Physician Group's Rev Cycle Initiative Yields '300% Return On Effort'

Dignity Health's physician group cut patient increased cash collection and cut patient bills in accounts receivable.

A revenue-cycle initiative at a California-based physician group has boosted the organization's finances, including a 20% decrease in accounts receivable over 90 days and an increase in cash collections to 108% over budget.

Dignity Health Medical Foundation’s affiliated medical groups serve as the primary employment model for Dignity Health in California, with more than 1,000 clinicians. San Francisco-based Dignity Health operates 39 hospitals in California, Arizona and Nevada.

In January, DHMF sought to reverse downward trends in accounts receivable, cash collection, and earnings before interest, tax, depreciation, and amortization. In response, the organization launched an effort that focused on accounts receivable management, charge integrity, vendor strategy, and clinical documentation.

Accounts Receivable

One of the primary goals of DHMF's revenue-cycle initiative was to improve accounts receivable performance without relying on increased effort—and expense—at accounts receivable vendors. This goal was met by increasing staff time in the DHMF central business office created mainly with overtime hours.

With the additional staff hours, AR was assessed on a weekly basis. The assessments targeted several classes of accounts that had aged beyond 120 days, including these:

• Rejections of claims over $1,500 due to medical record requests
• Claims rejections for surgeries and infusions due to missing information such as operative report notes
• Government claims that could be collected potentially quickly, such as Medicare claims
• High-dollar recurrent patients
• Commercial payers with a history of paying relatively quickly

DHMF focused on accounts aged beyond 120 days for two reasons, says Diane Butler, a director at Chicago-based consultancy Navigant, which helped implement the physician group's revenue-cycle initiative. First, the difficulty of collecting accounts increases significantly after 120 days. Second, AR aged greater than 120 days is customarily "reserved," with organizations setting aside cash in the event of failure to collect and eventually transferring the outstanding balance to bad debt.

The AR effort has generated significant gains, says Christopher McGoldrick, DHMF’s chief financial officer. "When we began this initiative, approximately 50% of our accounts receivable was less than 90 days. Now, it represents 70%."

DHMF, part of a health system that is slated to merge with Englewood, Colo.-based Catholic Health Initiatives, has set a goal of 85% of AR at less than 90 days, he says.

Improved AR performance coupled with enhanced cash collections were better than budgeted levels and more than offset increased spending on CBO staff overtime, McGoldrick says.

"We had a 300% return on effort."

Charge Integrity

Before a physician's services can be billed to a payer, the charge capture process must be completed. Charge capture identifies the services rendered as well as patient-encounter information such as patient name, medical record number, date of service, and where the patient was seen.

To optimize its charge-capture processes, DHMF, whose parent company posted $12.6 billion in 2016 operating revenue, took several actions:

• Developed a management report for missing and pending charges to alert clinic leadership about delays between time of service and billing of service
• Modified the coding staff review process to focus on claims with higher complexity because of the proven track record of clinicians coding patient encounters with lower complexity
• Decreased the time for finalization of a charge and clinician sign-off

The coding staff focused on high-complexity charges as a crucial part of DHMF's charge-integrity effort, Butler says.

"The coders were looking at every single charge that came through, which was a huge piece of business. Based upon experience, we knew that some charges did not need to be reviewed, especially [evaluation and management] codes at the lower levels," she says.

E&M codes range from Level 1 to Level 5. Butler says clinicians tend to code correctly for the lower-level codes: Level 1 to Level 3. However, clinicians have shown less accuracy when coding Level 4 and Level 5 services.

At Level 4 and Level 5, the code reflects intangible services such as medical decision-making and the complexity of the patient's status. 

“Experience has shown that providers are more likely to undervalue these less tangible services and choose a code that does not accurately reflect the complexity of the patient's status or the decision-making employed by the provider," Butler says.

Vendor Strategy

"There was a dependence on vendors that had become automatic," Butler says. "What DHMF has now is a prospective look at where they have the internal talent to manage claims, and where there are claims that are so small in volume that they don't have the expertise—that's where they look to bring in vendors."

For "niche" claims with small volumes, vendors often have expertise in areas such as coding that DHMF does not have in-house.

Based on this vendor-spend strategy, DHMF renegotiated some contracts to drive cost savings, McGoldrick says.

For example, DHMF has been able to lower accounts-receivable costs by changing the timing of when some claims are sent out of the organization to a vendor for accounts-receivable management. Under one original contract, claims were placed with an external AR vendor at 120 days from the date of service. Under the new contract terms, claims are sent out to the vendor 120 days from the date of posting the charge.

This contractual change has resulted in keeping aging claims in-house about 10 days longer.

"We recognized that they were aging out and being placed with the vendor, when, in fact, we had done the lion's share of the work and all we had to do was further pursue payment," McGoldrick says.

Decreasing reliance on contract-labor coders also has generated significant cost savings, he says. "We were paying about 300% more per hour to hire contract-labor coders than to have coding in-house. So, we have an initiative to bring in many of our coders."

Clinical Documentation

Physician engagement, training and coding oversight were the main components of DHMF's clinical-documentation improvement efforts.

Financial messaging was the key element of physician engagement, McGoldrick says, with clear communication that the central business office needed accurate clinical documentation including physician charts to generate service charges and compensation for clinician services.

"For them, it was a matter of compensation. For us, it was a matter of revenue recognition."

A vendor provided peer-to-peer clinical-documentation training for DHMF physicians.

"Doctors heard from other doctors on how to code their patient encounters appropriately. They were already doing the work, and they just needed to document it in order to get the appropriate credit," McGoldrick says.

"Coder intervention" is an essential part of clinical-documentation oversight, he says. These interventions feature coders bringing a sampling of notes to a clinician, who is shown how the notes could have been modified to reflect the appropriate level of service and medical decision-making.

From March 2017 to this month, DHMF's charge-capture and clinical-documentation efforts have significantly reduced the lag between time of service and the generation of a service charge, he says.

In March, the lag was 22 days; now, the lag is 10 days.

Editor's note: This story has been updated to more accurately describe the relationship between Dignity Health and DHMF physicians.