Finding the revenue cycle blind spot: 5 questions with Versalus CEO Dr. Robert Corrato
Dr. Corrato will moderate a panel at Becker’s Hospital Review 7th Annual CEO + CFO Roundtable titled, “The Hidden Threat: How Complacency in Utilization Review Threatens your Bottom Line, ” at 10:55 a.m. on Wednesday, Nov. 14. Learn more about the event here.
Question: What is one of the most interesting healthcare industry changes you’ve observed in recent years?
Dr. Robert Corrato: In 2013, CMS implemented the two-midnight rule to clarify the appropriateness of inpatient hospital admissions. CMS implemented the policy to achieve the following goals: decrease short-stay inpatients, decrease longer stay observation, bring about more consistency for Medicare beneficiaries and limit a patient’s financial burden. This is a significant change to the criteria used to evaluate Medicare inpatient and outpatient billing status, which before the two-midnight rule was based on severity of illness and intensity of service. The two-midnight rule represents a significant opportunity to streamline and simplify processes. Unfortunately, most hospitals have made some adjustments but have largely continued to use the same screening criteria to review cases that focus on severity of illness and intensity of service. Although hospitals are now looking to use technology to automate this process, it’s technology that is automating an antiquated process. Automating a bad process does not make the outcome better, you simply get the wrong answer faster. Hospital leaders need to fully understand the rules, discard dogma that is now obsolete, and change the way they do utilization management.
Q: What do you see as the most vulnerable part of a hospital’s business?
RC: Vulnerability exists where we are unaware or not in control. An example of the first is what we refer to as the revenue cycle “blind spot” — the intersection between clinical decisions and documentation, regulations and contracts and the business office. This is where utilization management lives and is fraught with thousands of hand offs and lack of accountability intra-department. This is one of the most vulnerable areas of the hospital revenue cycle. Hospitals have set up processes for revenue cycle, but few have paid closed attention to this part of the cycle. Most utilization review/utilization management programs continue to apply one process to all cases with little visibility into the regulatory reasoning, contractual obligations or financial impact. The result is lost revenue, increased compliance risk and significant process inefficiencies.
An example of the second type of vulnerability almost happened this year. CMS removed total knee replacement from the inpatient-only list. While this created financial distress due to decreased payment for outpatient surgeries, it could have been much worse for hospitals. If CMS had also approved doing the procedure at ambulatory surgical centers, the procedure could have been done outside of the hospital at a physician-owned facility. That would mean hospitals would receive zero revenue on a lot of these cases, and remember, this is the most common major surgical procedure in the country. Hospitals have virtually no control over how CMS makes this decision, hence the vulnerability.
Q: What’s one conviction in healthcare that needs to be challenged?
RC: I’d like to challenge healthcare executives on their belief that they have enough data, reports and analytics — and have them ask themselves what happened, why and what will happen. Question your assumptions about processes and metrics. Most health system/hospital executives believe they have the information needed to accurately measure performance. In many areas of the hospital, they do. But in others, the traditional metrics used to monitor performance have hospitals executives focusing on the wrong areas and many times unable to determine why something is happening. For example, a low private payer denial rate is not an indicator of good financial performance. But many health systems still measure and reward staff based on keeping a low denial rate. A low denial rate is not a sign of appropriate reimbursement and good payer relationships but may be the result of utilization management nurses acquiescing to payers and making most cases observation. Question the status quo and ask why.
Q: What keeps you excited and motivated to come to work each day?
RC: What motivates me is the fact that we are giving hospital executives insights into both clinical and financial operations that they have never seen before and that they are able to act upon. Up to now, it has been the standard for clinical information to reside in one silo and finance in another. Combining the data is a game changer. Nothing is more satisfying than hearing an experienced CFO say to me: “I have never seen information like this,” and then seeing those insights translated into meaningful change. That change might be safeguarding revenue, improving compliance, or streamlining operations, but it’s change that we are a part of — and that is what motivates me to come to work every day.
Q: How can hospital executives and physicians ensure they’re aligned around the same strategic goals?
RC: This can be a real challenge. For the most part, hospitals and physicians are already aligned in wanting to provide patients with the highest quality care they can. However, hospitals and physicians have different contracts and incentives with the payers, often putting them at odds. This problem is magnified when the payer or its subsidiary owns the physician group. It is important for hospital executives to understand what physicians are driving contract underperformance and understand the drivers of that underperformance. Then, they need to sit down with the physician and the payer to create processes that are equitable and acceptable to all parties. I know that sometimes physicians can be frustrating — I’m one of them — but I’m careful never to blame them for merely optimizing their own contracts. The key is to understand their incentives, and if they conflict with hospital incentives to work it out with all parties at the table.