in front of you. By writing down and identifying the errors, we were able to back into the question, 'How do we deal with it?'"

Tweaking the health information system for patient accounts. An incorrectly set-up health information system contributed to Appalachian's high denial rate. For example, the system didn't always generate the correct bill type for the UB04. "Claims were rejecting right out of the chute because the bill-type digits weren't set up right for some services. Billing staff were correcting the errors by hand when they saw the claims because we had never stopped to figure out what was causing the problem. It was an easy fix: We reset our systems," says Moore.

Adding new scrubbing software. Like many hospitals, Appalachian used an outside, third-party billing system "to do a second scrub" after its own health information system did the initial check, says Moore. "New scrubbing software made a huge difference, particularly with identifying claims that would be denied due to Medicare's medically unlikely edits and medical necessity edits."

Training revenue-cycle staff. Appalachian instituted an education program to train staff and help them understand the importance of what they were doing. For example, the health information management staff (HIM) bypassed some edits in the coding software. "They had been told that they only needed to look at the edits that were in red. That wasn't true. So the claims were being pushed through by the coding staff, and then they kicked out again in billing. We were touching bills twice when we didn't need to," says Moore.

Similarly, registration staff didn't understand how the information they collect impacts billing. "Nobody ever told them how important it was or even showed them their mistakes," says Moore. "We developed a program so they would know their errors and be able to fix them." Specific areas that Appalachian targeted for education included charge capture, point-of-service collections, insurance verifications, self-pay accounts and scheduling.  Appalachian also set productivity standards and goals for all revenue-cycle departments.

Educating the clinical team. Clinical documentation improvement (CDI) was a major focus, says Moore. "We were undercoding some of our records because we just didn't have the documentation to support coding higher-paying conditions." For example, the CDI program educated physicians to make sure they were correctly documenting septicemia vs. sepsis.

Another issue involved Medicare's medically unlikely edits. "We told the clinical departments, 'We are having trouble getting paid for this. Is there something else we can do and still take care of our patients?'" says Moore. "Sometimes they would say yes, and we were able to adjust the services so we didn't run up against the edits. Sometimes they would say no, and we would deal with it." - Caralyn

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