Revenue Cycle Management: Dealing with Denials

Fred J. Pane , B.S.Pharm. Sr. Director of Pharmacy Affairs

Premier Inc.

Linda Pearson, R.N., M.B.A.,CCM, ACM, CPHQ Manager, Case Management Department

H. Lee Moffitt Cancer Center & Research Institute

Erica Egri, M.S.Premier Management EngineerSouth Florida Baptist Hospital

Why revenue cycle management?

• American Hospital Association:– Hospitals across the U.S. are under pressures of escalating debt.

Uncompensated care approached $25 billion in 2003.– A survey of 130 hospital CFOs in 2004 revealed a leading financial

priority to reduce accounts receivable (A/R) days.• The Advisory Board Company developed a white paper on revenue

cycle management in 2005 for CFOs• Those affected:

– Hospital bond ratings and cash on hand– Capital expenditures and future building plans– FTEs and payroll expenses

American Hospital Association and The Advisory Board Company

Why revenue cycle management?

• Reducing days in A/R is tough! • Challenges:

– Self-pay and uninsured patients– Billing errors– Insurance underpayments– Operational inefficiencies

• Some hospitals have placed cashiers in their EDs, other departments to collect co-pays before the patient leaves

Revenue cycle business model

Start

IS support

Medical records coding

Claims submission Third-

party follow-up

Rejectionprocessing

Paymentprocessing

Appeals

Contractmanagement

Chargecapture/CDM

coding

Encounterservices provided

Scheduling/registration

Patient access

Revenuegeneration

Outpatientprospective

paymentsystem

Front-end

Back-end

Created by Fred J. Pane, B.S.Pharm.

We need to know ALL of our payers!

• Payer A: Current MA rate• Payer B: Cost plus 10%• Payer C: 75% of charges• Payer D: 70% of charges• Payer F: 65% of charges• Payer G: 80% of charges• Payer H: Current MA rate plus 5%• Payer I: Medicare rate

Actual Hospital Reimbursement Rates

Ambulatory medical oncology unit payor mix

PayorHospital A payor %

Hospital B payor %

Combined locations %

MedicareBlue CrossManagedMedicaidSelf-InsuredCommercialMedicaid Managed CareSelf-PayMedicare Managed CareDirect Contract

412820

43321

<1<1

481927

1221

<10

<1

422621

3332100

Total 100 100 100

What are the top profitable product lines?

• Percentage of total hospital profit 2005– Inpatient-top 3

• Cardiac 18%• General Surgery 14%• Oncology 9%

– Outpatient-top 2• Radiology 26%• Oncology 14%

The Advisory Board Company, Innovations Center

Outpatient Reimbursement: Case Management’s Role

Linda Pearson, R.N., M.B.A., CCMH. Lee Moffitt Cancer Center & Research Institute

Objectives• Identify case management role as “Clinical Business

Manager”• Describe the role of case management in Medicare

reimbursement

Hx of Medicare• Social Security Act• National Health Insurance Program

Health insurance intended for people

• Age 65 or older• Some under age 65 with disabilities• ESRD

Medicare program overview

Part AHospital Insurance

Benefits (automatic)

Part BMedical Insurance Benefits (optional)

Hospital inpatient care

Hospital OP LMRP

Nursing home care

Home health care

Hospice care

Physician services

Outpatient services

Medical supplies

ESRD services

MedicareAdministered by CMSand local contractors

Part CMedicare + Choice

(optional)

Medicare managed care

Provides at least comparable benefits

Flexible benefit structure CMS

Part DPrescription Drug Benefit

Decentralization of Medicare

• Section 1816(a)

Section 1842(a)

• Intermediaries and carriers– To identify your local FI or contractor go to

www.cms.gov

CMS

Responsibilities of carriers and FIs

• General overview– Implement integrity and safeguards– Oversee billing, payment and benefit functions

• Development of LMRPs / LCDs– Medical review of claims– Determination of medical necessity

Advance beneficiary notice• Notifies the beneficiary of reasons services not covered• Given before services rendered• Beneficiary’s financial responsibility

– Secondary insurance– Charity– Appeal rights

Actual Hospital Model

Advance beneficiary notice• Beneficiary as informed consumer

– Physician / patient communication• Treatment options• Quality of life issues

– Active participant in healthcare decisions

Patient appeal process1. Physician orders noncovered service2. ABN issued to patient3. Patient signs ABN; services rendered4. Provider bills services with modifier5. FI denies claim; notifies beneficiary6. Beneficiary files appeal to FI7. Medical records sent to FI8. Wait…..

Actual Hospital Model

Provider appeal processLCD Reconsideration Process• Request to modify any section of existing LCD• Must be submitted in writing and clearly state specific

revisions• Copies of published evidence supporting revision

Provider appeal process• FI has 30 days to determine if request is valid• If valid, within 90 days of day request

received, FI makes a final reconsideration decision

• FI must provide rationale for decision regardless of final determination

FI = Fiscal intermediary

LCD appeals

The appeal process and changes to the final LCD is long and tedious.

