Revenue Cycle Turnaround: Can you go it alone?

Introduction

It happens. Sometimes hospital receivables go awry, at time a lot awry!

Naturally, when your hospital is having a serious cash flow problem, you need to do something to change your revenue cycle management processes. You first need to identify the cause or causes of the deficiency, then determine how to get your revenue back on track.

The revenue cycle is a complex series of business processes that require strong management skills and expertise, a robust set of controls, and a significant investment in technology. A well-functioning revenue cycle is critical for the financial health of all provider organizations.

Somewhere along the way, something broke, and now there is a disconnect between the revenue cycle management concept and what people did with that concept. The problem may be entitlement, complacency, laziness, or ego.

Turning around a troubled revenue cycle is no easy feat. Many hospitals need to figure out precisely what is wrong with their infrastructure , and good, thought out solutions need to be implemented.

The American Hospital Association states half of the nation’s 5,000 hospitals are in serious financial trouble. Thus, poor performing receivables are becoming a big concern as hospitals continue to bleed red ink.

Common Reasons for Stalled Receivables

Cash flow can stall out for many different reasons. In some cases, new technology may have problems that need to be worked out, while at the same time bills need to be sent out and collected.

When problems with revenue cycle technology accumulate, accounts receivable days can increase, and those prolonged accounts receivable days can account for significant cash flow. 

Hospital billers and collectors spend a lot of time doing clean-up work and rework. Often, this is because they have not addressed the root causes of their problems.

Here are 5 of the biggest culprits for lost accounts receivables:

1. Inaccurate registration information. 

Hospitals can have inaccurate patient information for many reasons, including insurance coverage changes, complicated insurance contracts, errors in insurance data entered and a lack of knowledge of policies and procedures. Inaccurate information can lead to denials and cause significant payment delays.

2. Third-party payers. 

Third-party payers can be major contributors to slowdowns in the healthcare revenue cycle. Medicare, Medicaid, and private insurers can effectively avoid paying claims by requiring perfect compliance with their individual requirements, and they frequently change those requirements.

3. Outdated skills and resources.

Staff skills, policies, procedures, systems, and other resources that have not evolved adequately to keep pace with the continual changes of today’s environment

4. Lack of internal controls.

Internal control refers to the ability of the revenue cycle to control itself. Morale is low, fear is high, and the lackluster employees are scared.

Perpetual restructuring of the department may well affect the moods, attitudes, and behaviors of staff as they wonder what will happen next. Poor morale breeds feeble performance, negative energy, lost momentum, declining expectations, and mistrust. 

With an attitude that “I am doing the best I can” and an aversion to asking for help for whatever reason, high backlogs can occur within a short period of time. In addition, upgrading talent in key positions needs to be prerequisite for achieving the vision.

 5. Small balances and outsourced accounts. 

Small balances that are never asked for account for lost revenue through small balance write-offs.

In addition, spending money on outsourced vendors to collect money that the hospital can collect at no cost is a practice no longer sustainable due to rising healthcare costs. 

The First 100 Days

The success of a receivables turnaround and increased cash is often dictated by what happens during that first 100 days.

When attempting a turnaround, you might want to follow these guideless:

1.  Communicate that the has started and why. 

Be sure you spend considerable time educating the staff on what life would be like after the implementation. 

Create a sense of urgency to everyone that things will change. Name the problem and explain how everyone will get the department reoriented and return to be a successful department. Ensure the hospital CEO and CFO attend the "kick-off meeting".

But, developing a sense of urgency is critical to a fast getaway in the turnaround of attitudes by the people in the department.

Momentum. Urgency. Action. Important factors to begin the turnaround.

2.   Conduct a top-to-bottom operational review.

This should be the first phase in improving revenue cycle performances and includes an analysis of billing systems, billing practices, staffing levels, and accounts receivables.

Whether you need to reorganize your entire accounts receivable function or simply want to improve on existing policies, the process begins by understanding your current state and conducting a gap analysis to determine how your performance compares to industry peers, competitors, and best practices. From there, you can identify the steps you need to take to close those gaps.

Chat with all managers and/or many of the front-line workers during the factfinding. Listen carefully. Actively seek comments and observations.

The specific steps for getting valuable insights from personnel are the following:

1.    Ask for input.

2.    Seriously consider it, and objectively evaluate it.

3.    Use those ideas that are good.

4.    Reject those ideas that are not practical.

5.    Give credit and other appropriate rewards to those who contributed ideas that were used.

6.    Convince those whose ideas were rejected that their ideas were considered and explain why they were not used.

3.   Develop an action plan.

Careful planning is very important to obtain buy-in, support, and commitment. The triumphant manager must be able to develop well thought-out solutions to clean up their aged receivables. 

a. Review the current or most recent programs used to train.

b. Retrain individuals who need to enhance performance. 

c. Prioritize, work, and eliminate all unnecessary or redundant work that does not add value.

