The Value of Utilization in the Hospital Supply Chain

Health Care Financial Consultant Supply Chain 02

What is Utilization in Healthcare?

Utilization can be defined as the extent to which hospitals are making use of products or services. Many hospitals have historically focused on savings related to pricing and standardization. However, with seemingly relentless financial pressures and complexities of the healthcare supply chain, utilization opportunities are the next wave to spark interest of savvy hospital executives.

Opportunity for improvement in utilization can exist due to over, under, or improper use of a hospital’s goods, equipment or services. Being able to conduct an accurate assessment of current operations to determine if utilization opportunities exist is a challenge for most hospital leaders due to several factors such as unreliable documentation data and constantly evolving market options for products and services.

Successful implementation of utilization opportunities delivers the following benefits to an organization:
  • Financial benefits ranging 7-15% depending on the category
  • More efficient use of time and resources
  • Discovery of other deep issues within a category, often quality related
Key Opportunity Indicators

Poor Asset Management

In today’s environment, hospitals have a broad mix of assets across the organization. Understanding the true total cost of those assets is a challenge. Total cost of ownership for each asset includes not only the acquisition cost but also ongoing expenses related to maintenance, service and consumables. Furthermore, with hospital service lines experiencing continuous evolution, it’s difficult to maintain current lists of assets, let alone track service and maintenance records. As a result, an organization may find many inefficiencies or low returns on investments when true total cost of ownership is revealed.

  • Client Example: In our experience, clinical engineering often comes up in client discussions as an area to review due to its costly asset acquisitions, large asset inventory, and significant recurring spend on service and maintenance. Optimizing service levels on under-utilized or low-risk devices can drive utilization improvement. As an example, in outsourced maintenance agreements for ultrasounds, there may be significant savings to move from a platinum to silver or bronze support levels when in-house maintenance capabilities exist or sufficient inventory is available to swap out devices as equipment downtime occurs.

High Volume of Add-on Charges

For outsourced services, expenses can mount quickly due to “add on” charges for line items such as over-time, out of scope requests, volume commitment penalties, etc. These situations can result when service requirements were not anticipated when the agreement was created or if an organization experiences operational changes that impact how the services are now used. For these reasons continuous utilization reviews are important.

  • Client Example: Within our client’s clinical purchased services spend, such as dialysis, we discovered a high volume of “delay” charges that increased over several years. This led us to identify an operational bottleneck that was occurring with the patient transport process for treatments performed in the dialysis suite. Once the problem was understood, the transport process was redesigned, resulting in improved patient flow and a significant reduction in delay charges.

Misalignment with Key Performance Indicators (KPIs)

Although the process for determining utilization opportunities does not rely on data alone, using Key Performance Indicators (KPIs) to monitor high level utilization trends is helpful.  KPIs are multi-dimensional, data-driven measurements of key operational data that highlight performance relative to targets and help measure productivity in healthcare organizations. KPIs are a good first place to look for unfavorable utilization trends that may be a symptom of a larger underlying operational issue. We find implementing a KPI reporting tool that ties operational performance to cost can bring more awareness to potential utilization improvement opportunities and ultimately help drive and sustain change.

  • Client Example: Appropriate linen utilization is a common issue for many hospitals, and an opportunity that our clients typically believe exists based on operational practices they witness.  However, determining just how much utilization opportunity there is can be difficult to pinpoint. In our experience, a KPI that effectively measures linen utilization levels, including linen loss, reported in a metric of pounds per adjusted patient day helps our clients identify utilization improvement opportunities.
Key Success Factors

Establish Multi-Disciplinary Teams

Discovering utilization opportunity requires a long-term, multi-faceted approach more complicated than identifying opportunities in pricing or standardization, which are common focuses for traditional value analysis teams. Therefore, it helps to have a dedicated team that understands the nuances of the specific utilization elements. Multi-disciplinary teams including nursing, finance, support services and supply chain are most effective. For many organizations, engaging a third party to determine team composition, establish charters, facilitate initial meetings and help cultivate working relationships on the team, has been very beneficial to expediting efficient and effective utilization projects.

Leverage Multiple Tools and Processes

Identifying utilization opportunities is a comprehensive evaluation process. There is no one tool, process or metric that leads to successful utilization-based initiatives. It is often a combination of many tools that effects sustainable change over the long-term.

Find the Right Change Agent(s)

One of the most difficult aspects to pursuing utilization opportunities is effecting lasting operational changes. Once opportunities are identified and an implementation strategy is defined, an important next step is gaining support of those involved in the operation that change is necessary. An influential leader that can gain organizational support for change – whether it is a change in practices, processes or technologies – is crucial for transformation. Individuals need to feel well supported in the direction the organization is taking, especially when that direction requires change. Success will be elusive without stakeholder buy-in and support.

Improve Continuously

Continuously re-evaluating operations by looking to leading practices inside or outside your organization is important to maintain proper utilization. Take advantage of healthcare industry associations, roundtables and whitepapers that are regularly published to stay aware of key trends. Utilization opportunities, unlike pricing, are not proprietary and can typically be shared through collaborative discussions with peers.

