Becker's Hospital Review

18 Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 tolerance policy for fraudulent activity, specifically upcoding. In their letters, Ms. Sebelius and Mr. Holder called on groups like the American Hospital Association to help them in the fight against such improper activity. Hospitals feeling inundated by the storm of regulatory demands are not alone. Richard Umbdenstock, president and CEO of the AHA, agreed with the government's call for regulatory oversight, but he stressed hospitals' need for more guidance — not more audits. "No one questions the need to identify billing mistakes, but the flood of new auditors is deluging hospitals with redundant audits, unmanageable medical record requests and inappropriate payment denials," he wrote in an op-ed in The New York Times. The regulatory environment is not taking a pause: Hospitals have new regulatory challenges on their plate this year, such as HIPAA and meaningful use audits. The HITECH Act requires HHS to perform periodic audits to ensure compliance with HIPAA security rules and breach notification standards. Accordingly, the Office of Civil Rights launched an audit pilot program from November through December that will expand into 2013, making it a matter of when — not if — hospitals will be audited. CMS also launched meaningful use audits in the summer of 2012, but as of press time, the agency had released little information on how many provid- 11 Ways Hospitals and Health Systems Can Increase Profitability (continued from page 1) for many hospitals are the source of positive margins, are also changing reimbursement structures with hospitals, which could put further pressure on hospitals' bottom lines. With all of these financial pressures, managing a hospital's balance sheet has become as challenging as a blindfolded dart game. However, hospitals and health systems are not about to enter a black hole in 2013. There are still several ways organizations can maintain, or increase, profitability next year. As always, it will require diligent attention to detail, hard work and consistent reminders that hospitals really only have two options within their parameters: increase revenue or cut expenses. 1. Make a concerted effort to revamp the revenue cycle. Richard Rico, CFO of Sky Lakes Medical Center in Klamath Falls, Ore., arrived at the independent, 176-bed hospital more than three years ago. One of the first things he noticed that was eating away at the hospital's profitability was a lack of attention paid to the revenue cycle. Coding needed improvement; claims were wasting away in accounts receivable; and upfront payments were almost nonexistent. He knew he had to work with the financial team to turn the department around. "We worked as a team with coding, billing and collections to make sure we are maximizing our net revenues," Mr. Rico says. "Now, we don't get denials because of incorrect coding, and we are collecting at a higher rate on same-dollar gross revenue, so that adds to the bottom line." The revenue cycle is one of the biggest areas of opportunities for hospital leaders in 2013 because it's completely within their control. If hospital coders and physicians improve their ers will be audited. Auditors may focus on whether providers actually own their certified EHR, whether physicians regularly use the EHR and whether providers can support their claims for exemption to MU attestation measures, if applicable. Finally, Medicare and Medicaid Recovery Auditors, formerly known as recovery audit contractors, remain a significant burden for hospitals and health systems. Medicare auditors topped a good chunk of their collection records in fiscal year 2012 — as of press time, collections for three of the past four quarters surpassed previous records and totaled $1.64 billion in overpayments. It's likely Medicare auditors will maintain this momentum into 2013. Providers have access to some dialogue and information on Medicare audits, such as CMS' quarterly audit newsletters and the AHA's RACTrac surveys, but Medicaid audits remain more ambiguous. Medicaid audits were launched in January 2012, but there was little update on the audits' progress throughout the year, largely because a good portion of states did not have Medicaid audit solutions finalized for at least six months into the year. It has been estimated that once they begin gaining ground, Medicaid audits will focus on coverage and payment issues first, similar to Medicare audits. n coding and documentation — all while staying in compliance with federal and state guidelines — that immediately results in better reimbursements that actually reflect the value of services provided. Revenue cycle improvements will especially help out hospitals and health systems that are letting their A/R days climb too high. 3. Standardize physician preference items. Enhancing a hospital's supply chain is always considered to be an easy way to improve profitability. Group purchasing organizations help that cause, but Ray Alvey, CFO of Saint Louis University Hospital, says bigger savings can be found in physician preference items. "The older a claim gets, the less likely it is you'll collect," Mr. Rico says. "That was something that we focused on, and we really have maintained that for the past three years. It's a real profit-booster." Implantable devices, especially within orthopedics and cardiology, can be very expensive for hospitals, and not every physician may use the same products for their procedures. Mr. Alvey says executives look to standardize the products for their physicians — but not in an authoritarian manner. The hospital provides physicians with all necessary data from vendors on their procedural items in a transparent process, and through collaboration, the hospital and physicians agree on the preference items that work best for the hospital. 2. Add new services if they have a good return. Last year, Larry Moore, CFO of Cumberland Medical Center in Crossville, Tenn., said adding a new service line such as bariatrics or other specialties is the most common way to add revenue to the organization's earnings statement. Adding new service lines remains a valuable tactic for 2013; however, any addition of services requires research of the surrounding population as well as a comparative analysis of service lines offered at competing hospitals and health systems. Mr. Rico agrees those are important things to consider when exploring the addition of a new service line. Creating new streams of revenue is a big maneuver and cannot be done without the requisite research and planning. However, the time may be ripe for hospitals to add a new service line because the costs associated with the process are fairly low due to the stagnant economy. A growing and aging population on the horizon may also spur hospitals to dip their toes into new services to reach more patients — as long as the return on investment is both immediate and sustainable. "Sometimes people forget that things that were more expensive years ago may make more sense now, especially if you're a sole community hospital," Mr. Rico says. "Add new services where you can — as long as they have a good ROI." "If you work with physicians, drive utilization and help them buy into [the concept], that is where the bigger savings will be," Mr. Alvey says. "However, if you went in there and said, 'We want the lowest prices,' you lose support. You can't nickel and dime them." Bill Fera, MD, clinical transformation leader for Ernst & Young's Health Care Advisory Services, agrees. He says hospitals that act in a concerted manner to identify the most cost-effective, bestvalue devices, medications and other physician preference items immediately help out their own profitability prospects. However, it must be done in a thoughtful way, and physician-led "value analysis committees" can make the standardization of these products more efficient. "If you can identify high-cost personal preference items that may not have an equivalent advantage, why are you using them?" Dr. Fera says. "But [this process] starts with medical staff lead-

• Cover