New payment startup Ooda Health has raised $40.5 million on the premise that its technology will make sure patients never get another bill from a hospital or doctor.
Why it matters: Ooda Health not only has big-name venture capitalists on board (Oak HC/FT and DFJ led the funding round), but also has large health insurers and providers as investors. However, while the company attempts to cut administrative waste, it won’t address the health care system’s underlying pricing and spending habits.
https://www.healthcareitleaders.com/blog/5-revenue-cycle-trends-to-watch/
When we think of healthcare and hospitals, we primarily think of the patient experience as it relates to individual health and wellness. However, another important part of the patient experience involves the finance and billing departments of healthcare organizations. The moment a patient checks in for an appointment, they enter into this system of payment and processes and the journey ends when all claims and patient payments have been received either from the patient or from their insurance company. This sounds like a simple, linear process, but it’s much more complicated than that. To help organize these financial processes, organizations rely on healthcare revenue cycle management and software to process this constant influx of important data.
As the healthcare industry continuously changes, revenue cycle management policies and software are changing with it. Healthcare IT Leaders Revenue Cycle Lead, Larry Todd, CPA, discusses the changes happening in the industry and the trends to watch in 2018 with revenue cycle management.
Healthcare systems are getting bigger as more organizations are merging. Many legacy systems are beginning to sunset, and there is a need for organizations to implement a new system to support the growth of the organization. “It’s important for organizations to consider how they will sunset their legacy system and embrace the new system during a revenue cycle implementation,” says Todd. “Organizations need to take a step back before the implementation to consider how to build a holistic system. Without proper integrations, many organizations will be challenged to manage their reimbursement processes.”
Claim denials and documentation to support appeals are areas where the revenue cycle marketplace continues to struggle, says Todd. “Organizations are seeking innovative ways to improve these processes and reduce denial rates, through either third-party systems, or, if possible, within the host system.”
“Any implementation will affect the revenue of the organization so it’s very important for CFOs to be involved in the implementation project and to be informed of key parts of the project that could put the organization and its revenue at risk,” says Todd.
As a former CFO and trained accountant, Todd says it’s a mistake for CFOs to disengage once an implementation is underway. “These are highly technical projects, so there is a tendency to hand over the reins to IT or the software vendor, but financial executives need to stay engaged throughout the project, including weekly implementation status updates.”
Clients should form a revenue cycle action team that includes the CFO and puts all of the revenue cycle stakeholders at the table, including clinicians, says Todd. Having the CFO involved in this process ensures critical executive oversight regarding decisions that impact AR and Cash.
As healthcare organizations transition from a legacy system to a new system, they need to consider how they will handle the change management for their staff. “Some employees have been using these systems for more than 10 years. Properly training employees on the new system is a top concern for executives and managers,” says Todd.
As organizations integrate their new system and implement changes, a key recipe for success is to hire experts who understand the technical and operational aspects of the the software and organizational processes. “It’s very valuable to work with a consulting firm that employs real consultants – people who have worked in operations for years and truly understand the unique challenges of implementing revenue cycle solutions” says Todd. “At Healthcare IT Leaders, we all have unique perspectives and experiences that we bring to the table thanks to this approach.”
https://www.bna.com/cigna-prevails-texas-n73014481565/
Cigna Healthcare defeated a lawsuit by a Houston hospital accusing it of underpaying hundreds of medical benefit claims.
Cigna didn’t abuse its discretion when it reduced benefit payments to North Cypress Medical Center Operating Co. Ltd after it learned that the hospital engaged in fee-forgiving—a practice where out-of-network providers charge patients less than what they owe under their health insurance plans, a federal judge in Texas held Aug. 7.
Multiple lawsuits challenging the billing and payment practices between out-of-network providers and health insurers have been filed in the past decade, when insurers started reducing or withholding payments to providers that engaged in fee-forgiving. Insurers such as Cigna, Aetna, and UnitedHealthcare allege this practice is fraudulent.