Standardization in the Hospital Supply Chain

Health Care Financial Consultant Standardization

What is Standardization in Healthcare?

Standardization can be defined as the extent to which hospitals are making use of the same products, services and processes. Due to the sheer number of suppliers and products available in the market combined with a diverse array of end-user preferences, hospital leaders often find they have a variety of similar products and services being used across the organization.

Standardization delivers the following benefits to an organization:
  • Financial benefits ranging 15 – 30% depending on the category
  • Leveraging system purchasing power
  • Improved consistency of service levels across the organization
  • Improved patient care and access
Key Opportunity Indicators

Supplier Fragmentation

The use of multiple suppliers providing similar products and services may be a strong indicator for standardization opportunities. A closer review may reveal differences in both pricing and quality amongst the suppliers.

  • Client Example: Pathstone worked with a large health system that used multiple suppliers for over the phone interpretive services. By consolidating its supplier base through a competitive bid process, the client was able to leverage the health system buying power to negotiate market competitive prices and save over 25% in annual costs.

Product Fragmentation

The use of multiple products or services that fulfill a similar need can be another indicator of potential standardization opportunities. Different end-user preferences are a key contributing factor to product fragmentation, which can lead to varying price points for similar products and services. A thorough review of purchase orders or supplier invoice data can be a good starting point to understand the degree of product fragmentation.

  • Client Example: Pathstone recently reviewed print services for a client and discovered over 40 different copier models being used across the organization, resulting in variable device leases and cost per page rates. A deeper analysis showed over half of the devices had similar functionality but were billed at different rates. By standardizing devices, the client was able to achieve significant savings.

Incomplete Category Definition

An incomplete understanding of a total product or service category due to extensive fragmentation can lead to missed opportunities to take advantage of key supplier relationships. If there is a narrow view of a category and its scope, it can significantly restrict the hospital’s leverage in negotiating key supplier contracts.

  • Client Example: Revisiting our previous example, the key driver behind the client’s fragmented supplier base was its decision to allocate business based on the type of interpretive services, such as in-person, over the phone and video interpretation services. Pathstone worked collaboratively with the client to identify suppliers with capabilities for all types of services, thereby generating more leverage for negotiations with existing and new suppliers.

Varying Service Levels

Disparate service level expectations across departments or facilities may also suggest opportunities to achieve cost or service efficiencies. This is often an overlooked identifier but can drive more consistent service delivery at a lower cost overall.

  • Client Example: In the same example as mentioned above, Pathstone discovered varying break/fix Service Level Agreements (SLAs) for the copiers across departments, resulting in inconsistent service and higher staffing costs due to the vendor’s inability to implement standardized practices. By standardizing and aligning break/fix SLAs with actual needs, the client was able to not only reduce costs but also improve service levels by optimizing staff deployment based on the “density” of areas (the volume and devices at a certain location).
Key Success Factors

Utilize a Data-Driven Process

High-performing organizations remain disciplined in utilizing data as a foundation to identify opportunities for change. Since standardization requires a change in end-user preferences for suppliers, products and services, data is crucial for an objective approach to arrive at the best solution. Without the use of data, organizations may resort to anecdotal information that will not drive optimal results.

Increase Knowledge of Complex Categories

Understanding the strengths and weaknesses of suppliers, products and services enables organizations to select the best solution that meets internal objectives. By conducting market due diligence, organizations can evaluate a wide range of options considered by their peers. Partnering with third party consultants such as Pathstone may be beneficial to access market intelligence and provide assistance in determining what change is truly best-in-class and beneficial to the organization.

Engage Key Stakeholders Early

Any standardization initiative that does not have support and buy-in from key stakeholders is bound to fail over the long-term. A strong leadership team that participates in initial decision making and ongoing management is essential to reduce costs and improve service levels. When working with clients on standardization initiatives, Pathstone proactively identifies champions that can engage end-users and hold them accountable. By doing so, initiative benefits can be sustained over the long term.

Insourcing vs. Outsourcing in the Hospital Supply Chain

Health Care Financial Consultant 05

What is Make vs. Buy in Healthcare?

Make vs. buy in healthcare can be defined as the extent to which hospitals choose to use in-sourced or out-sourced resources.  Many clients often do not pursue this lever because each evaluation is unique; it requires robust data analysis, deep operational knowledge, change management and a longer timeline to successfully implement. However, the benefits that come with the make vs. buy lever can be enormous to any healthcare organization.

Key Opportunity Indicators:

Significant Change in Volumes

A significant change in volumes, regardless if products or services are outsourced or provided in-house, can be a good signal it is time to evaluate the make vs. buy value lever. As demand changes, hospitals need to determine if either a make or buy model is best suited to maintain costs and quality levels over the long-term. Often, an increase in volume can serve as a strong leverage point for negotiations with suppliers. Conversely, with a significant decrease in volumes, organizations need to evaluate if its service delivery model has a flexible cost structure that can match current demand or if it is heavily burdened by fixed costs.

