Healthcare Providers Leave Money on the Table

Utilize a Collections Calculator to Quantify Biggest Areas of Denials and Solve the Root Causes

As explained in CenturyGoal’s blog on Denials Taking Big Bites of the Apple, healthcare providers’ bills get denied and are never paid by third-party payers 8-17% of the time across US geographic regions and are continuously increasing over time. It is estimated that 90% of denials are preventable and 65% are never worked. Now that’s leaving money on the table for sure!

Common denials include areas of patient registration and eligibility, insufficient medical documentation, lack of pre-authorization for patient services, billing and coding errors, services not covered, and much more. Frequent denials of payment on healthcare providers’ bills by health insurance companies can seem never-ending and impossible to overcome, but it can be managed with the right approach.

As explained in CenturyGoal’s blog on the Collection Calculator, generally any healthcare provider can utilize reasonably affordable and manageable digital solutions to deploy an approach and methodology used to identify and quantify the biggest denial area issues so that procedures can be put in place to avoid those denials.

The following are steps to properly use the Collections Calculator:

• Develop database of contractual rates by procedure for all (or at least most) Payers
• Collect data on all patient transactions for a selected historical period (e.g., last 12 months) and the amount actually paid for each transaction using 837 billing data and bank records
• Compare how much was paid to what should have been paid for each transaction based on the contractual rate (hypothetically, contractual rates total $1m vs. actual payments of $800k)
• Use 835 payer adjudication data to summarize the denial reasons that comprise the difference between what was paid and what was contractually owed ($200k in hypothetical example in point above)
  
  

Once the areas of denials are identified, processes need to be put in place to prevent denials. A real example includes a behavioral healthcare company that had a collections rate increase from 80% of contractual amounts to 86% of contractual amounts within just four months and went on to collect much more over time.

In other words, the company was collecting only $80 million for the $100 million it should have collected. This was determined by multiplying each visit times its contractual rate for the Payer associated with each transaction. Upon analyzing the $20 million shortfall, it was determined that $15 million of it related to three types of payment denials: credentialing; eligibility; and documentation.

These issues were immediately addressed by fixing the problems at the front end. Doctors that were not credentialed with certain Payers were not scheduled with patients of those Payers, patient eligibility processes were revised to include automated insurance verification upon scheduling appointments, and documentation issues related to certain Payers were identified and corrected through the billing process. This led to a $6 million positive annual impact to earnings within four months followed by continuous improvements thereafter.

Automate Tasks that are Performed Manually and have High Labor Costs

Those in healthcare know that the industry has not yet been digitally transformed according to John Glaser, an executive in residence at Harvard Medical School, and Ranil Herath, president at Emeritus Healthcare. Healthcare workers still use fax machines and perform tedious manual processes even in the “most wired” hospitals and clinics. They are continually frustrated by how poorly those technologies work together, and how difficult it is to extract needed data, much less combine data from multiple sources to achieve the insights they need to function day-to-day. Industry news and medical literature abounds with accounts of IT-related clinician burnout. However, there are many problems that technology can solve.

Boston Consulting Group (BCG) did a study titled Which Sectors Perform Best in Digital Transformation? The findings show that the healthcare industry is on the lower end of digital maturity among various industries. This suggests that there is still a long way to go for the healthcare industry. Moreover, the results show that Payers are far more successful than Providers with their digital transformation efforts. This makes it difficult for Providers to keep up with Payers as they are continuously automating the revenue cycle management process.

The good news is that there are reasonably achievable automation opportunities for Providers that can eliminate the lion share of time spent on administrative tasks and lead to higher profitability. Nearly a third of physicians say that they spend 20 hours or more a week on paperwork and administrative tasks, with overall average over 15 hours per week. This can be reasonably and quickly reduced to a fraction of this time.

There are many different functions that can be automated across operating processes and business processes. The illustration below covers several across functional areas.