The Importance of A Clinically Driven Revenue Cycle to Improve Outcomes and the Bottom Line

The following is a guest article by Carol Howard, BSN, MBA, Vice President Clinical Revenue Cycle Integration, EvidenceCare.

When a patient presents in an emergency department (ED), the physician must quickly assess whether the patient should be admitted, placed in observational care, or transitioned to an advanced level of care. In a busy ED where physicians see a broad cross-section of conditions, this can be challenging. But this one decision can have significant ramifications on the hospital’s bottom line. The problem stems from insufficient evidence-based documentation with which to support this decision. Without that insight, hospitals face increased denials from a variety of factors—especially medical necessity—not to mention poorer outcomes that, in and of itself, can negatively impact the bottom line.

This is especially problematic as hospitals grapple with the COVID-19 pandemic. As we’ve learned over the past several months, COVID patients presenting with multiple co-morbidities make care decisions even more complex. And managing the COVID claims process is now just as complex with the uncertainty of when to bill through the CARES Act, when to bill through the payer, or when to bill the patient. And this uncertainty is likely to increase denials and put even greater pressure on a hospital’s bottom line.

Denials Are On The Rise

Payers today are denying a record number of claims, especially Medicare and Medicaid. While the average denial rate tends to hover around 11%, some payers—especially ACA Marketplace plans—deny one in every five in-network claims. Across all insurers, rates range from 1% to more that 40%.

The cost of those denials adds up. A 2016 study of 3.3 billion provider transactions across 724 hospitals found that up to 3.3% of net patient revenue was at risk due to denials. The cost? $262 billion, or $4.9 million per hospital. The study found that while 63% of denials are recoverable, the rework to appeal those denials was a staggering $8.6 billion, or $118 per claim.

One reason denials have increased is that payers are using more sophisticated algorithms to identify things like medical necessity issues and potential DRG downgrades. They’re also adding more complex criteria on top of what the CMS recommends.

Preventing Denials By Aligning Clinical Decisions With Payer Criteria

To prevent denials, providers must take a more proactive approach—one that begins in the ED and uses evidence-based admission criteria built into the workflow through the Electronic Health Records (EHR). While most revenue cycle and Electronic Medical Record (EMR) vendors offer a basic solution using payer criteria, they don’t go far enough. Providers need access to clinical indicators for more effective review of utilization and documentation of medical necessity, and for more informed decision-making at the point of admission.

A More Effective Revenue Cycle

The ED is the gateway to the hospital and clinicians in the ED are the primary driver of the revenue cycle. In a time when hospitals are struggling with reduced reimbursement, paper-thin margins, and the COVID-19 pandemic, they need a more effective way to protect their bottom line. By leveraging an evidence-based admission criteria solution, hospitals can decrease denial rework costs, reduce write-offs, improve outcomes, and enhance patient satisfaction.