  • Client Example: Pathstone recently worked with a large health system that was experiencing continuous growth in annual bed rental spend. Although renting beds provided benefits such as procurement flexibility and third-party maintenances services, our analysis showed the increase in volumes was large enough that an investment in purchasing hospital beds was more favorable to the organization. As a result of our recommendations, the health system was able to reduce rental costs by 20%.

Increasing Program Costs & Decreasing Quality

If annual costs related to a service are increasing while quality is decreasing, it may be worth evaluating make vs. buy opportunities. From a cost perspective, organizations need to understand the key drivers of increased costs. Is it price, volume or productivity? Furthermore, hospitals can partner with third parties (GPO, consultants, benchmarking service, etc.) to determine how costs compare to the market and begin to measure key performance indicators for their  health system. From a quality perspective, performance on key service level agreements (SLA) and end-user feedback can be gathered to understand key drivers of decreasing quality levels. Is it bandwidth, staff capabilities or limited resources?  By understanding the current state, hospitals can then effectively evaluate the benefits of transitioning to a make or buy model.

Fragmented Service Delivery Models

If your organization has a different mix of service delivery models, it may indicate opportunities to generate value. Fragmented service delivery models lead to differing levels of productivity, cost and quality, potentially impacting patient care and operations. By selecting a standard make or buy model for a given product or service, an organization is essentially applying another form of the third value lever we’ve covered, standardization.

  • Client Example: Pathstone has encountered several clients that have fragmented models for courier services which led to differing levels of staffing, service quality and cost, all of which can also make daily operations challenging to manage. In several of those situations, a decision was made to outsource courier services by working closely with key stakeholders across the health system, leading to more consistent service delivery and lower costs.
Key Success Factors

Develop Business Cases

Organizations that utilize a comprehensive business case to evaluate the pros and cons of an in-sourced or outsourced model will increase their chance of success. The business case is a fact-based tool that allows teams to have an open and objective dialogue when selecting the best strategy.  For complex categories, engaging third parties to develop business cases can provide market information and objective analysis necessary to make the best decision.

Evaluate Program on an Ongoing Basis

Since costs, quality and performance of programs can change over time, organizations that continuously evaluate make vs. buy opportunities position themselves to generate more value over the long-term. Continuous self-assessment can uncover opportunities resulting from minor improvements in supplier relationships to complete transformations for an organization’s service delivery model. For example, one important question for an organization to ask about an insourced operation is: “What else can we do with these resources?” The opportunity cost of those resources can help identify alternatives that drive more value for the organization. Furthermore, alignment of the service with the organization’s overall mission should be evaluated.

Access to Market Intelligence and Best Practices

Hospitals that have conducted extensive market research are well positioned to evaluate existing outsourced or internal programs.  Market intelligence on leading practice cost metrics and performance indicators can be an effective barometer to measure financial, quality and operational performance. Partnering with third party providers that can provide insight on market benchmarks can help an organization set the right targets to measure the competitiveness of existing programs.

The Value of Revenue in the Hospital Supply Chain

Health Care Financial Consultant Revenue

What is Revenue?

This value lever can be defined as any revenue, rebate or reimbursement generated from a purchased product or service. Revenue is often overlooked by healthcare supply chain due to the department’s traditional focus on reducing costs. However, many products and services provided by suppliers can play a significant role in generating revenue, rebates or reimbursements for the health system.

Key benefits of this value lever include:
  • Financial benefits ranging 5-25% depending on the category
  • Increased revenue and reimbursement when cost reduction opportunities are limited
  • Enhanced supplier or contract rebates
  • Creation of funding to upgrade or expand products and services
Key Opportunity Indicators

Limited Discussion on Any Supply Chain Driven Revenue Opportunities

If your organization is not recognizing revenue as a value lever within supply chain, this may be one of the first signs of opportunity. Once spend categories with potential revenue opportunities are identified, negotiations with suppliers in those categories should include conversations around incorporating revenue or rebates into new arrangements.

  • Client Example: Pathstone worked with a client that received a cost reduction proposal from its release of information (ROI) provider. Though the client was eager to accept the offer, Pathstone understood that the supplier was funding the client’s program with revenue associated with billable patient requests that were not visible to the client. By analyzing program revenues, Pathstone was able to help the client negotiate a revenue share agreement that generated 30% in additional financial benefit to the organization.

Lower Supplier Prices Charged Compared to Market Rates

If supplier prices charged for an outsourced service are lower than what the market typically commands, this is another indication of the potential for hidden revenue opportunities. If the organization’s prices are well below market averages, it may be a sign that the vendor is capturing significant revenue to offset costs of the program being delivered to the client. Further investigation may uncover opportunity for the client to at least share in that revenue. Auxiliary services such as parking and cafeteria are common candidates for these types of evaluations and opportunities.

Shrinking Revenue from Existing Programs

If volume for a revenue generating product or service is decreasing, this may signal the current program needs to be modified to align with the current environment. Decreasing volumes may be caused by unexpected factors such as changes in supplier pricing, evolving market forces impacting demand or new supplier/end-user resistance.

