Revenue Cycle Management – VHA

Can GPOs help plug the revenue drain for their members?

Editor’s Note: The participation of those in the following articles does not constitute an endorsement of the sponsor’s products or services.


The following responses were provided by Kerry Stark, senior director of revenue cycle management services for VHA.

JHC: How do you break down the concept of revenue cycle management?

Kerry Stark: We break down revenue cycle management as follows:

  • Contract negotiation with third party payers. Providers should negotiate contracts from a position of knowledge, with the ability to simulate proposed contract terms and provide for flexibility to react to changing volume and price dynamics during the contract period.
  • Chargemaster coding. Ensure that each line item in the charge description master has proper HCPCS coding to satisfy coding/billing rules of multiple payers
  • Pricing. Ensure that each service item in the charge description master has a price that is reasonable compared to the cost of the service, the marketing strategy for the product line, the consumer’s perception of the value, level of expertise involved, level of difficulty, ease of access and convenience of the service.
  • Advance estimate of consumer out-of-pocket costs. Take into consideration any anticipated services and the consumer’s health plan benefits/terms.
  • Advanced Beneficiary Notice (ABN) and Explanation of Benefits (EOB). Provide this in advance of patient services being rendered.
  • Advance determination of charity, medical indigence or financial hardship write-offs. Consider patients for medical indigence/financial hardship discount policy over bad-debt write-offs.
  • Charge capture. Ensure that processes are in place to capture all appropriate charges and post them to the patient account on a timely basis.
  • Anticipation of the exact third-party payment. Use a contract management system to do so for each case. Compare actual payment to anticipated payment and research/recoup shortages immediately.
  • Clear and timely process for handling denials, return-to-provider, etc. Some claims need additional documentation. Prioritize this stream properly to avoid missing deadlines, large dollar claims, etc.
  • Effective cash posting and cash management process.
  • Effective collection process for patient balances.
  • Analysis of profitability of product lines/third party payer contracts to develop prices and contract negotiation terms for next period.

Increasingly, we will see “tool kits” come into the market – for instance, packages of tools to help providers manage the revenue cycle from point of access to final collection or write-off. Revenue cycle management will become increasingly more manageable by default, as a single solution governs the entire process.

JHC: Are there basic categories you address with regard to revenue cycle management? What are these categories and how are they broken down?

Stark: As we approach this concept in working with our members, we see the revenue cycle process include the following categories:

  • Contracting/pricing. Members must be able to negotiate contract terms with payers that make the relationship manageable not only from a patient care perspective, but also from a billing perspective. They must also be able to operationalize these contract terms. Pricing transparency and defensible pricing have also become key components within the revenue cycle management process, as the requirements continue to build from the growth of consumer-driven care to government activity.
  • Patient access. Our members’ first point of contact with the patient includes all processes required to identify and register the patient for treatment or services. It is the entry point of information into the revenue cycle, and it includes scheduling, pre-registration, insurance verification and pre-certification, eligibility, financial and clinical counseling, registration/admission, cash collections and customer service.
  • Clinical documentation/utilization. This includes clinical documentation and accountability, development and implementation of care management strategies, in-house educational sessions to support coding/documentation, documentation requirements of third party payers, internal audit to support departmental charge capture, charge description master maintenance and departmental education, administration of contract management application, and customer service.
  • Health information management. This entails management of patient documentation and final code assignments describing the primary treatment provided for the stay or encounter. Examples include management of claims discharged to ensure timely filing of all patient claims, patient record management, patient condition reporting and management reporting of patient population clinical conditions and service line utilization of available services.
  • Patient accounting. This includes cash exception reports, adjudicating accounts through third party and patient payments, collection and bad debt write-off.
  • Financial impact analysis. This involves measuring the actual results of revenue cycle management against the projected financial outcomes, then feeding this data back into the process to generate improvement in revenue cycle management performance. The review process can include DRG profiles, payer report cards tracking days and payment history to determine resource utilization; payment accuracy; contract payment compliance; cash collection percentages by payer compared to contract management system expectations; net realized dollars compared to cash receipts; review of contractual, bad debt and administrative write offs; documentation and coding review; and denial and rejection review.

JHC: What software tools do you offer to address different aspects of revenue cycle management?

Stark: Through our strategic partnership with Accuro Healthcare Solutions, and relationship agreements with other selected revenue cycle management suppliers, we offer a comprehensive suite of technology applications and services to assist our members with the revenue cycle management process. These relationships provide VHA members with access to solutions that offer the following:

  • Increased revenue capture.
  • Coding and billing compliance.
  • Denial prevention.
  • Reimbursement optimization.
  • Outpatient profitability.
  • Defensible pricing.
  • Comparative benchmarks.
  • Management of managed care contracts.
  • Linkage between supply item master and charge description master.
  • Patient-friendly estimates.
  • Multifacility charge description master.