Best practice: maximize outpatient reimbursement

• Revenue Improvement committee– Members (clinical and financial)– Identify Medicare reimbursement issues– Identify appeals

• Billing and coding process– Lead biller, QA coding specialist and Case

management / Clinical business manager– Meet weekly– Identify noncovered charges– Review documentation– Recode and rebill as appropriate

Best practice: maximize outpatient reimbursement

• Pharmacy responsibility: new drug– New drug approval & formulary status– Determine drug and infusion charge– Ensure billing codes conform with CMS rules– Build standards into protocols and orders

• Pharmacy / radiology responsibility: individual patient– Identify non-covered items against LMRP – Notify MD for ABN– Justify non-indicated use if required for appeal

Best practice: maximize reimbursement

Role of pharmacy / radiology

1. MD + core team formulates patient Tx plan

2. Orders reviewed by pharmacy / radiology

3. Pharmacist / radiologist checks LCD software for medical necessity (Caremedic)

4. Order passes; treatment continued

5. Order does not pass; pharmacy / radiology notifies MD to obtain ABN

What’s next ?

Additional step in ABN process: Patient Resource Center

• Patients receiving ABN will be screened by Patient Resource Center pharmacist for eligibility to drug replacement/co-pay or full assistance programs

The future of Medicare

• Changes to LCD– Name change to Local Coverage Decision (07/01/04)– Plan developed by Secretary to determine which

LMRPs to adopt nationally– ***Collaboration among FIs– FLASCO / FI meetings– Standard format for LCDs– Overall goal to increase consistency

Checklist for case managers• Notify Financial Services of non-covered services

• Ensure proper CMS coding• Update pre-printed orders and order pathways

• Check for claim denials• Monitor rule changes

• Adopt changes into hospital processes• Educate members of financial / clinical team• Actively interact with LCDs and other rule makers

Reimbursement questions

• How does the reimbursement change impact your clinical and formulary decisions?

• How do you make decisions on inpatient and outpatient products?

• How closely do you assess payer mix?

Information sourceswww. accc-cancer.comwww. cms.govwww.cms.hhs.gov/mmu/ (NEW)www. medicare.govwww. fda.govwww. cancercare.govwww.health.cch.comCo-payment assistance 800-272-9376

Cardiac Stress Medicare Denials

• Goal: to decrease the percentage of Cardiac Stress Test Medicare denials on outpatients and observation patients from 42% to 13% by June 2006

• Problem was identified through auditing of charts with Medicare denial charges for cardiac stress tests

• Project start date: December 2005• Project end date: June 2006• In 2004, SFBH lost $87,531 in total charges on cardiac stress tests. In 2005,

total losses increased to $114,171– 2 drugs denied along with test:

• Cardiac Ejection Fraction• Cardiac Motion Wall

• Team Members:– Jack Vasconcellos, Director, Operations– Tammy Gaschler, Manager, Patient Care Coordination– Erica Egri, Premier Management Engineer– Beth Player-Tancredo, Manager, Physician Relations– Milissa Sulick, Coordinator Cardiac Rehab

Project overview

Changes implemented / interventions • Use of new cardiac stress test script with diagnoses that meet

Medicare Medical Necessity per LMRP guidelines

– Physician is asked to select one of the diagnoses listed on script to perform the test

• Education provided to physicians and their office staff on financial impact of documenting inappropriate diagnosis on hospital

– Cardiologists and biggest “offenders” were target audience

• “Offenders” identified by determining who ordered the test through the completion of chart audits

• If a patient chart does not list the appropriate diagnosis for the test, chart is to be held until appropriate diagnosis is obtained

Results / impact

54%

13%

24%

42%

0%

20%

40%

60%

80%

100%

2004 2005 2006

% D

en

ied

*

Old Process New Process

-$128,600 lost

-$30,960 lost$97,64

0*Denotes % denials of cardiac stress tests performed

on Medicare outpatients

Statement of results• Reduction in number of cardiac stress tests denied

– Savings of approximately $100,000 based on reimbursement due to appropriate documentation of diagnosis

• Reduction in re-work caused by having to re-pull charts with denials to investigate cause of denial and provide appropriate documentation for reimbursement

• Physician satisfaction – with the use of the script, physicians will not receive as many calls from hospital staff requesting appropriate diagnosis to perform test

Success factors and lessons learned• Keys to success

– Team dynamics – everyone engaged and up-to-date – Physician willingness to use new script and attend

education session• Barriers to success

– Resistance to change from physicians’ office staff– Coders’ goal to code charts as quickly as possible so bill

can be dropped and hospital can be reimbursed• Lessons learned

– Medicare has a very strict reimbursement policy, and healthcare organizations need to increase physicians’ awareness on issues related to denials and their impact on the financial health of a hospital

Next steps• Observation patients are currently checked for medical

necessity– Unit clerk/cardiac rehab not entering patients on

schedule – no way of knowing whether or not diagnosis meet Medicare medical necessity

• Monitor denials through the use of a dashboard to be reviewed on a monthly basis– Charts with a cardiac stress test denial will be audited

and root cause analysis will be performed to determine cause of denial

• Solidify projected savings• Focus on EKG Medicare denials, since it was our 2nd

largest denial in 2005