This blog post is the second installment of a four-part series. View Part One
Profitability and patient satisfaction targets remain elusive for hospitals in 2022, but laboratory outreach and outpatient operations can contribute to these larger organizational goals with the appropriate people, processes, and technologies in place. This second installment of our “How to Calibrate Hospital Lab Financial Performance” series outlines high-level business considerations for establishing an outreach program and begins addressing some of the analytics capabilities (tailored by stakeholders) that better inform critical decision-making.
Capacity utilization is a function of equipment, staffing, supplies, and the testing mix, along with test demand. Bolstering relationships with providers in the community via effective sales and customer service is key to achieving needed scale. When managed effectively, a 30% margin contribution is a realistic outcome for such an initiative, as Jane Hermansen of the Mayo Clinic discusses in this HFMA on-demand webinar.
Relative to inpatient diagnostics needs, laboratory outreach is, by design, a competitive endeavor. As such, it is typically advisable to build a separate fee schedule, to support demand generation efforts.
Automate RCM Workflows
Rightfully so, hospital RCM teams are compelled to prioritize high-value inpatient claims. Meanwhile, lower-dollar outreach claims with errors, incomplete data, or missing documentation are written off based on threshold policies, due to the cost of manual intervention. In many instances, these problem claims are misclassified as “contractual allowance” as opposed to bad debt. This practice exacerbates the issue by masking the full magnitude of cumulative cash lost, which often adds up to millions of dollars in mid-size and large hospital labs.
Automating additional processes in RCM workflows to proactively address front-end and back-end denials can avoid such losses with a reduced need for manual intervention. Relevant capabilities include error correction and edits, insurance discovery, payor change handling, compliance checks, and flexible pricing configurations.
Proactively shrinking high denial rates provides additional benefits as well by positively impacting patient satisfaction levels.
Elevate Reporting Capabilities for the RCM Team
When viewing the lab as a profit center, it is advisable to monitor the operational and financial performance of the lab in the appropriate fashion. This calls for real-time actionable data, curated into KPIs for each stakeholder, including the RCM team, lab director, and finance leadership.
For the RCM team, the charter is about driving accounts receivable to cash in the bank. Therefore, metrics tied to accounts receivable are paramount, such as:
- Accounts receivable aging, measured as “Days in AR” and “Days Sales Outstanding”
- Collections as a percentage of contract allowable
- Bad debt percentages
A sample report in this category demonstrates aging by payor group. In the graph below, the patient payor group is most prominent over time. Understanding that uninsured patients comprise the largest percentage of outstanding receivables can be very helpful in supporting cross-functional discussions and planning regarding patient engagement effectiveness, financial responsibility determinations, pricing, and related issues.
Aging By Payor Group
Beyond receivables, dashboards reflecting revenue cycle efficiency are important for RCM teams to maximize claims processing productivity. Reports that spotlight workflow bottlenecks are particularly useful in pinpointing where further automation should be employed. By regularly reviewing such data, the RCM team can often easily see patterns arising in eligibility issues, claim submission errors, additional documentation requirements, or other areas. This information facilitates root cause analysis and enables issue mitigation either by employing readily available automation or by process and system configuration.
Moreover, once a fix is in place, new reporting capabilities can provide validation. For example, the view below of a ”Workflow Process Report” demonstrates that action taken to address a specific “unpriceable” error has achieved the desired result – the error rate has been cut by 50% in three weeks.
Be sure to look for the next installment of “How to Calibrate Hospital Lab Financial Performance.” The upcoming blogs in this series will provide more in-depth discussions of role-specific reporting needs and capabilities for finance leaders, lab directors, and sales teams.
How to Calibrate Hospital Lab Financial Performance
Harley Ross, XIFIN Chief Commercial Officer
Stephanie Denham, XIFIN AVP, RCM Systems and Analytics
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