The ruling, which came after an eight-day bench trial, is a significant victory for Cigna in a long-running lawsuit by North Cypress, which sought to hold the insurer liable for at least $50 million in unpaid claims.
In 2016, Judge Keith P. Ellison held that Cigna violated federal benefits law by denying full payment of benefit claims.
Since then, the U.S. Court of Appeals for the Fifth Circuit issued a number of opinions in favor of insurers, including one where it reversed a $16.4 million judgment against Cigna in a case in which another small Texas-based hospital accused it of underpaying medical claims. Last week, the Fifth Circuit affirmed a ruling against the hospital in its lawsuit accusing Aetna Life Insurance Co. of underpaying medical claims in violation of the Employee Retirement Income Security Act and Texas law.
After the parties Cigna and North Cypress engaged in full discovery, the claims at issue were limited to the 575 benefit claims for which the hospital exhausted its administrative remedies. Cigna argued at trial that in these 575 claims, it didn’t apply its fee-forgiving protocol to reduce payments to 395 of them because they were for nonemergency services.
Cigna’s interpretation of its plans to require an out-of-network provider to collect the full portion of coinsurance from a patient was reasonable, Ellison said.
Ellison, who sits in the U.S. District Court for the Southern District of Texas, pointed out that Cigna had substantial evidence to support its determination that North Cypress engaged in fee-forgiving. Cigna had sent surveys to patients who had received treatment at North Cypress and it discovered that the hospital was discounting or forgiving out-of-network coinsurance, Ellison said.
https://khn.org/news/vulnerable-rural-hospitals-face-quandaries-over-questionable-billing-schemes/
Two rural Missouri hospitals recently handed over their operations to a private company that promised to turn them around with a billing practice it calls “a lab outreach program.”
But the approach that company is using is drawing attention from lawmakers and Missouri’s auditor. It is similar to a tactic underway at 20 rural hospitals in Missouri, Kansas, Oklahoma, Florida and California.
Read KHN’s previous coverage of this topic: “Outsiders Swoop In Vowing To Rescue Rural Hospitals Short On Hope — And Money” by California Healthline senior correspondent Barbara Feder Ostrov.
Hospitals continue to face financial challenges as the landscape shifts, and the challenge posed to hospitals by patient balances after insurance, or PBAI, is growing. That’s according to a new TransUnion Healthcare analysis that showed PBAI rose from 8 percent of the total bill responsibility during the first quarter of 2012 to 12.2 percent during the same quarter in 2017.
Commercially insured patients experienced a PBAI increase of 67 percent from $467 to $781, the analysis showed. The rising trend fueled an 88 percent increase in total hospital revenue attributed to PBAI over the 5-year period.
As patients take on more risk and shoulder more of their own healthcare costs, uncompensated care is also rising. TransUnion cited the American Hospital Association’s 2017 Hospital Fact Sheet, which said uncompensated care increased by $2.6 billion dollars in 2016, the first increase in three years. Rising PBAI has no doubt amplified bad debt for providers, contributing to that rise.
Jonathan Wiik, principal for healthcare strategy at TransUnion, said he expects the figure to have risen in 2017 and again in 2018.
The analysis also indicated that Medicare Bad Debt, which happens when Medicare patients don’t pay their deductibles and coinsurance, rose from $3.14 billion in 2012 to $3.69 billion in 2016, a 17 percent increase. If a hospital feels it has exhausted all efforts to get money from a Medicare beneficiary who has an outstanding copay coinsurance or deductible, and they have documented their efforts to collect, Medicare will actually pay the hospital back though not dollar-for-dollar. Wiik said Medicare pays about 65 cents on the dollar for that payback so the hospital still loses some money, about a third of the bill to be exact.
“A great example of that is a hip surgery patient that has Medicare, has a $1,000 deductible and never paid it,” Wilk said. “The hospital would have gotten $650 back but lost $350.”
