As payers become more sophisticated and aggressive in their audit and denial activity, many hospitals have struggled to keep pace. Operational silos and departmental driven metrics lead to disjointed, labor intensive, and ultimately unsuccessful efforts. These efforts may be perceived as progress in one department but have little impact on the hospital’s bottom line. A successful strategy recognizes two things: first, each payer is unique and varies significantly in its approach and second, managing Key Performance Indicators (KPIs) in departmental silos only plays into the hands of the payers. To that end, what is needed is a single indicator of success that recognizes the interdependence of departments and allows hospitals and health systems to create strategies and tactics that leverage the power of the whole rather than focusing on the specific metrics of the parts.
Contract Yield - The Ultimate Metric to Measure Performance
We have written about the ultimate metric before – Contract Yield as the “true north” number. Contract Yield is an index that allows hospitals to normalize variation and create a fair comparison among its payers including traditional Medicare. The calculation for contract yield is actual payment received from a payer relative to charges. Once that comparative bottom line has been calculated, understanding the causes of revenue leakage across each driver – rate structure; observation rate; Case Mix Index (CMI); documentation and coding issues; resource utilization; and billing office denials and downgrades – uncovers not only the impact and interrelatedness of the drivers of revenue leakage, but allows you to understand the payers’ responses to your efforts to combat revenue leakage.
Make no mistake, your hospital is under siege by these payers. They need to turn a profit. If they don’t, the payers leave the market while your hospital still cares for their former insureds. And it is far easier for payers to withhold payments to providers than to invest the time and resources to manage patients more efficiently. They conquer hospitals and turn a profit by implementing individual strategies and tactics that keep hospital departments such as Utilization Management, Contracting, and Coding separated from one another. One department might receive a prior authorization denial, while another department gets a “DRG validation” audit and denial, and “never the twain shall meet.” Once you adopt this “under siege” and “conquer by division” mentality, you can take steps to combat these payer incursions.
Level the Playing Field
Hospitals have tried many approaches – investing in Utilization Review infrastructure, contract modeling engines, Clinical Documentation Improvement, and Length of Stay management programs – but MA performance continues to suffer. Recently, I was reading an old Central Intelligence Agency article, “The 10 Commandments of Counterintelligence,” and I realized that the principles used by intelligence services to combat their foes are wholly applicable to approaches hospitals must use to level the playing field with their payers.
- Be Offensive
- Honor Your professionals
- Own the Street
- Know Your History
- Do Not Ignore Analysis
- Do Not Be Parochial
- Train Your People
- Do Not Be Shoved Aside
- Do Not Stay Too Long
- Never Give Up
Each one of these “counterintelligence commandments” is relevant to hospitals. “Be Offensive” means not taking what the payer medical directors or billing office personnel tell you as gospel – you must decide, based on the contract and regulations, what is appropriate and institute processes and protocols to ensure payers are held to those standards. When a payer, for example, arbitrarily decides to change the rules and disallow certain diagnosis codes in the calculation of a final DRG, do not accept that. Understand your hospital has rights and escalate. If a payer uses the “Two-Midnight Rule” only when convenient for it but changes the rule when it does not work in its favor, take them to task.
Leverage Analytics to Focus Your Efforts and Get Results
When the author speaks of “Do Not Ignore Analysis,” he makes a case that operators are not usually good analysts. Importantly, he describes what can happen when the people doing the operational work are informed by the information they need:
“Wonderful things happen when good analysts in sufficient numbers pore over our DA reports, presence lists, SIGINT, audio and teltap transcripts, maps, travel data, and surveillance reports. They find the clues, make the connections, and focus our efforts in the areas that will be most productive.” [Bold added by the author]
This insight could not be more applicable to devising your global approach to Medicare Advantage plans. You need the right information not only from your department, but from all revenue cycle functions. You need to know not merely the general problem, but also the specifics of when and where you are vulnerable – down to the department, diagnosis, clinician, or the individual case. Only when you have this information can you work in concert with your colleagues to develop a response that gives you the results you expect. “Do Not Be Parochial” also applies here, as it is rare that the tactics used by the payer do not require a multi-pronged, inter-departmental response.
Never Give Up
I could write a long tome on each one of these principles, but will end on this note. To me, the most important commandments are “Do Not Be Shoved Aside” and “Never Give Up.” I speak to many hospitals, and many of their people have essentially resigned themselves to accepting what the payer gives them. Identify the challenges posed by the payers and do not stop bringing it up until action is taken. Payers are counting on you to become exhausted trying to chase down and combat their multi-pronged attacks on your revenue. Never Give Up, otherwise your hospital will die a revenue “death by a thousand cuts.” Also, I promise you that once you tackle one payer issue, another will arise. If you have deployed a process of relying on analytics to identify these issues, establishing the root cause, and taking immediate and aggressive actions – all the way up to confronting the payer at the executive level or pursuing legal remedy, you will get results. Sometimes that means a contract change or an acknowledgement by the payer to change processes. Sometimes it is merely the payer moving on and looking for an easier target elsewhere. Whatever the endgame, following these ten commandments of counterintelligence will leave your hospital and your department in a stronger, sustainable position, allowing you to fulfill the mission of providing excellent care for your patients.
Questions? Comments? Observations? Please email me at Drjoe@VersalusHealth.com. I would enjoy hearing your perspectives and thoughts about this post.