The revenue cycle, that pivotal part of a hospital business concerned with documenting and generating claims for payment, began to reveal itself several years ago as much more than just the province of the finance department at Integris Health.

In preparing for whatever a Medicare recovery audit contractor might red flag in sleuthing for overpayments, financial managers at the 14-hospital, Oklahoma City-based system, kept digging into the clinical, coding and information-management areas to fully understand billing particulars. "It quickly became obvious that what happens on both the clinical side and financial side are so interrelated—including documentation—that they really couldn't be separated," says Gregory Meyers, system vice president for revenue integrity. Every clinical decision had a financial impact, he says.

In 2009, Integris pulled case management, health information coding and information management into the revenue-cycle function. "It became a natural evolution to us where we [viewed] the patient experience as two rails on the same railroad track," Meyers says. "We want our patients to have the same high-quality, patient-centric experience going down both rails of that track. And to do that, they can't operate in isolation. The clinical world and the financial world have to interact."

Experts in revenue-cycle management say it's time for hospitals to liberate claims payment and collection functions from the financial silo and incorporate within health care services one inclusive revenue cycle that starts before a patient shows up and ends when the account has been closed.

"Our belief is that the revenue cycle requires an integrated approach," says Deirdre Byrne, senior vice president of interim and consulting services with the B.E. Smith consulting firm. "Accountability certainly must reside with finance, but it is fundamentally impossible for the revenue cycle to be the success it must be as the engine for the organization if it doesn't have commitment from colleagues across the health system."

Specifically, some mainly financial areas could use more input from the clinical setting, especially in hammering out contracts that can succeed or fail based on how the terms mesh or clash with medical workflow and decision-making. By the same token, patient care areas need to better understand the financial impact of medical activities. That sometimes means first poking through cultural barriers.

"There has historically been a tension between the clinical folks and the financial folks in hospitals, in [that] there seemed to be sort of a bias on the [part of the] clinical staff that the financial staff really wasn't perhaps concerned about patient care and patient quality as much as the clinical staff was," Meyers says. "Like most large health systems, we've struggled with that—you'll occasionally hear a nurse saying, 'It's not my job to worry about finances; I'm here to take care of the patient.' "

But acute awareness of revenue-cycle issues during acute care protects not only hospital finances, but also those of patients. Inattention to those issues could make for an unhappy customer down the road and register a hit to a hospital's bottom line. A few examples of how the clinical side affects bills:

  • Treatment that isn't pre-certified. A patient goes to the radiology department for a series of imaging studies properly authorized by the insurer. Those results prompt the radiologist to order additional scans. The bill for those extra images is later denied because they weren't pre-certified. That doesn't mean the radiologist shouldn't have done it, says Jamie Townsend, vice president of consulting solutions for B.E. Smith. It just means when a plan of care changes, it has to be captured and communicated to the revenue-cycle side. Among other things, it should trigger a procedure to clear the move with an insurer.
  • Decisions to admit patients or keep them for observation. For instance, in the case of a Medicare beneficiary, a physician might prefer that he be in observation rather than be an inpatient. "And that sounds like a worthy effort," says Meyers. But if the patient met acute care criteria, "a hospital is leaving a lot of money on the table from a reimbursement standpoint, and, [financially], it's not the best thing for the [patient]." Medicare beneficiaries have one annual deductible as an inpatient, while observation, as an outpatient occurrence, carries extra copayments and additional costs, such as for drugs. "What looked like a really innocent decision on the front end from the clinical perspective has patient satisfaction impact [and] hospital revenue impact," he says.
  • Liability for uncovered services. Hospitals need a process of fair warning about out-of-pocket costs, says Anthony Spezia, president and chief executive officer of Covenant Health, Knoxville, Tenn. "For example, a patient no longer meets acute care criteria, and let's just say it's not convenient for the family [to pick the patient up that day]. Sorry, they need to be told if they stay another day, that will be their responsibility." If it's a physician who wants to keep the patient longer than the insurance will cover, he has to know and declare that the cost rests with the patient's family, Spezia adds.

Every Little Detail

The details that go into the business of health care—expenses incurred, necessary care authorized, supplies tracked and accounted for, reimbursement claims documented and explained—typically originate in managed care and purchasing contracts that first must be executed shrewdly and then communicated intelligently throughout the hospital, from patient intake to nursing unit to discharge, Byrne says. From pre-approvals to outlier dates, payment bundles to fixed fees, the terms need to be loaded into information systems and procedures that synchronize the clinical and revenue-cycle sides of the health care operation.

That sounds obvious, but it frequently fails in practice, says Townsend, who sees a lot of reacting rather than up-front planning when reimbursements are denied or come in less than expected. "A good revenue-cycle management approach focuses 80 percent of the brainpower, energy, reporting and time on pre-access functions"—the things to be done before a patient accesses care. "It's amazing that oftentimes a contract is negotiated without full knowledge of what the actual financial impact of that contract is going to be."