The trend indicates that hospitals continue to experience reimbursement pressure that can be tied directly to the increase in how much of their own medical cost patients are now taking on
“That’s a very scary thing. For the average elective surgery the number used to be 10 percent, now it’s 30. Patients are great volume for hospitals but they are horrible payers compared to insurance companies. They cost twice as much to collect from and they take three times as long to pay. That’s an administrative burden for the hospital-cost to collect – it’s significantly higher to collect from a patient than from a insurer,” Wilk said.
To show just how much the payer landscape has shifted for hospitals, patients are now generally ranked as a top tier payer for hospitals, right after Medicare and Medicaid. Then comes PBAI and then commercial, according to Wiik. And with patients in the top of a hospital’s AR ranking, he’s seeing some clinics do deductible holds in which they delay their claim while a related hospital claim processes. They don’t send it in until the patient meets the deductible through the hospital. Once it is met then the clinic will send in their claim and get paid right away because the payer is paying, not the patient.
A big part of the problem is a huge gap in benefits literacy for patients coupled with the driving force of consumerism.
“They don’t understand the magnitude of the costs they they are going to get hit with. A relatively simple elective surgery will blow a $2,500 dollar deductible out of the water almost every time. Patients don’t realize that until it happens so hospitals should be engaging them early and putting patient-facing estimates in front of them. And it’s really not about collecting money from patients anymore it’s about getting them financing,” Wiik said.
That means proactively setting up payment plans to spread debt out over time, which protects not only the patient experience but also the hospital’s revenue. Plus it’s a more pleasant conversation to have. If patients are a higher ranking payer, hospitals should be putting into place more policies to deal with their needs and requirements, treating them like the force they are becoming.
“Imagine if you were going in for knee surgery and your hospital sent you a text that said here’s your payment plan would you like to start that now. I think a lot of patients would appreciate that. It doesn’t happen. But it should. The technology is there. You can buy groceries online now and go pick them up. It’s all billed electronically now.”
It can be hard to do estimates and set up payment plans early because medical costs cost can vary so much, but patients want that kind of experience. They put it on the hospitals to figure out how to get them a bill that is at least close to what they were expecting, and set them up to pay for it.
“They are going to go somewhere where that experience is frictionless. That’s what hospitals have to be aware of,” Wilk said. “The market is highly competitive when it comes to that type of stuff and the ones who are innovating and engaging patients are going to get those millennials and the folks that live paying their bills online.”
A doctor offers a surgical add-on that leads to a $1,877 bill for a young girl’s ear piercing. A patient protests unnecessary scans to identify and treat her breast cysts. A study shows intensive-care-level treatment is overused.
ProPublica has been documenting the myriad ways the health system wastes money on unnecessary services, often shifting the costs to consumers. But there are ways patients can protect themselves.
We consulted the bill-wrangling professionals at Medliminal, one of a number of companies that negotiate to reduce their clients’ charges for a share of the savings. After years of jousting with hospitals, medical providers and insurers, their key advice for patients and their families is to be assertive and proactive.
Here are seven steps patients can take to protect themselves:
https://www.healthcaredive.com/news/hospital-revenue-cycles-improving-but-denials-are-up/511014/
Advisory Board’s biennial survey reviewed four critical performance indicators. The researchers found mixed results. Denials remain an issue for hospitals, which wrote off 90% more uncollectable denials compared to six years ago.
The report also highlights downstream challenges. The median hospital successful denial appeals rate over the past two years:
Advisory Board predicted that denials will remain an issue as an increasing number of them “are based on medical necessity rather than technical or demographic error.”
James Green, national partner of consulting at Advisory Board, said hospitals and health systems need strategies to address denials proactively. “The wide range of denials performance among health systems — spanning 3% of net patient revenue between high and low performers — amounts to a $10 million swing for a median 350-bed hospital. Appeals are becoming increasingly difficult, so health systems should focus on approaches such as improved documentation and authorization processes,” said Green.
Another issue for health systems and hospitals is cash flow. In a bit of good news, the median performance for net accounts receivable days improved 8% between 2015 and 2017. However, Advisory Board warned the gains may be partially caused by write-offs and other factors, which can reduce accounts receivable and pose other challenges.
