8/7/2019 Financial Turnaround Requires Complete Revenue Cycle Reorganization

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The board of directors and leadership of a 16-hospital, not-for-profit health system sought the assistance of an Interim Chief Financial Officer to lead a financial improvement initiative whenthe system went from an annualized income in excess of $135million to a monthly operating loss over a nine-month time period.

After an initial assessment, the Interim CFO saw three primary areas of concern: Annualized net revenue had declined by more than $100 million The system was not equipped to handle the owned physician

practice networks rapid growth Productivity management did not adjust as needed to

accommodate restructure and reorganization that occurredwithin the system, resulting in increased labor costs

Because the revenue cycle breakdown accounted for approximately 80% of the profitability decline, revenue cycle became the mostimportant initiative. The Interim CFO determined that a financialimprovement strategy had to be developed and implementedquickly to address the organizations rapidly declining financialsituation. Clear accountability for development and implementationof that strategy was also required and accomplishing this wasthe number one priority. Finally, senior management and the boardhad to approve and support implementation of the financial strategy.

Case Study

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Financial Turnaround Requires Complete Revenue Cycle Reorganization

From $20 million monthly in denied claims to $10 million monthly profit in 12 months

Revenue Cycle AccomplishmentsChallenge: The system was experiencing more than $20 millionmonthly in denied claims, due to major Medicare changes and new medical necessity regulations, as well as independently negotiated managed care contracts at reimbursement rates below operatingcosts in tertiary care facilities. For the Interim CFO, addressing thischallenge required a multi-pronged approach.

Solutions: Incorporated a new management approach and structure

to oversee the revenue cycle, including putting together a corporate revenue cycle management support team and

facility-specific revenue cycle teams Implemented failed billing and remittance advice denial

reporting, as well as revenue cycle measurable benchmark reporting with entity-specific report cards

Helped each hospital develop action plans to address causes of billing failure, payment denial and revenue cycle under-performance

Reviewed monthly progress reports and took corrective actionwhen necessary

Incorporated revenue cycle performance report card into

revenue cycle team members individual evaluations Developed policies and procedures to provide managed care

contracting parameters; contract modeling; discount levels;and communication, implementation, management, and performance reporting of all new contracts

Implemented systemwide insurance and service eligibility verification software

Results: Within 12 months of implementation, the systemreturned to monthly profit levels exceeding $10 million similar to those experienced prior to Medicares intermediary

regulatory changes. The organizations revenue cycle had clear management structure with defined accountability forachieving specific benchmark targets, and management systems were designed to prevent revenue cycle failures before they occurred.

The health system that emerged after the Interim CFOs engagementhad the structure, accountability, decision support and managementreporting necessary to enable it to proactively manage change and most importantly, know expected net revenue, measure actualnet revenue and respond quickly to prevent or minimize shortfalls.

5 revenue cycle success factors The importance of good revenue cycle management cannot beoverstated. Here are a few tips to help ensure a healthy revenue cycle:

Integration - Revenue cycle management must integrate all

activity from contract negotiation to final payment Establish Focus - An appropriate management approach, account-

ability and sound reporting to measure expected optimum versusactual reimbursement by payer; identify and correct shortfalls

A Team Approach - That includes clear line accountability is vital Organizational Alignment - In a multi-hospital system, focus

must reside at the hospital or provider level management Pre-Service - Focus 80% of efforts into patient care prior to

delivery of any services

Medicare changes,regulations and poorreimbursementslead to this loss

Revenue Cycle Turnaround:12 month timeframe

$10M/monthprofit$20M/

monthdeniedclaims

Clearmanagementstructure withdefinedaccountabilityand newmanagementsystems leadto turnaround

by the numbers