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Money multiplies: revenue cycle solutions lead three-tiered update of healthcare system's business office. (Financial Information system: case history).

Baptist Health System (BHS) in Knoxville, TN, was trying to profitably manage its revenue cycle in the face of changing rules and regulations issued by commercial and government payers while, at the same time, keeping pace with the health system's growth. As BHS made plans for a facility expansion, management understood that three key financial issues within the revenue cycle had to be solved first.

Inefficient claims processing, contract management processes and $70,000 per month in write-offs due to medical necessity denials in the laboratory were inhibiting the health system's ability to optimize billing and reimbursement. The two-hospital health system planned to double its size by the summer of 2003, and that growth would put greater pressure on the business office and its core patient accounting system. If BHS moved forward with the expansion before solving these issues, the problems could multiply.

Need for Integration

Understanding that the organization lacked the technology to rectify revenue cycle difficulties, BHS' Chief Information Officer Chester Maze and Director of Patient Financial Services Margarete Cox began to investigate potential IT solutions. They wanted systems that would enable them to automate claims processing and to monitor compliance of payer contracts, as well as the necessity of specific medical procedures.

A chief criterion for the selection of technology was integration with BHS' existing patient accounting system. Another goal was maintaining the health system's current business office staffing, as well as current accounts receivable (A/R) levels.

"Despite having many manual processes, we were not struggling with high A/R like many hospitals," says Cox. "We had already managed our A/R days into the low 50s using our homegrown claims system. Our objective in the area of A/R was to maintain our levels, a challenge when you're installing a new claims system on top of patient accounting and learning the ins and outs of new processes."

The claims processing area that BHS needed to address was upfront editing to improve the process flow among Cox's team of 20 billers and collectors. "Our business office operated on a claims system that made it difficult to keep up with all the Medicare rules and regulations for billing and to track claim errors when they occurred," says Cox. "As we anticipated the opening of two new facilities, we knew we would need to address a greater commercial payer mix and move from manual to electronic claims processing."

Along with basic, manual contract management functionality, BHS also needed to tackle deficiencies in its contract modeling compliance. BHS' primary tool for contract modeling was manual culling of historic data which, coupled with the inability of payers to process claims within contract terms, severely limited BHS' effectiveness.

Finding lost revenue was the motivation for installing a compliance management system in BHS' large referral laboratory business. Without an automated system in place to determine if payment for a laboratory procedure was appropriate, BHS was writing off $70,000 a month in medical necessity denials and needed a mechanism to reduce that unnecessary drain.

Implementing Integrated Solutions

BHS considered McKesson Information Solutions early in the selection process because of its longstanding partnership with the vendor. The health system had successfully used McKesson's HealthQuest[R] 2000 mainframe-based hospital information system since 1991. When the billing staff watched a demo of the claims management product, they were impressed with the ease of use of the Windows-based system.

Maze and Cox were focused on the vendor's ability to integrate the claims management system with its patient accounting system. In the end, ease of use, integration with BHS' patient accounting system and references from other claims management system users led BHS to select McKesson.

In March 2001, BHS installed McKesson's claims editing product, EC2000[TM] Claims Administrator. Key to the implementation was the integration between the claims product and the HealthQuest Patient Accounting system. Prior to the installation of the claims editing product, BHS' IS department had to manually maintain and update claims modifications within the much more complex HealthQuest system. Integration enables the BHS business office to control the building of claims edits within EC2000 instead of requiring the IS department to write specialty code to do it.

The vendor provided the BHS business office staff with one week of on-site training on the claims management system. The staff then practiced on the system for two more weeks until they were comfortable with the new processes. At the same time, BHS began utilizing McKesson's contract management and compliance management systems.

"Interface issues can kill an implementation. But right out of the gate, the teams worked closely to address all issues in a timely manner," says Cox. "I've seen implementations where a vendor puts the customer in the middle of trying to determine who `owns' a problem. In this case, the implementation teams jointly took ownership, and that account, ability was a key to our successful implementation."

Increased Revenues

Installation of the integrated claims management, contract management and compliance management systems solutions increased BHS' operating revenues by more than $3 million.

With Claims Administrator, everything from tracking registration denials to editing a claim is online. Clean claims are delivered to payers more quickly, and BHS reduced net days in A/R by four additional days after only four months. According to Cox, that reduction equates to a gain of approximately $1.8 million to the health system's bottom line each year.

By automating contract management, BHS is better able to manage compliance. An internal contract team loaded BHS' 50 payer contracts into the contract management system, worked with the payers on how to process claims, and even renegotiated contracts and terminated those that were unprofitable.

"Within a year, we improved payments by $1.2 million through effective contract renegotiation and refusing to accept agreements at could not be monitored in our systems," Cox states. "I expect revenue to continue to grow in 2003 because we are just beginning to track insurance underpayments through variance collection reporting."

Within six months of going live on the compliance management system, BHS could automatically monitor whether a procedure was medically necessary, and the number of billable tests grew by 50 percent. In other words, the system had reduced half of the denials, from as many as 2,500 per month down to 1,000 per month, which created a 50 percent increase in billable laboratory revenue.

"By automating and improving our processes, we improved our medical necessity compliance. We now verify medical necessity prior to service, which has enabled us to convert $50,000 per month in denials into billable revenue," says Cox, adding that the organization continues to look for ways to improve that process.

Overall, the technology has elevated the efficiency in the business office's workflow. The greater productivity has positioned BHS to handle the forthcoming increase in business office volume from the two new hospitals without adding more staff.

"We have made significant improvements in our business office's ability to bill commercial payers electronically, track contract compliance and reduce medical necessity denials by 50 percent," says Caryn Hawthorne, chief financial officer. "Using well-integrated financial technology is positioning BHS for future growth by allowing us to handle more claims, to monitor those claims--along with payer contracts and physician lab orders--more closely, and to do it all without adding personnel."

Margarete Cox
Director of Patient Financial Services
Baptist Health System
Knoxville, TN MCKESSON


HealthQuest[R] 2000
EC2000[TM] Claims Administrator
Pathways Contract Management[TM]
Pathways Compliance Advisor[TM]
McKesson Information Solutions
Alpharetta, GA
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Title Annotation:Baptist Health Systems
Publication:Health Management Technology
Geographic Code:1USA
Date:Jan 1, 2003
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