JHC: How can you help your members address differences working with Medicare-insured patients, privately insured patients or uninsured patients?

Stark: Regardless of their insurance carrier, consumers and beneficiaries always have one question requiring a concise and succinct answer: “How much will I owe?” As a result, the handling of beneficiary deductibles and co-payments is similar in all cases where insurance is involved. The uninsured and underinsured share the same concern as those individuals with coverage, but the question in their minds is, “How much will I owe after the most discounts you can give me?”

As far as insurance is concerned, Medicare may be the easiest to manage. Medicare beneficiaries don’t have the “pre-certification” requirements that members of HMOs or PPOs typically have. Nor do they have the high deductibles and co-payments that commercial carriers typically require. When a simple claim process is combined with statutory limits on payment days, Medicare may represent the least concern to those responsible for the revenue cycle.

Managed care companies, on the other hand, represent the most problematic of all payers. Most require pre-certification for most services, especially surgery. And, the complex contracts these companies write give them ample opportunity to delay payments for additional documentation, incomplete billing, and so forth. Finally, they are not bound by regulation to pay promptly, although many states have attempted to implement legislation to force them to do so. Typically, these laws have fairly long payment times and no teeth. That is, penalties for late payment often have less economic significance than the payer gains by slowing their outflow of cash.

Self-pay balances often have the shortest collection cycle, due either to co-payments and deductibles, or the uninsured/underinsured status of the patient. Typically, there is a short letter series, possibly in concert with a telephone call or two, after which the claim is outsourced to a collection agency or law firm.

JHC: If reimbursement is capitated, what difference does revenue cycle management make?

Stark: Capitated claims represent a special subset of insured claims, since there is no collection process in the true sense of the term. Payments are received “per member, per month,” and the provider is contractually obligated to provide all services for that flat rate. At most, the only true collection processes revolve around co-payments and deductibles. In “partial capitation” cases, revenue cycle management must be able to separate the capitated component (which require no collection process) from the non-capitated component (which must be handled like any other insurance).

JHC: How much more money should hospital systems be able to make by addressing revenue cycle management?

Stark: Revenue cycle management does not “make” money for hospitals. Rather, hospitals make money by delivering services. Revenue cycle management ensures the following:

  • Hospitals receive the funds that are due for services rendered.
  • Prices for these services are responsible.
  • Future contract negotiations are favorable.
  • Hospitals will continue to fulfill their mission.

Of course, it should be remembered that additional collections are 100 percent “bottom line.”

JHC: What steps should CEOs or COOs take to begin addressing revenue cycle management if they do not already do so?

Stark: The first step is for these leaders to analyze current operations to identify opportunities for improvement. As with any new paradigm, implementing a proactive revenue cycle management model may require members to redesign their current work patterns. Hospital leaders could consider the following operational changes to begin implementing an effective process around revenue cycle management:

  • Create a revenue cycle management team.
  • Employee development and recognition.

Target processes for redesign include the following:

  • Establish a strategic and defensible pricing strategy. National initiatives, advocacy groups and others have a growing interest in giving the public access to hospital pricing and chargemaster information. Healthcare facilities need to take appropriate measures to better prepare for this pricing transparency and work to establish optimum, yet defensible, pricing.
  • Increase up-front cash collection. Point-of-service payment can be increased by creating patient-friendly estimates and improving the medical necessity/beneficiary notification process. Some hospitals have seen a dramatic increase in point-of-service collections after including financial counseling in the patient access function.
  • Ensure a compliant chargemaster. Constant regulatory changes make it crucial for hospitals to consider technology solutions to assist in coding and chargemaster compliance. These applications also provide a more simple process for representatives from an organization’s clinical teams to have involvement in chargemaster management, to ensure accurate billing for services provided.
  • Provide linkage between the supply item master and the chargemaster. Linking expensive supply purchases and their utilization to chargemaster utilization enable hospitals to ensure accurate reimbursement and work to negotiate carve-out reimbursements for high-cost physician preference items.
  • Improve denials management. Hospitals can decrease denials in payment by tracking and analyzing denied claims to enhance cash position and decrease accounts receivable.
  • Implement technology to help streamline and accelerate existing processes. The right piece of technology, along with an optimized process, can be invaluable to shortening the revenue cycle process.

JHC: What will revenue cycle management mean to your members in five years? Do you anticipate that this will become a major part of running a hospital system?

Stark: Historically, when hospitals looked for a way to “cut expenses” in the short term, the business office (patient financial services) was the place to start. In recent years, providers have awakened to the fact that compromising the revenue cycle management process compromises the entire organization. Unfortunately, this realization did not bring with it any significant level of expertise in how to manage the revenue cycle. With or without staff, most patient financial services continue to operate as they have for the last 40 years. The solution is to implement automated systems, which are run by educated and experienced revenue cycle managers. As noted above, every dollar of new collections is 100 percent profit, which means the patient financial services director can have the highest marginal profit of any department in the organization.