  • Client Example:  Pathstone evaluated a health system’s accounts payable commercial bank card program, which offers a quicker payment platform for the health system’s suppliers in exchange for a rebate paid by the supplier to the health system. Our analysis showed low levels of card adoption by suppliers, translating to lower rebates for the health system. A deeper dive into the data revealed most suppliers were already being paid quickly without the use of the card program. By reconfiguring standard payment terms to exceed the card program, the health system created an incentive for suppliers to adopt the card program and thereby increased card program participation and rebates by 10%.
Key Success Factors

Develop Business Cases

Organizations that utilize a comprehensive business case to evaluate the pros and cons of an in-sourced or outsourced model will increase their chance of success. The business case is a fact-based tool that allows teams to have an open and objective dialogue when selecting the best strategy. For complex categories, engaging third parties to develop business cases can provide market information and objective analysis necessary to make the best decision.

Evaluate Program on an Ongoing Basis

Since costs, quality and performance of programs can change over time, organizations that continuously evaluate make vs. buy opportunities position themselves to generate more value over the long-term. Continuous self-assessment can uncover opportunities resulting from minor improvements in supplier relationships to complete transformations for an organization’s service delivery model. For example, one important question for an organization to ask about an insourced operation is: “What else can we do with these resources?” The opportunity cost of those resources can help identify alternatives that drive more value for the organization. Furthermore, alignment of the service with the organization’s overall mission should be evaluated.

Access to Market Intelligence and Best Practices

Hospitals that have conducted extensive market research are well positioned to evaluate existing outsourced or internal programs. Market intelligence on leading practice cost metrics and performance indicators can be an effective barometer to measure financial, quality and operational performance. Partnering with third party providers that can provide insight on market benchmarks can help an organization set the right targets to measure the competitiveness of existing programs.

The Value of Strategic Alliances in the Hospital Supply Chain

Health Care Financial Consultant Alliance in Healthcare

What is a Strategic Alliance in Healthcare?

A strategic alliance can be defined as a form of mutually beneficial relationship or partnership between two parties focused on collaboration that achieves results for both organizations they wouldn’t be able to realize on their own. Strategic alliances are an increasing trend in the healthcare industry as a mechanism to achieve cost reduction and increase profitability. There is a broad spectrum of strategic alliances ranging from formal arrangements, such as joint ventures to more loosely affiliated collaborations.

Strategic alliances can offer the following benefits to an organization:
  • Incremental cost savings or revenue
  • Increased sustainability of long-term cost savings
  • Increased access to additional resources (knowledge, capital, etc.)
  • Expanded reach in the community through new partnerships
Key Opportunity Indicators

Minimal Investment in Outpatient Services

The healthcare industry is rapidly changing on a local level with competing hospitals establishing strategic relationships around the community, which can significantly increase competition for patients. With an on-going shift towards outpatient care in the market, hospitals continue to evaluate opportunities to increase outpatient offerings. Hospitals are often turning to suppliers for partnership opportunities to increase patient reach

  • Client Example: Dialysis services is an example where we see hospitals partner with the external service providers in joint venture arrangements with a goal of expanding offerings in the local market. Becker’s Hospital Review released an article, Joint ventures and collaborations across healthcare services (August 2017), which reported hospitals are increasingly turning to dialysis services as an area with clear benefits to hospital and supplier strategic partnerships. Since managing costs and the complexity of care for dialysis patients is difficult on both an inpatient and outpatient basis, it’s not a surprise that we see the industry leaders like DaVita and Fresenius partnering with hospitals across the country in joint ventures to deliver care. Negotiating such arrangements with competitive rates for dialysis inpatient services while also delivering competitive revenue share for the hospital through the joint venture is very challenging.

Strong Existing Supplier Relationship

Many hospitals have been successful capitalizing on a history of strong relationships with their suppliers by taking the relationship to the next level through creative new partnerships that deliver greater value for both organizations.

  • Client Example: Pathstone has encountered hospitals that have formed joint ventures with air ambulance providers that have been long-time service providers for those hospitals. In a service category such as this, hospitals have limited supplier choices in the market due to significant supplier consolidation over the years. When the two parties embark on a joint venture, one common goal may be the expansion of medical services to under-served areas that either the hospital or air ambulance company is challenged to serve on their own. By partnering, both organizations benefit from expanded market reach.

Merger and Acquisition (M&A) is Not an Option

Although M&A activity in the healthcare industry is occurring at an increasing rate, some hospitals are seeking alternatives that can still deliver the financial and operational efficiencies necessary to survive in the current market. M&A transactions are often very long, complex ordeals that come with heavy scrutiny of potential competitive implications, which we believe is one reason there is an increase in strategic alliances.