In another bit of good news, expanded coverage via the Affordable Care Act reduced hospital bad debt. However, that is offset by more and higher patient deductibles. Hospitals in Medicaid expansion states performed better regarding less bad debt, but high-deductible health plans (HDHP) increased unpaid patient obligations across all states regardless of whether they expanded Medicaid.
A recent Kaiser Family Foundation study found that the average deductible for people with employer-based health insurance increased from $303 in 2006 to $1,505 in 2017.
Advisory Board said the increase of HDHPs shows hospitals and health systems need to focus on patient collections, particularly at the point of service (POS). The report said a median 350-bed hospital could increase collections from $800,000 to nearly $3 million by improving POS collections. Advisory Board added that systems that collect upfront often give patients discounts, which result in a 90% increase in POS collections compared to those that do not offer discounts.
The cost of collections is an issue that continues to plague health systems. The median cost to collect has remained at 3% over the past four years, but that is higher than what it cost a decade ago. Advisory Board said reducing those costs are critical given the softening hospital margin trends in the past year. Health systems have also not realized cost improvements despite consolidation and centralized revenue cycle functions.
“While, for example, patient access is difficult to centralize, other functions present good opportunities, such as coding, billing, collections, denials and payer contracting, especially given their high operational costs for these functions,” said Christopher Kerns, executive director of research at Advisory Board.
Lower reimbursements and inpatient services coupled with a payer push for more outpatient services and patients taking on more responsibility for out-of-pocket costs is causing hospitals and health systems to figure out ways to survive. While Advisory Board mentioned suggestions to improve revenue cycle, some systems have instead decided mergers and acquisitions and divestitures are a better way to go.
Going those routes to improve financial footing has their own set of barriers. For instance, mergers and acquisitions reduce expenses for hospitals, but they can also cut revenue and hurt margins in the first two years, according to a recent report by the Deloitte Center for Health Solutions, in collaboration with Healthcare Financial Management Association.
As the Advisory Board report shows, there is some good news concerning hospital revenue cycles. However, hospitals must continue to improve patient collections as well as reduce payer denials — in a cost-effective manner — if they can expect to remain viable.
Health IT giant Verona, Wis.-based Epic Systems has been hit with a False Claims Act lawsuit that alleges the company’s software double-bills Medicare and Medicaid for anesthesia services, resulting in the government being overbilled by hundreds of millions of dollars.
The lawsuit, which was filed under the qui tam provision of the False Claims Act in 2015 and made public Thursday, alleges Epic’s billing software’s default protocol is to charge for both the applicable base units for anesthesia provided on a procedure and the actual time taken for the procedure. This results in the provider being reimbursed twice for the base unit component, according to the lawsuit.
The whistle-blower who filed the lawsuit, Geraldine Petrowski, worked at Raleigh, N.C.-based WakeMed Health from September 2008 through June 2014. In her role as supervisor of physician’s coding, Ms. Petrowski served as the hospital liaison for Epic’s implementation of its software at WakeMed Health.
Ms. Petrowski claims she provided examples to Epic representatives illustrating the double-billing practice, and the company initially ignored her complaints. “It was only after relator, Petrowski, reiterated her direction to fix this software setting that [Epic] relented and fixed it only for the WakeMed Health facility,” according to the lawsuit.
The lawsuit alleges the unlawful billing protocol has resulted “in the presentation of hundreds of millions of dollars in fraudulent bills for anesthesia services being submitted to Medicare and Medicaid as false claims.”
In a statement to Healthcare IT News, an Epic spokeswoman said, “The plaintiff’s assertions represent a fundamental misunderstanding of how claims software works.”
The Department of Justice declined to intervene in the case, and the whistle-blower will move forward in the case without the government.
Not long ago, health systems gobbled up hospitals with the overriding goal of growth, expanded footprints and market share. Some major health systems are now regretting those buys as they have become saddled with community hospitals that are losing money and struggling with large debt and capital needs.
