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Improve Collection Efficiently, Reduce AR Days and Drive-Down Aging Hospital Receivables

Jim Yarsinsky
Founder and Principal, Zinserv Healthcare, Philadelphia, PA

An efficient revenue cycle is critical to maintaining good finances.

The healthcare revenue cycle is fundamental to healthcare providers’ ability to maintain physician compensation, keep up with overhead, and invest in new technologies. When the healthcare revenue cycle is not managed well, collection efficiency drops and accounts receivable (AR) days increase. Numerous tasks go into the revenue cycle, from collecting insurance and procedure data to preparing claims to billing patients. When any of these processes are inefficient or ineffective, the healthcare revenue cycle is needlessly prolonged.

Streamlining the healthcare revenue cycle involves ensuring collection efficiency and monitoring AR days. With a well-managed revenue cycle, money comes in faster, with less effort. Everyone has a role, from physicians, nurses, and other clinicians to medical accounting staff to administrative workers. Here are four ways to improve collection efficiency and reduce AR days.

1. Make the Healthcare Revenue Cycle More Front-End Driven

By making the healthcare revenue cycle more front-end driven, you can separate administrative work from the clinical setting, often improving the experience for both clinicians and patients. Collections should also improve. Once a patient is scheduled, a staff member is notified and can begin verifying insurance information and eligibility, requesting pre-authorization, if necessary, and estimating patient liability. Much of this work is done on the back end, but doing it up front, instead, and giving patients the opportunity to pre-pay cuts collection costs and can reduce the risk of bad debt exposure. Obtaining pre-authorization up front prevents rejected claims and helps keep AR days under control.

2. Put Your Enterprise Data Warehouse to Work

If your facility has an enterprise data warehouse (EDW), you can put it to work to help you streamline the healthcare revenue cycle. The best starting point is analyzing current data status on clinical, financial, and patient satisfaction measures and looking for trends. Many EDW systems offer tools that let you drill down into data and find the causes of these trends. Additionally, you can purchase benchmarking data for your EDW that will let you compare performance to similar healthcare facilities. Once you benchmark your data, you can more easily identify places in the healthcare revenue cycle that need improvement. Mining your EDW lets you find roadblocks that are unnecessarily prolonging your revenue cycle so you can examine root causes and fix them.

3. Have a Robust Plan for Reducing and Handling Rejected Claims

Preventing claim rejections can greatly improve revenue collection.

Rejected claims represent a major lost revenue opportunity. Denials represent the 10 percent to 20 percent of claims that cause most missed revenue opportunities. When denials are allowed to accumulate, opportunities for collection can be missed altogether, and AR days increase. Many facilities assign staff specifically to claims denial work, so rejected claims can be resubmitted quickly.

It is also important to analyze denials and learn whether there is a root cause that can be eliminated to cut down on denials. Receiving denials in one location rather than multiple points of entry helps with consistent data collection that can help get to the root of claim rejection causes. Plus, it allows better time tracking so fewer claims end up rejected for failing to meet submission deadlines. Monitoring contracts with payers closely to ensure their demands are reasonable and they are not under reimbursing can also help tighten the revenue cycle and reduce AR days.

4. Ask Frontline Staff What They Need to Be Most Effective

If collection efficiency is suffering and AR days are increasing, you can always ask your frontline staff if something is causing inefficiencies and how they might be addressed. When you have identified a problem that’s reducing collection efficiency, your frontline staff are the people who deal with it every day, and they may have good suggestions about how to resolve them.

Examining workflows periodically and communicating regularly with frontline staff about what helps them accomplish their work are ways to keep workflows efficient. For example, when workarounds are necessary, it is important to find out why and what could be done to eliminate the need for the workaround in the future.

How to Drive Down Aging Hospital Receivables

Accurate, efficient revenue cycle management is essential to maintaining positive cash flow in a healthcare facility.

