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Revenue Cycle Management Requires “Trust But Verify” Mentality

Healthcare Providers depend on their electronic health records (EHR) and revenue cycle management (RCM) solution systems to capture and present metrics so that clinical and operational performance can be reviewed. In particular, RCM solutions/modules position themselves as a key component for spotlighting effective/ineffective processing areas within the “Front-End”, “Middle”, and “Back-End”. Having insights into operating efficiency and effectiveness details within each area of processing of RCM is critical because without them, the potential for identifying – and addressing – avoidable “revenue leakage” is dramatically reduced.

Enabled by the availability of RCM tools, Providers have been prescriptive with monitoring their internal RCM activities. But monitoring processes should not stop at internal RCM activities. It should include diligently reviewing the interactions with its key external party, the Payor. Per defined Provider-Payor and Payor-Member agreements, the Provider will provide clinical services to patients, e.g., Payor’s members, and the Payor agrees to pay for specific services rendered. With all of the various permutation of Patient-Member scenarios that could exist, Providers need to execute “a trust but verify” approach with all parties, its Payor partners and its patients/guarantors, to ensure that the appropriate and agreed upon clinical care is provided and paid for.

Provider and Payor have defined their operating relationship through signed contract and/or program acceptance. Over the years, a variety of contract types have been introduced and executed successfully between Providers and Payors. Some examples of contract types include case-based, per-diem, fee-for-service (FFS), pay-for-performance (P4P), or some other arrangement. Recognizing that most Provider-Payor contracts are not simple, straight-forward percent-of-charge (PoC) contracts (another contract type example), Providers can feel overwhelmed with determining whether or not they received proper reimbursement from their Payor partner. However, this is where the introduction of a Contract Management System (CMS) into their RCM review processes can alleviate some of the concern. CMS’ specialize in providing the capabilities for Providers to author the agreed-upon Provider-Payor contract terms into executable algorithms. As a result, Providers can simulate the specific Payor reimbursement methodology(ies) against generated claims to calculate “expected” revenue (charges), cash (payments), and contractual allowances (adjustments) – which can be ultimately compared against the actual values from the Payor, e.g., providing “Trust But Verify” support.

When a CMS is properly maintained, and its output is properly leveraged within the Provider-Payor relationship, the “Trust” side of the relationship grows because the “Verify” part of the process operates via a consistent and continuous feedback-loop. This feedback-loop is initiated as Providers execute comparative analysis activities between “expected” CMS-generated reimbursement results to the actual remittance advice information received from the Payor. The result is immediately identification of payment variances.

Variances between expected and actual reimbursement should be scrutinized to determine root-cause for the variance observed. In some cases, it will be determined that the Payor paid the claim according to the contract — and the error can be attributed to the term(s) authored or the fee schedule(s) maintained within the CMS. In cases like these, Providers will correct the term(s)/fee schedule(s) in the CMS, and then internally recalculating the submitted claims to generate a “new” expected reimbursement. The result should be a new, recalculated payment variance of zero. In other cases, the Provider will determine that it believes the Payor actually paid the claim incorrectly, initiating Under Payment/Denial (or Over Payment) review activities with its Payor “partner”. This review may lead to a correction in payment received from the Payor, e.g., additional cash (cash recovery), or it may lead to term clarification which may require contract term updates in the CMS, e.g., denied appeal/unrecoverable cash.

As Peter Drucker said, “If you can’t measure it, you can’t improve it.” Providers spend a lot of time and resources in identifying and addressing “revenue leakage” within RCM. Payors should be reviewing their Provider-Payor processing relationships with a similar, “trust but verify” mentality. Through analytics that can be generated out of their RCM and CMS solutions. Providers should not only be able to quickly compare Payor performance and contractual compliance, but should also be able to “drill-down-to” the encounter/claim attributes for root-cause identification – specially with the added pressures that today’s environment is creating against operating margins. Providers need to ensure they are “armed with information” so they can actively correct any revenue “leakage” situations – regardless where upon the RCM Life Cycle they may exist.

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Chris Donahue

Chris Donahue is a director in Perficient's national healthcare practice. He has more than 25 years of technology experience including 20 years in the healthcare industry. Chris provides leadership in revenue cycle and clinical analytics solutions for both providers and health plans and is a trusted adviser to c-level executives.

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