  • Client Example: Regional or local Purchasing alliances are becoming more popular across the country as an enhancement to hospital centric or national GPO purchasing. This is one example of hospital collaborations that can be achieved without formal mergers or acquisitions.
Key Success Factors

Align Goals

Ensuring a “win-win” mindset for all parties involved in an alliance is no easy feat. At the outset, the alliance must agree on their mutual purpose to keep everyone committed on a common goal and consistently seeking out the synergies for both parties, while still pursuing their individual organization’s goals. Many alliances will develop a charter and detailed workplans to keep on track. Sharing institutional knowledge and best practices can be invaluable to help each party achieve their mutual and individual goals.

Manage Conflict of Interest

Although collaboration in the healthcare industry is commonplace today, limitations do exist regarding those that can collaborate and the degree to which they collaborate. This is especially true for physician-hospital relationships because of Stark Law, where potential conflicts of interests can carry the threat of litigation and hefty fines. What makes matters more complicated is that Stark Law does lack clarity which is why you should pay careful attention to any relationships that may involve physicians. For example, we sometimes encounter hospital employed nephrologists that enter into partnerships to open dialysis outpatient clinics in the same town. On top of this, the hospital that employs the nephrologist sometimes engages in a joint venture with the nephrologist partnership for the dialysis outpatient clinic. This is especially complex and needs to be managed appropriately because the situation runs the risk of having business interests interfere with patient recommendations for outpatient dialysis services.

Maintain Effective Leadership

The right leadership is a key success factor for strategic alliances. Without this the best designed and well-intentioned alliance will often fail. Collaborative leadership teams that effectively utilize Steering Committees to manage key decisions should be required to help work out any issues and review progress towards the mutual goals.

Medical Billing in Healthcare: In-House vs Outsourced

Health Care Financial Consultant Medical Billing

Understanding Medical Billing in Healthcare Practices

One of the more complex components of running a medical practice is managing your organization’s medical billing process. With thousands of potential medical codes for different diagnoses and procedures, on top of the numerous payers in the market, having the ability to effectively manage billing is a key driver of success in today’s healthcare industry.

In-House vs Outsourced Billing: No One-Size-Fits-All Solution

There is no “one-size-fits-all” as it relates to medical billing solutions; however, the two primary options for a healthcare organization are in-house medical billing and outsourced billing. There are three overarching considerations when evaluating whether to implement in-house or outsourced billing:

  • The cost
  • An organization’s capacity to execute billing
  • Maintaining confidential health services while billing
Evaluating the Cost of Medical Billing

Evaluating the cost implications of your selected billing option is critical for revenue management. For small clinics, there may not be enough revenue generated to cover the fixed costs of billing and turn a return on investment (ROI). It is important to do a cost-benefit analysis to ensure that the clinic can expect a net income.

Essential Internal Billing Activities

Whether or not your organization elects to keep billing in-house or outsource billing, a handful of important billing activities must be maintained internally. As an organization, you are held accountable for submitting accurate and timely billing information to the outsourced billing agency or to individual third-party payers. The organization is also responsible for:

  • Insurance verification
  • Medical patient registration
  • Coding
Maintaining Confidentiality: Written Billing Policies

Finally, it is of utmost importance to have clear written healthcare billing policies on how to manage bills and balances to ensure private patient information is managed appropriately.

Exploring In-House Billing

In-house billing includes the staff of a clinic or healthcare organization being responsible for all aspects of revenue cycle management. They submit claims to a clearinghouse, directly to Medicaid, or to the insurance company for reimbursement. They also set charges, collect patient fees (copays and deductibles), and manage the accounts receivable.

In-housing billing comes with several advantages all of which include:

  • More visibility over the billing process
  • High flexibility
  • Increased control over patient accounts

Nevertheless, it’s essential to be mindful of the potential difficulties linked with in-house billing, which encompass:

  • High upfront expenses for labor and technology
  • Ongoing training needs
  • High dependency on your staff members
Outsourcing: A Common Solution to Medical Billing

Many healthcare organizations opt to outsource their medical billing to a third party. These third-party companies typically take a percentage of a healthcare organization’s collections as payment for managing many aspects of a revenue cycle, on top of recurring monthly fees.

Outsourced billing has countless benefits which may include:

  • Having more experienced parties managing your billing
  • Advanced software options
  • Saving on internal time and resources

However, outsourced billing requires your organization to:

  • Maintain and oversee contractual obligations to the selected third party
  • Outsourcing gives your organization less control over patient accounts
Weighing the Choices: Outsourced vs In-House Medical Billing

The decision in outsource medical billing versus billing in-house is very dependent on your organization’s needs and resources, and each option has its own benefits and disadvantages.

To learn how Pathstone Partners can help your organization with medical billing, contact our team of healthcare experts.

How to Improve Clinical Documentation in Healthcare

Health Care Financial Consultant Clinical documentation

What is Clinical Documentation Improvement (CDI) in Healthcare?

Clinical documentation improvement (CDI) aims to represent a patient’s clinical status into coded data. This data is then used for medical research, quality reporting, financial reimbursement, public health data, and disease tracking/trending. By enhancing clinical documentation, medical data collection, reporting, and digital health technology, hospitals will improve their cost efficiency, thus maximizing their revenue and increasing productivity in their organization.