Maintaining positive healthcare finances require that claims processing and payments are effectively managed and that claims are trackable at all points so issues can be addressed promptly.

First, hospitals must learn what their issues are when they believe their financials are performing poorly. Is it the billing department? Is it medical records? Could the problem be charge capture?

Third-party payers can be major contributors to slowdowns in the healthcare revenue cycle. Medicare, Medicaid, and private insurers can effectively avoid paying claims by requiring perfect compliance with their requirements, and they frequently change those requirements, so what was perfect last year may result in a denial this year.

Other factors that negatively affect hospital accounts receivables include information technology problems, lack of communication between revenue cycle departments, and inadequate training of personnel in the specifics of the healthcare revenue cycle.

To dramatically turn around poor or inefficient revenue cycle performance and increase cash flow, the management team must be able to implement well thoughtout solutions from planning and documenting an effective course of action. A good number of revenue cycle folks believe this but are not sure what to do first, then next and next and next and next.

Here are a few key steps you can take to reduce hospital AR days.

  • Determine goals for AR days for the facility the ideal number of AR days varies depending on the type of facility and its specific mix of payers. Defining a goal for AR days is step one to achieving that goal.
  • Work toward timely, accurate documentation by ensuring timely and accurate documentation for coding and billing cases and adequate revenue cycle staffing, AR days can be reduced. Reviewing transcription turnaround times can find inefficiencies that can be corrected, and having consistent communication with doctors on outstanding dictation can ensure timely completion of this critical process.
  • Set “clean claim” goals. Make sure your coders and billers (or billing company) understand your expectations for clean claims. Set a goal of getting clean claims out within 48 hours of receipt of the required documentation. Also, make your goals for follow-up on electronic rejections on uploaded claims crystal clear.
  • Manage the claims denial process effectively meeting your goal for days in AR is essential for keeping the healthcare revenue cycle on track.
  • Ensure you have processes in place for tracking denials and that your personnel understands how denials are to be handled to minimize time to payment. Communicating the claims denial process as part of your revenue cycle staffing procedures can effectively reduce AR days.
  • Educate personnel on payer-specific policies to ensure that your personnel has access to training on requirements for Medicare, Medicaid, and major private insurers. Many payers have online access to policies as well as webinar-style training for this purpose.

Conclusion

As hospitals deal with the everchanging financial environment, the billing and collections operation are one of the most crucial aspects of managing a healthcare business. Cash-starved health systems are the victim of a declining AR turnover rate and a deteriorating AR aging schedule.

Turning around a troubled revenue cycle is no easy feat. Most hospitals first need to determine what is wrong with the infrastructure of their revenue cycle and then construct a work plan that will achieve the necessary changes while maintaining cash flow in the interim.

When AR ages to the point of no return, hospitals need to recover cash quickly and work down aging receivables.

Whichever road you decide to take during a revenue cycle turnaround attempt, remember that proper planning and allocating the right resources to produce maximum performance are the keys to any successful AR turnaround effort.

When practices are implemented that effectively shorten the healthcare revenue cycle, the impact can be tremendous. By decreasing a payment cycle by only five days, cash flow can increase and hospital accounts receivables can significantly decrease.


Jim Yarsinsky, CRCE-1, is the founder and engagement principal of Zinserv Healthcare. The company provides AR SWAT teams to hospitals to work down aging receivables. He brings more than 30 years of revenue cycle management and consulting experience. Before starting Zinserv, Mr. Yarsinsky was President of Expeditive, LLC for 13 years. The firm provides revenue enhancement services by providing interim staffing and consulting to healthcare providers. The company was acquired by Besler Consulting in 2004. While at Expeditive, he developed a reputation as an expert in developing cash producing strategies. Yarsinsky earned the designation of Certified Revenue Cycle Executive (CRCE-1) in 1995 from the American Association of Healthcare Administrative Management. He has a degree in business administration from Rutgers University. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. or 877-266-6691.


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