Two major health systems facing this issue are Community Health Systems (CHS) and Tenet Healthcare, who are both looking to shed facilities.
“The strategy that CHS, Tenet and many others had was to really build around scale without really thinking about the regional economics of how these hospitals work together,” Gregory Hagood, senior managing director at SOLIC Capital Advisors, which works with hospitals on mergers and acquisitions, told Healthcare Dive.
Health systems like CHS and Tenet grew their systems with large purchases, but they’ve learned from their experiences and are now looking at divestiture options as a way to shed unprofitable hospitals and billions of debt. No longer are major systems and investors interested in buying struggling hospitals, which CHS did when it purchased the struggling Florida system Health Management Associates for $7.5 billion in 2014.
CHS, a for-profit system with 137 hospitals in 21 states, is looking to divest at least 30 hospitals this year. They have already announced more than 20 hospital sales this year. CHS’ divestitures come after the health system lost $1.7 billion last year and accumulated about $15 billion in debt. Given their financial situation, Moody’s Investors Service recently downgraded CHS’ corporate family rating, probability of default rating and senior unsecured notes.
Meanwhile, Tenet Healthcare, the third largest investor-owned U.S. health system, is looking into strategic business options that may include a sale. The Wall Street Journal estimated Tenet has a market value of $1.6 billion, which is a far cry from what it owes. Fitch Ratings reported that Tenet had about $15.4 billion of debt at the end of June.
Tenet recently announced it’s selling eight U.S. hospitals and all of its nine U.K. facilities, which CEO Trevor Fetter said will yield between $900 million and $1 billion.
In addition to the sales, the company is dealing with executive and board shake-ups. Fetter recently announced his impending departure and two board members left the board because of “irreconcilable differences regarding significant matters impacting Tenet and its stakeholders.”
CHS and Tenet might be the most high-profile systems looking to shed debt and facilities, but they’re far from the only ones. A recent report by Kaufman Hall found that hospital and health systems mergers and acquisitions increased 15% in Q2. Big players are especially active. There were six transactions of health systems with nearly $1 billion or more in revenues announced in the first half of 2017. There were only four such deals in all of 2016.
Though hospital M&A activity remains high, healthcare financial experts say the days of health systems swallowing small, unprofitable hospitals as part of larger deals to solely build a system’s footprint are gone. Those days have been replaced by more strategic decisions as to what is right for the organizations, Richard Gundling, senior vice president of healthcare financial practices at the Healthcare Financial Management Association, told Healthcare Dive.
Health systems are now taking a strategic view of hospitals to see if they fit into their culture. They are also ignoring small, community hospitals with debt or buying them for much less than they may be worth.
The systems that are selling unprofitable hospitals are also faced with a market in which investors aren’t interested in paying top dollar for struggling hospitals with heavy debt. Instead, Hagood said, investors are more interested in post-acute care services like rehab and long-term care and ambulatory care initiatives. They don’t typically see hospitals as a wise investment.
“Smaller systems that have huge debt loads or pent-up capital demands have received a lukewarm reception at best,” Patrick Allen, managing director with Kaufman Hall’s mergers and acquisitions practice, told Healthcare Dive.
Health systems, especially ones that have built up debt, are having trouble making up lost revenues. Hospitals could once cover a struggling type of care through a different, more profitable service. That’s no longer the case as payers and the CMS have squeezed hospital margins.
Sagging reimbursements and payer policies that move patients from hospitals to outpatient care and freestanding facilities are hurting hospital finances. There’s also a CMS proposal to allow hip and knee replacement surgeries for Medicare patients on an outpatient basis. Those kinds of surgeries are often the most profitable for hospitals, which means they may soon lose another revenue driver.
Beyond those direct payer impacts, health systems are looking to protect themselves against a changing industry in which market share isn’t as important as flexibility and efficiency. “As all of these changes are occurring, the systems are strategically moving and gathering their assets to be able to deal with expected changes,” Gundling said.