Why Are Clinical Documentation Improvements Important?

With the increasing complexity of medicine and healthcare, there is great importance of capturing data accurately for further analysis. Physicians spend about six hours per day performing data entry into patient records, which includes clinical documentation. These administrative tasks detract providers from focusing on patient care, which is what they are trained on. Physician education typically doesn’t include payer rules for clinical documentation, or other factors that influence a hospital’s revenue.

Moreover, physicians typically don’t prioritize improvements in clinical documentation, and consider it to take away time from providing patient care. The implementation of physician advisors, or clinically experienced professionals, can act as a bridge between healthcare providers and other staff to support clinical documentation improvements.

What Are the Challenges of CDI?

While implementing CDI can improve hospital revenue and efficiency, you should account for potential pitfalls. When creating a CDI program, consider the following:

  • Technology issues: Some outdated technology may make communication and reporting more challenging. While implementing a CDI plan, there may be necessary technology updates as well.
  • Conflicting information: Some client intake charts may have duplicate or conflicting data with their patient records. CDI can help remove and prevent unnecessary reporting.
  • Physician engagement: After the CDI system implementation, physicians must comply with new standards and communicate as necessary.

While you may face these challenges, the overall impact on patient well-being makes CDI necessary for many individual healthcare practices. As employees address the individual challenges, they’ll create a trickle effect that enhances all aspects of the hospital system.

Benefits of Clinical Documentation Improvements

There are several benefits to implementing clinical documentation improvement within your health system. The main advantages of CDI include:

  • Reduced Claim Denials: Insurance companies can deny a patient’s request for healthcare coverage due to ineligibility, lack of detail, late submission, missing information, and more. With enhancements in clinical documentation, claims will be thoroughly completed on time, which reduces the chances of a patient’s claim being denied.
  • Lower Physician Queries: Improved clinical documentation will also decrease physician queries, by ensuring the Current Procedural Terminology (CPT) and Classification of Diseases (ICD) codes are precise based on physician notes.
  • Improves Communication: Lastly, CDI strengthens communication not only for the patient and provider, but for everyone who accesses the patient’s charts, specifically billing companies. Clinical documentation improvement keeps both the healthcare provider and billing company on the same page regarding the patient’s healthcare, so they will better care for the patient. Payers continue to push for CDI and accurate clinical data not only to tie financial reimbursement to value, but to consequently improve care quality overall.

A 2016 Black Book Market Research survey found that nearly 90% of hospitals that implemented CDI earned at least $1.5M more in healthcare revenue and claims reimbursement, showing a clear benefit for hospital revenue.

Improved Documentation and Performance

CDI also advances patient care. When a patient’s record is accurate detailed, healthcare professionals can create more personalized treatment plans. Better documentation not only improves patient care, but also provider performance. The Heritage Valley Health System in Pennsylvania found that better CDI reduced their predicted mortality by 27%, showing clear and tangible benefits. With better clinical documentation, healthcare providers can more easily identify and correct gaps in care. This comprehensive data allows providers to catch a potential complication before it arises, therefore improving patient safety and shortening hospital stays.

Different Types of CDI Metrics

Knowing which key healthcare metrics to look for will help you understand how your system works and where to make adjustments. If you want to analyze trends and gaps, Pathstone Partners will assist as you interpret and visualize the data.

Review Rate

The review rate accounts for how many documents the CDI team reviews in a given time. This metric helps administrative staff measure productivity within any organization. You can break this number down by timeframe and assign quantitative goals to each CDI team member.

Query Rate

The query rate is the number of queries per the number of reviews. This number helps leaders notice how their team handles documentation and manages communications.

Response Rate

This rate represents how often staff is responding to queries. You can see which groups are struggling to respond and offer guidance and education to improve this rate.

Response Time

Your response time is how long it takes physicians to respond to queries once they receive them. You might consider setting a standard response time goal across all teams. Reaching this goal will improve communication and ensure patient needs are met quickly.

Case Mix Index (CMI)

The CMI is the average relative weight of all diagnosis-related groups (DRGs) within a hospital. This number determines how sick patients are at any hospital and helps staff calculate payments to meet demand. You should monitor this number monthly and compare it to similar institutions with the same services.

Need Help With Clinical Documentation Improvement?

As a leading healthcare management consulting firm, Pathstone Partners can help with CDI in any facility. We work with your team and offer strategies and software that improve performance across the board.

Whether you want to implement a new CDI program or refresh your policies, we can find a custom solution for your facility. Contact us today to learn more about our CDI consulting capabilities!

Importance of Environmental Services (EVS) in Healthcare

Health Care Financial Consultant Environmental Services in Healthcare

What Are Environmental Services in Healthcare?

A key challenge that health systems face involves healing patients in an environment in which many illnesses are highly transmissible. Environmental services (EVS), which is defined as all cleaning services that take place in healthcare settings, performs the vital service of protecting patients, visitors, and staff from infectious pathogens. While proper cleaning of clinical spaces has a direct impact on patient health outcomes, the perception of clean in non-clinical areas significantly influences patient satisfaction scores.

