Effective Compliance Programs are Essential to Manage Risk While Driving Growth for IDTFs (Part 4 of 4)

In the final part of this four-part blog series, we focus on effective compliance programs for independent device testing facilities (IDTFs) revenue cycle management (RCM). If you missed the first three blog posts, you could find them here.

Any review of the RCM process needs to include compliance considerations. Compliance requirements keep changing, and a misstep can result in lost revenues, fines, and even extreme penalties like debarment, corporate integrity agreements, and criminal consequences for your company and responsible individuals. Thorough revenue cycle management addresses compliance issues that can cost an organization money, business freedom, and even exit opportunities.

An IDTF needs to maintain an effective compliance program, to comply with applicable law and as a necessary risk management approach. There are eight factors that together comprise an effective compliance program:

1. Written policies, procedures, standards of conduct
2. Designated Compliance Officer and Committee
3. Effective training and education
4. Effective lines of communication
5. Internal monitoring and auditing
6. Disciplinary guidelines
7. Corrective action
8. Setting goals through risk management

Compliance-related penalties can range from recoupment of payments and fines to debarment and even jail for individuals responsible for violations. Commercial payor contracts can also have restrictions on such activities, and federal and state law can restrict activities under insurance and other commercial relationships.

In December 2019, the Office of Inspector General (OIG) released its semiannual report to Congress. According to the report, $5.9 billion was recovered from fraud investigations during the fiscal year 2019 ― a more than two-fold increase from 2018. The agency pointed to charges against 24 telemedicine and medical equipment company executives and physicians for their alleged participation in a $1.2 billion healthcare fraud scheme. The massive recoveries by the federal government have resulted in aggressive enforcement that has not changed from one presidential administration to the next, and have encouraged state governments and even commercial payors to take similar actions. 

Your revenue management activities need to include compliance planning and monitoring. The hot issues of the day change, and appropriate attention will enhance your likelihood of keeping the revenue you earn, and preserving the value you create. 

The healthcare industry is in a state of constant change in laws, regulations, and other government requirements, reimbursements and payor requirements, and commercial and patient expectations. It is hard for any individual diagnostic provider to keep up with the changes. 

If you are considering a change of billing solution and moving towards revenue cycle management, RCM software should have compliance capabilities built into the logic and workflow, enable an audit trail, have a highly secure system and communications, and a strong business continuity plan.

Outsourcing all or a portion of your RCM activities can further assist with compliance. When your own employees manage the entire billing process, decisions on coding, write-offs, and other billing matters can increase the risk of fraud, waste, and abuse. Your compensation and management policies may create unintentional incentives for bad or careless behavior. Outsourcing certain RCM activities may reduce the incentives for fraud, waste, and abuse by eliminating the rewards and opportunities for bad or careless behavior. 

It is important for IDTFs to know their true total cost of billing, including billing staff to deal with all of the challenges just reviewed. There are also other associated costs, such as —software maintenance, hardware amortization and maintenance, facilities, and reporting, business intelligence and other add-ons, that together can add up to more than four times the expected cost.

Do You Know Your Total Cost of Billing as a Percentage of Revenue?

As with any industry, healthcare can expect significant changes, and those changes often impact systems. Changes such as these are typically billed out as additional development work by software vendors. Since these sorts of changes are vital to being able to submit claims, IDTFs can find themselves at the mercy of software vendors’ fees and timelines.

Codes, associated fee schedules from CMS, and contractual fees and claim requirements from hundreds of third-party payors make for a complicated process that requires accurately managing a myriad of details and regular re-evaluation and updates. IDFTs are typically reliant on traditional billing systems and software vendors to handle these updates. Unfortunately, many vendors cannot guarantee sufficient provisions for support, rapid implementation, testing, and troubleshooting.

Want to learn more about how to make your compliance program more effective? Watch this webinar.

All of these factors pose risk to an organization’s clean claim error rate, compliance, and top-line revenue.

Annual software maintenance fees, often upwards of 20% to 30% of an installed software price, are another cost that can take organizations by surprise since upgrades are typically not included in these fees. As a result, some will try to save money by skimping on or delaying upgrades, creating performance and security problems, and often necessitating ad hoc workarounds to address system shortcomings. SaaS-based solutions eliminate these additional fees.

Clearinghouse costs are another consideration. Some RCM partners can assist with minimizing a testing facility’s clearinghouse costs by directly connecting to many payors. This allows for the submission of a large percentage of claims directly to payors, reducing clearinghouse costs.

The staff effort required to maintain billing logic updates, and the staff needed to perform claims submission and data maintenance, contribute to the cost of billing but are often overlooked. Data maintenance is a potentially time-consuming and costly endeavor. Failure to stay current with such updates can lead to claim errors and delayed or reduced reimbursement, driving up the cost of billing.

The cost of administration — particularly end-of-month reconciliation and general ledger work — is a very real aspect of total cost of billing. Accounting staff often spend many hours trying to tease numbers out of the billing system that accurately represent the facility’s revenue performance and can be used in the general ledger.

Reporting and financial analysts are also often a hidden cost. Many organizations belatedly discover that the reports they need are an added cost; each new report requires additional coding to produce — a cost that the software vendor passes on to the facility.

In addition, with increased pressures on reimbursement, IDTF leaders need to be able to monitor key performance indicators, such as profitability by payor, profitability by provider, and other management data that are necessary to strategically manage their business.

Key Takeaways

• Effectively managing billing, claim processing, and accounts receivables is an important way to manage total cost of billing and as a valuation driver
• Correctly accounting for contractual allowance is a critical factor in accurately reporting revenue and profitability
• An effective compliance program is essential
• Measuring important key performance indicators (KPIs) helps ensure business success
• Optimizing reimbursements is one of the most successful ways to improve financial performance

Here is a checklist that you can use today. Your billing process should include the following specific capabilities.