The Importance of Identifying

Do black holes negatively impact financial performance? Yes, almost always. Does every hospital have black holes? Yes, almost always. Black holes are defined as a region of space from which nothing, not even light, can escape. In healthcare, this translates to a system or process breakdown that prevents a hospital from getting paid. In this edition of Insights, we will explain the process by which accounts enter the black hole, indicate the impact of black holes on financial performance, and provide suggestions to help you identify black holes.      

The complexity of the rules associated with billing requirements and coding principals, combined with the increasing regulatory pressure, has contributed to knowledge gaps leading to missed revenue opportunities, avoidable denials, and payment delays. Many times, these opportunities are never identified, and hospitals do not collect what they are rightfully due. Effectively capturing and billing all charges related to services provided is a challenge that can have a significant impact on a hospital's bottom line. It requires knowledgeable staff with up-to-date information on coding regulations, payment rule changes, and effective processes supported by information systems to ensure that all appropriate charges are included on the bill. Ensuring all of these components are working properly requires skilled staff and a monitoring system that management can use to avoid missed opportunity.

"You don't know what you don't know" is a phrase that is commonly used and can be applied to this topic. In the healthcare revenue cycle landscape, no one person knows everything; it's simply too complex. The revenue cycle requires subject matter expertise in patient access, case management, charge capture, charge description master, coding, compliance, patient financial services, managed care, reimbursement, and finance. In addition to subject matter expertise, orchestrated coordination between all of these areas is essential to billing a clean claim with all the appropriate charges. Hospitals rely on information systems to link these departments and electronically push information flow from department to department. A challenge is that information systems are not perfect and often have limitations. Additionally, these systems are only as good as the people who program them. It is very common for the flow of information to be interrupted or lost resulting in the black hole theory. Black holes are all around us as evidenced by the special "revenue recovery" projects that are always being performed (either internally or externally). Think of all the time and money that is spent on recovering lost revenues. The growing problem of black holes can be solved.

Systems don't solve problems, people do. Over the years, hospitals and society in general have become too reliant on technology and have lost touch with our most valuable asset: people. Systems are simply tools that should be built around pre-determined processes, but too often processes are built around systems. Depending on the flexibility of the information system, this contributes to revenue integrity issues and financial loss. Unfortunately, many of these losses are never identified because of knowledge gaps. On average, it is estimated that a hospital loses between 1-3% of revenue due to system and process breakdowns. A common example of a breakdown is a reclassified account, which is an account that was registered incorrectly and consequently denied as member not eligible. Assuming the appropriate follow-up activity takes place and the new insurance plan is assigned, it's common for that reclassified account to never get billed. In this example, we incorrectly assume that the information system sends a new bill, but this is not always the case. Despite popular belief, it is very common for a new insurance claim to get "stuck" in the patient accounting system. Additionally, this process breakdown may contribute to incorrect revenue projection. 

Another example of a disconnected link between people, process, and technology where accounts fall into a black hole is related to billing scrubbers. Over the years, billing scrubbers were viewed as the best invention since sliced bread, but are they? The challenge with billing scrubbers is the account is classified as "final billed" even though it has not left the business office. Without a proper monitoring and reporting system, a CFO may be left wondering why cash collections are under expectations. Ideally, these accounts would be classified as discharged not final billed (DNFB) and segregated by reason. 

While these are just a few examples on the patient accounting side, the list of potential black holes are endless, especially in the charge description master, charge capture, and coding areas, otherwise known as the middle of the revenue cycle. To identify these opportunities, forming a revenue integrity task force of seasoned and knowledgeable professionals in all revenue cycle areas is the single most critical success factor. Larger health systems are starting to form Revenue Integrity Departments in a Service Center environment; however, this remains a challenge for the smaller health systems or stand-alone hospitals that lack the economies of scale and often the subject matter expertise. Nonetheless, whether a task force or department is created, the objective of these Revenue Integrity units is to maximize financial opportunity. Below is a partial list of some typical black hole areas that should be assessed:   

Based on assessment findings, it is imperative to create metrics that monitor typical black hole areas and to review these metrics regularly. Assessment findings and negative metric trends should be used to improve processes and ensure information systems are set up to support process changes. The long term financial impact of identifying these black holes is likely to contribute millions to future revenue growth. Most importantly, as hospitals continue to spend millions on systems, don't forget to invest in your most important asset - your people!
We are pleased to have the opportunity to present this information to you. If you have any questions, please contact Rob Jones at 484-431-4324 or
Best Regards,

Rob Jones
IMA Consulting