Turnaround objectives and stretch targets should be enormously dramatic to inspire and motivate.

No matter how good the potential of a solution, unless it is implemented properly, it won’t be effective. 

4. Take a much more aggressive approach in collections. 

Concentrate on high-dollar accounts (“leverage effect”) and collecting the most money in the shortest amount of time. Ensure your Medicare receivables get worked promptly and aggressively, as they are the fastest payer. 

Focus on:

• All the high dollar accounts that have been billed.
• Working through Medicare accounts, as they are typically the payer that has the quickest turnaround.
•  Improving patient access (e.g., at check in) collections of copays and deductibles. 

4.    Vigorously pursue the collection of all accounts receivables more than 45 days. 

Have your collectors work a couple “prime time” evening hours a week. Tighten your collection cycle, sending statements no more than 21 days apart. Conduct monthly meetings with large payers to review unpaid claims and bogus denials. 

5.    Boost employee morale.

Low employee morale is one of the root causes of a poorly functioning revenue cycle.

Billers are constantly frustrated with patient access departments. They find that incorrect information has been put into the forms they receive, and they do not want to spend their time correcting claims. They just want to be able to send out the bills and have them paid. 

Your employees are part of something bigger than themselves, but do they know it? Sometimes, that purpose gets lost in the day-to-day grind. Your staff will have a more positive outlook regarding changes if they understand how these changes will make their jobs easier.

6.     Start benchmarking everything. 

Focus everyone on what get measured gets managed. Employees feel empowered to make a difference when they see the needle move. Track these indicators:

? Net days in A/R

? A/R aged more than 90 days from discharge / date of service

? Payer rejects as a percentage of remittance revenue processed

? Final denials (direct write offs) as a percentage of gross revenue

? Cash as a percentage of net revenue

Successful Directors of Patient Financial Services aim to be in the top 10 percent of all categories.

As you track progress, feed results back to the team. Make it a big deal. Celebrate victories.

7.    Reduce denials.

Another focus area in any turnaround program should be effective implementation of denials management. Denials should be categorized and assigned to the department that can take corrective action.

The corrective action should be discussed in cross-functional meetings to ensure that it is the most effective at an organizational level vs. the department level.

According to Centers for Medicare & Medicaid Services (CMS), 20 percent of all claims are denied, 60 percent of lost or denied claims will never be resubmitted, and 18 percent of claims will never be collected. You need to have policy and procedures surrounding pre-certification and authorization denials. 

8.    Eliminate all billing backlogs.

Pull out the “timed-out” accounts that will never get paid. Write them off. Organize the accounts to be worked in descending balance order. Offer overtime if needed to get the job done. Bring in additional help from an interim revenue cycle staffing firm to work these accounts to make an effective final collection effort.

9.    Optimize existing technologies.

Leaders should optimize existing technologies to take full advantage of their revenue cycle capabilities. Many leaders currently don't take full advantage of the available applications in their current revenue cycle management systems.

10. Seriously consider bringing in outside help.

If internal resources are not available, and you require more revenue cycle horsepower, your hospital might consider hiring well-trained interim staff to work on absolving your backlogs. Many hospitals find that they cannot accomplish everything on their own and need outside help.

The cleanest and quickest approach to course correction, is for the revenue cycle-in crises to hire a consultant who can apply a fresh perspective to a tailored turnaround plan and has no political agenda and biases to color the decision-making process. They cut to the chase. 

Interim front-line staff and revenue cycle consultants can be an excellent solution to resolve bottlenecks and backlogs. This approach can be very cost effective providing you use skilled interim experts that are dedicated, solid, and dependable.

More and more hospitals are willing to pay the short term costs associated with obtaining a trained person (or A/R SWAT teams).

Conclusion: You can do it, just maybe not on your own – and That’s Okay!

Turning around a troubled revenue cycle is no easy feat. An effective and long-lasting A/R turnaround can take months or well over a year of hard work to achieve.

Most hospitals and healthcare systems first need to determine precisely what is wrong with the infrastructure of their revenue cycle, and then they can construct a work-plan that will achieve the necessary changes while maintaining cash flow in the interim.

Be sure you spend considerable time educating staff on what life will be like after the implementation and how much less stressful their jobs will be.

Profits are being squeezed, and payers are finding more and more reasons to avoid payment for healthcare services. As hospitals chug along, it is no exaggeration to say that the billing and collections operation is beyond a doubt becoming the most crucial aspect of managing a healthcare business.    

Whichever road you decide to take during a revenue cycle turnaround attempt, remember that proper planning and allocating the right resources to produce maximum performance are the keys to any successful A/R turnaround effort.