Gundling said another issue facing large systems that may lead to divestiture is cultural mismatch. A large system may have swooped in and bought a 100- or 150-bed community hospital as part of a larger purchase. The hospital’s community may have bristled at the idea of a large out-of-state corporate entity buying a mainstay of their community. Plus, physicians may dislike a new system’s clinical protocols.
“There might be times when you say it might not be the right fit for us after all … That can lead to a divestiture decision,” Gundling said.
Health systems are taking different avenues to deal with possible divestitures. Some systems want to completely rid themselves of certain hospitals. Others look to repurpose small hospitals for outpatient, skilled nursing facilities, labs or imaging while maintaining a large regional hospital. Still others forge partnerships, so they don’t completely sell the properties.
Allen said many health systems see their small community hospitals aren’t bringing in enough revenue and can’t be competitive in every service line and business. So, instead, they are dropping unprofitable services and sticking with what works for them.
Gundling compared health systems’ decisions about divestiture to an individual creating the right investment balance. For health systems, divestitures are not about selling properties, but strategically managing risk. “They aren’t just selling off to sell off. All have different strategies,” said Gundling.
Allen said divestitures are a balancing act for systems. They can shed debt and assets, but that comes with revenue loss. “The balance is always what is the right sale price for the exchange of cash flow when it becomes less than profitable. Balancing those two are always tough,” said Allen.
When deciding on whether to divest, merge or partner with other facilities, Allen said systems need to figure out the community’s needs, the area’s business climate, what the facility wants to be and potential partnership opportunities. Allen, whose company works mostly with nonprofit systems, said many are repurposing underutilized facilities into other uses like rehab, skilled nursing facilities, labs and imaging.
“Once you have a handle on what the market needs and what the market provides, then you can make strategies to get you there,” he said.
Another issue facing health systems is infrastructure. Many smaller hospitals don’t meet today’s care delivery system. “A lot of hospitals don’t lend themselves very efficiently to quality care based on their 30- and 40-year old design,” said Hagood. “That factor can accelerate their repurposing.”
Allen said divestitures have resulted in systems being able to reallocate capital and move forward with less debt. However, Hagood said one major reason health systems have for divestitures — shedding debt — hasn’t completely worked. Part of the problem is that the new investors aren’t paying top dollar for a struggling community hospital with debt.
“The biggest challenge so far is that they have struggled to get value for those assets to effectively repay that debt,” he said.
Gundling said health systems that have shed debt have followed the divestitures by focusing on cost efficiencies, supply chain management and revenue cycle management.
The hospital divestiture trend has led to sales, mergers and partnerships, with repurposed or downsized facilities, but it hasn’t closed many facilities. That may be coming soon, though.
Hagood said pending mergers, including the Mountain States Health Alliance and Wellmont Health System deal in Tennessee and Virginia, will likely lead to facility closures. There aren’t enough healthcare dollars to support the number of facilities in some of the Appalachian communities involved, he said.
Most of the large divestiture action has been centered around for-profit systems, but Hagood said to watch for more nonprofit action, including Catholic Health Initiatives (CHI), which recently reported a $585.2 million operating loss for fiscal year 2017 after losing $371.4 million in 2016.
Earlier this year, Moody’s Investor Service downgraded CHI’s rating on long-term debt and variable rate demand bonds because of poor operating performance since 2012 and a relatively low level of liquid assets. Moody’s warned that further downgrades could occur unless CHI improves its operating performance.
CHI divested its KentuckyOne facilities earlier this year, a move expected to bring in $534.9 million. Given the company’s finances and healthcare environment, Hagood said there could be more divestitures.
“Nonprofits are going to move slower, but I think you’re going to see them (divest) as economics continue to shift,” he said.
Experts agree the divestiture trend is just heating up as health systems deal with the greater emphasis on outpatient care and freestanding centers. Hagood predicted 24-7 inpatient facilities with full emergency rooms and surgical facilities will continue to dwindle in the coming years as systems repurpose facilities.
“There are 5,000-plus hospitals today. I think you’re going to see that consolidate down,” he said.
HENRY KOTULA 