Diagnosing Revenue Leaks

Karen Minich-Pourshadi, for HealthLeaders Media , December 13, 2010
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Editor's note: This piece is based on Karen Minich-Pourshadi's Oct.18 online column, "Financial Risk Assessments Can Diagnose Revenue Leaks." Visit www.healthleadersmedia.com, click on the Finance tab, then the Armchair Finance link.

Managing a healthcare organization's risk is a challenge, but doing so while the payment environment undergoes massive upheaval requires some serious forward thinking. Just ask anyone working in radiology these days and they'll tell you it's a tense time for their bottom lines—which makes it all the more important that they stay atop their revenue cycle by completing a regular financial risk assessment.

Diagnostic imaging has been a target for more than its share of cuts by Medicare. The government's strategy: Slash spending for imaging services by decreasing payments for the technical component of certain nonhospital advanced imaging services. Consider that in 2010 the Medicare Physician Fee Schedule final rule had adopted a 90% utilization rate for certain imaging equipment valued at more than $1 million, which included CT and MRI services. That number will change in 2011, however. The Patient Protection and Affordable Care Act will adopt a 75% utilization rate for CT, MRI, nuclear medicine, and PET equipment phased in over four years.

Both inpatient and outpatient imaging centers stand to feel the hit from this decrease in reimbursement, but it's the outpatient imaging centers—those that lack other streams of income—that will be hit the hardest. Michael Gonzales, billing operations manager for Radiological Associates of Sacramento Medical Group, Inc., knows this topic only too well, and he offered his insights on how the 900-employee private practice approached its revenue cycle challenges.

With more than 90 providers, RAS generates more than 750,000 claims per year. Gonzales' job is to make sure as many of those claims get paid as quickly as possible. So he and his team did a financial risk assessment to uncover current and potential problems. They recognized the possibility of more decreases in reimbursements, but they could do little to control that.

Like many other healthcare providers, RAS found the assessment uncovered other, preventable revenue cycle leaks. One of the biggest was in patient eligibility—they had an eligibility denial rate of 4.3% of the monthly volume. That denial rate is not completely surprising when you consider the group saw approximately 2,000 patients per day across 23 locations. But there was more.

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