Why Are Environmental Services Important in Hospitals?

Patient outcomes are directly influenced by the performance of EVS while in the hospital. Hospital-acquired infections (HAIs) affect roughly 1 in 31 hospital patients and 1 in 43 nursing home residents in the United States, their impact becoming more pronounced with the rise of antibiotic-resistant bacteria.

Further, HAIs represent a significant expense to hospitals at over $9.8B annually. HAIs represent a considerable challenge to EVS systems, as not all pathogens can be eliminated using the same cleaners and methods. C. diff, a common hospital-acquired bacterium, forms spores on surfaces and cannot be sterilized with bleach alone. In order for EVS to minimize the impact of HAIs on the health system, EVS staff must understand the nuances of cleaning patient care areas relative to non-hospital janitorial work.

Environmental services personnel are integral to the success of the health systems they serve because of the effect their work has on patient satisfaction. The Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey is issued to recent hospital patients nationwide as a means to evaluate and compare hospital performance across systems. Included in HCAHPS are questions related to the quality of the hospital environment, which includes how patients perceive the cleanliness of the hospital. As a result, EVS must ensure that both clinical and non-clinical areas are pathogen free to prevent HAI transmission and appear clean to the naked eye to bolster HCAHPS scores.

What is the Role of EVS Staff in Hospitals?

Efficiency and employee education are key factors that influence the success of an EVS department. EVS staff must be efficient in cleaning rooms post discharge to make room for new admissions, but too much emphasis placed on turnaround time may result in insufficient disinfection.

Further, employees must understand their role in combating HAIs not only for the benefit of patient outcomes and satisfaction, but also to mitigate their financial impact on the system. A successful EVS department is an essential component of a successful health system, as EVS plays a key role in helping hospitals achieve their primary objective of treating patients and preventing infection.

How to Stop Revenue Leakage In Healthcare

Health Care Financial Consultant 15

Identify and Evaluate Opportunities

Your organization can prevent revenue leakage by implementing a few best practices that ensure accuracy and efficiency and promote optimization. Addressing points of leakage will enable your organization to increase revenue while maintaining quality patient-provider relationships.

Consider your organization’s practices and determine what processes could be optimized to promote more efficiency. A few areas to evaluate include:

  • Patient scheduling and registration: How do patients schedule appointments? Do they need to fill out paperwork or an electronic form when registering? Where do data entry inaccuracies occur?
  • Recording of medical supplies, procedures and equipment used: Who records information during a patient’s visit? How are procedures documented? Are responsibilities established among staff members?
  • Insurance verification: When does verification take place? Who handles insurance? Where do errors happen in the process?
  • Claims management: Who is responsible for follow-up when claims are denied? Who is responsible for issuing claim submissions? What is the current timeline for claim processes?

Some solutions may be as simple as cleaning up common clerical errors, while others may be more complex, such as implementing digital transformation and integration. Reviewing your processes will reveal opportunities for improvement, expose inaccuracy or inefficiency and enable your team to resolve problems and create a smoother revenue cycle.

Ensure Accuracy

Revenue leakage often occurs from issues at the beginning of the revenue cycle when patients first register or schedule an appointment. Ensuring accuracy in the information collection process will drastically improve how practices capture revenue, enabling them to create claims with correct patient information.

One way to ensure accuracy is to utilize electronic capabilities. Requiring patients to register or schedule appointments online will decrease data entry errors from paperwork. Electronic referrals will help your practice keep track of potential patients and encourage them to schedule.

Verify Insurance

Checking insurance eligibility and approval is another way to prevent revenue leakage by ensuring your services will be covered. Maintaining accurate insurance information will enable your practice to submit claims with precise data.

Establish correct insurance information by reviewing it with patients at the beginning of their appointment. Update any changes to insurance carriers, coverage or contact information. Adjusting any changes will be easier to complete before the visit rather than tracking down patients after they leave.

Set Financial Responsibility Expectations

Keeping patients informed of their responsibilities will improve your revenue cycle and increase patient satisfaction. Providing estimated costs to patients before their appointment will keep patients informed and prepared to complete their payments.

Collect copays and coinsurance during check-in or after an appointment to ensure accurate and timely payments and decreased revenue leakage.

Organize Claim Management

Commitment to timely claim submission and appeals will enable your practice to improve your revenue cycle. Accurate patient data will decrease the number of claims denials you receive, and a dedicated management team will be able to appeal denied claims quickly and efficiently. Taking the time to evaluate, revise and resubmit denied claims will greatly decrease revenue leakage.

Simplify Payment Processes

Creating an easy payment process for your patients will improve revenue and boost patient satisfaction. Make bill pay convenient by offering an online payment option or a payment plan to give patients the flexibility to meet their bills.

Prevent Revenue Leakage With Help From Pathstone Partners

Revenue management and leakage prevention can be complex, but you can find understanding and empowerment when you work with Pathstone Partners. Our consultants will help you tackle financial and operational processes to identify opportunities, implement solutions and sustain beneficial practices for the success of your healthcare practice.