Full knowledge isn't possible, Townsend asserts, without involving clinical leadership in ascertaining what the health care setting can handle: for example, how a discount in service matches up against expenses; how a billing requirement plays out in the clinical setting; whether the workforce and infrastructure are sufficient to execute all agreed-upon terms profitably.

Item Master vs. Charge Master

Supply chain and pharmacy silos also have to be broken down and become a part of the revenue cycle, says Kelley Blair, vice president of professional services for Craneware, a vendor of revenue-cycle management software. "Supply and pharmacy costs are the second-biggest spend behind labor," she says, and "it can become very difficult to manage those costs and really identify what is being provided to a patient during the course of care because not all of it is billable, and that's one of the biggest ways that hospitals track what they're providing."

The supply chain function in a hospital likely is focused on such contracting matters as getting the best price and terms and may not be as aware of how the pricing information figures into the accounting of costs and allowable charges throughout the revenue cycle, Blair says.

All the information about purchased supplies—such as product name, vendor, cost, contract number with correct price—is loaded into what's known as an item master for materials management, while all the components of how charges are produced in the revenue cycle are contained in a charge master, says Karen Peterson, senior business solutions consultant at Craneware. Efforts by both departments to better link the two systems and reconcile product costs against their use in the emergency department, operating room and nursing units will pay off in more complete, clean bills, she says.

Two Root Causes of Denials

The act of sending patients to the hospital or receiving them in the ED triggers the need for a lot of financial information as well as clinical history, which if not obtained can doom the revenue cycle to unpaid bills. The Integris health system sustained $20 million in insurance denials last year, Meyers says, and in looking for the root causes found that a significant number came from two sources.

One was not having enough time to check insurance eligibility and verify the benefit level. "So we are really making a lot of effort to try to work with our medical staff and educate them on the importance of giving us as much advance notice as they can," Meyers says. "It helps us from a financial perspective, but it also allows us to begin to work with that patient from a clinical perspective and make sure their path through the system is as appropriate and as patient-centric as possible."

The other big cause of denials was a failure to get clinical documentation into the revenue cycle. "When it was all said and done, the services provided to the patient didn't match up with what we thought the services were going to be," Meyers says. "We'd call and get a particular radiology procedure pre-certified and authorized, and the physician does a second one—which may be a related procedure but we didn't have it pre-authorized. So when the bill gets to the insurance company, the feedback is, 'Well, sorry, you didn't get that approved, so we're denying that care.' "

The first step to solve that problem is integrating a good case manager into both the clinical and revenue-cycle worlds, says Byrne of B.E. Smith. Such managers are "setting the patient on a path, a plan of care…monitoring it to make sure that the patient is receiving the resources in the right time and place." The resources may be dictated in part by the terms under which the patient's insurance covers care.

That's part of an overall fail-safe process that has to operate alongside clinical activities without being intrusive, says Blair of Craneware. "It is unreasonable to expect that a clinician is going to know that now they've provided this new service, then a new pre-certification is going to be needed," she says. "There need to be systems in place that notify the right people to go and get that pre-certification and to understand that the care plan has changed."

One tactic is to build safeguards into the parallel information technology systems for clinical and business information, says Carol Conley, director of audit and compliance for CoxHealth, a three-hospital system in Springfield, Mo., with a critical-access hospital about 50 miles away. When a radiologist documents the results of imaging in the clinical IT system, they are sent over to the billing system. If, for some reason, the service isn't in the billing system to capture the charge, it's kicked out for manual review. Then a conversation ensues around whether one system had the service built in but not the other, Conley says.

Every department also gets a daily charge report listing patients and the charges that were billed the day before, she adds. That gives managers a chance to see if charges were missed and to make corrections.

Averting Angst

A final but crucial parallel pursuit revolves around the discharge process and beyond. With Medicare penalties for preventable readmissions as the wake-up call, health care organizations have begun institutionalizing the educational and psycho-social preparations needed for patients to understand their conditions, what they face after hospitalization and how to keep from relapsing. What they also need to provide is a plan for how patients will cope with their financial responsibility and a good idea of what that will be long before the bill arrives, experts say.

Feedback on the billing process in patient-satisfaction surveys seems to focus on the insecurity of patients and their families about the hit they face—"not knowing if it was going to be literally $500 or $50,000," says Byrne. "There was a time not that long ago when people would go into the hospital and have no concept of what they would come out with in terms of, 'Do we have enough room on our credit card?' or 'Can we refinance the house?' I've heard people have these conversations."

Integris uses business-intelligence systems at admission to resolve issues of Medicaid, charity care, ability to pay a balance in full or the need to work with a patient on other payment arrangements. "The moment we find out someone's coming here, it sets the whole process in motion on the revenue-cycle side to try to minimize the frustration and potential angst down the road on a patient for unnecessary financial reasons," Meyers says. "We pretty much know at the time of admission how that account is going to be resolved."

John Morrissey is a freelance writer in Chicago.