Our variety of services will enable your organization to manage revenue cycles easily, provide quality patient care, exceed business goals and ensure success. Contact us today to learn how Pathstone Partners can drive value for your healthcare practice.

Identifying Revenue Leakage in Healthcare

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What Is Revenue Leakage in Healthcare?

Revenue leakage happens when a healthcare practice gives care but does not receive payment for the services it provided. Leakage can occur in a few ways, such as forgotten accounts receivable or missed appeals deadlines for denied claims. It impacts the revenue cycle, preventing businesses from becoming financially viable.

Revenue leakage often goes unnoticed, but its impact can be detrimental to healthcare practices seeking to grow their business and maintain a high standard of care for their patients. The longer providers take to address points of leakage, the less likely they will be to receive any reimbursement for their services.

What Is the Impact of Revenue Leakage?

Healthcare providers must keep up with expenses to secure customer satisfaction and keep their practice in business. Revenue leakage can lead to lower earnings, putting providers at a disadvantage to their competitors.

A lack of revenue will significantly impact a healthcare facility’s ability to maintain several aspects of its organization, including:

  • Staff: Healthcare practices require proper resources to maintain a team with all the talents necessary to meet patient needs, ensure smooth processes and promote detailed organization. Revenue leakage can make hiring and retaining a highly skilled workforce challenging.
  • Quality care: If a provider is experiencing revenue leakage, they may add more services to compensate for the missing revenue. Extra services may decrease a provider’s ability to maintain high-quality care by increasing the likelihood of burnout.
  • Growth: Steady revenue enables organizations to grow their services and meet the needs of an expanding community. Healthcare practices that experience inconsistent income due to leakage may need help to keep up with growth demands.
  • Innovation: Cash flow powers innovation, helping providers maintain a competitive edge. A decrease in revenue will prevent businesses from matching a competitor’s offer, leading to a decline in patients.
  • Business goals: Revenue leakage can inhibit healthcare providers’ ability to meet business goals and objectives. Proper funding is necessary to achieve high standards and goals that drive the business forward.
What Are the Top Causes of Revenue Leakage in Healthcare?

Many forms of leakage are accidental and easy to correct, but they first must be identified. Revenue leakage can come from numerous sources, from issues with a provider’s processes to how patients or payors handle payments.

Some common causes of revenue leakage include:
  • Inaccurate information: Insufficient or incorrect registration data may result in a denied claim or errors in billing. Any changes in a patient’s personal information may also lead to revenue leakage.
  • Unverified insurance coverage: Without a proper review of insurance eligibility or approval, procedures and services may be given without adequate coverage. Inconsistencies with insurance coverage may also come from errors in payor-provider agreements, halting the revenue cycle.
  • Pricing issues: Inadequate pricing may lead to missed revenue opportunities. Prices set too low may undermine services for what they are worth, while prices set too high may drive patients to seek care elsewhere.
  • Unpaid accounts receivable: Sometimes outstanding bills remain unpaid for too long, going unnoticed or becoming lost. The longer an accounts receivable goes unpaid, the less likely providers are to recover any reimbursement.
  • Claims denials and underpayments: Inaccurate information can lead to claim denials and underpayments, slowing the revenue cycle for a healthcare provider. Any delay in addressing these issues with insurance companies can lead to missed appeals deadlines and less revenue for services already given.
  • Unbilled claims: Without a dedicated team to manage claims, practices may experience a variety of problems leading to revenue leakage. Claims require accuracy and consistent follow up ensure all claims are correctly billed.
  • Scheduling issues: Revenue leakage can also result from missed opportunities to receive revenue. These instances include referred patients who have yet to make an appointment or gaps in scheduling that could have been filled to maximize available time and resources.
  • Lost patients: Previous patients who seek another provider for care instead of returning are another form of revenue leakage. Healthcare providers miss out on revenue opportunities when patients feel their needs will be met better elsewhere.
  • Billing errors: Manual input of data may lead to various types of billing errors, decreasing the amount of revenue providers could and should be receiving. Accidental discounts or other inaccuracies in billing will halt the revenue cycle.
  • Unaccounted costs: Administrative costs can sometimes be miscalculated, resulting in underpayment from patients or payors. Incomplete logs of materials and equipment used during treatment or medical procedures performed may also lead to inaccuracies in how much patients or payors are charged.

These forms of leakage are common and usually unintentional, making it challenging to track and manage potential revenue opportunities. Healthcare practices need to ensure careful follow-up to protect vital revenue streams and prevent any leakage.

Revenue management is essential in the healthcare industry. Consistent cash flow enables providers to establish themselves as trustworthy professionals that provide the high-quality care patients seek. Revenue also allows organizations to experience growth and innovation that helps them keep up with competitors and maintain a talented workforce.

Healthcare practices need to ensure they have the funds to support their services and maintain patient satisfaction. Providers have a thin margin of error to work with, making revenue leakage an essential situation to address and resolve if healthcare practices wish to enjoy the benefits of consistent revenue.