4 Key Sources of Revenue Leakage in Private Hospitals | Alcidion Skip to content

4 Key Sources of Revenue Leakage in Private Hospitals

Private Healthcare is in a state of transition as it deals with diminishing health fund membership that has dropped from a peak of 47.4 per cent in 2015 to 45.8 per cent in September 2017, and the emerging shift from volume-based to value-based healthcare which is rewriting the way Private Hospitals are compensated by Healthcare Funds. In a recent report, Morgan Stanley predicts health fund membership will continue to fall placing pressure on private hospitals as they try to get on top of this step change. So, what can Private Hospitals do as they move into this new era?

One primary fact that all Private Hospitals have been aware of for some time is Revenue Leakage. The importance of which is only really taking hold now as revenue gaps appear in the form of reduced activity, fixed rate pricing and Health Funds who are utilising their vast amounts of data to claw back claims from up to 4 years ago. These changes are outside of a Private Hospital’s control, but Revenue Leakage isn’t.

‘Revenue Leakage’ is a term coined to identify money lost by not effectively billing for the services or products you provide. Healthcare is a complex beast. Delivering effective care to patients is complicated, as is the Activity Based Funding (ABF) model which generates the majority of a hospital’s revenue. In order to reduce Revenue Leakage there are some areas that Private Hospitals will need to focus on if they are to steady this ship during this time of change.

At Alcidion, we have worked with Private Hospital partners to identify four areas that greatly impact private hospital revenue, all of which face the same challenge – how to improve clinical documentation without slowing down and frustrating clinical staff, particularly VMOs.

This is probably the biggest source of Revenue Leakage as Private Hospitals rely on Visiting Medical Officers (VMOs) to provide them with patient information that is used to determine how complex a patient is, and the appropriate reimbursement level. This shouldn’t cause an issue given that the VMO has the patient documentation prior to admission, however this tends to be in his or her office IT system which is not connected to the hospital. For the hospital to get access to this information the VMO would have to re-write it into hospital notes which is not seen as best use of their time. In a Public Hospital scenario there are different doctors looking after a patient inside and outside of hospital, so Junior Doctors are on hand write up patient details, but unfortunately in Private this is not the case.

Clinical documentation provides background information on a patient including if they have other comorbidities, such as diabetes or a heart condition, that will impact the length of stay and the resources they may need to access during their time in hospital. The number of comorbidities a patient has strongly influences the amount of money the hospital will charge for the hospital admission.

Other sources of clinical documentation such as doctors’ progress notes, nursing documentation, and allied health notes also have an impact as there are certain procedures that need to be followed to ensure that the hospital can recoup the revenue associated with that part of a patients stay. For example, nursing notes can be useful to understand emerging comorbidities and complications, but the information must be confirmed by a doctor to be coded.

Without the appropriate details in the clinical documentation the true complexity of the patient is not reflected in the ABF coding, and the hospital doesn’t get reimbursed for the work that was done to manage the patient.

The Medicare Benefits Schedule (MBS) is a listing of the Medicare services subsidised by the Australian government. When a VMO carries out a procedure on a patient they must document the correct code from the MBS for that procedure both in the hospital and back at their office for billing. For a variety of reasons, the VMO may have small variations in MBS items documented in the hospital compared to in their office. When a mismatch occurs Health Funds will reject the claim and the hospital must either resubmit or lose the revenue.

This is not the only area that MBS Documentation can cause a leak in revenue. For some procedures that require an overnight stay the VMO will need to complete a certificate to validate the admission. If there is no certificate, then the Health Fund can refuse to pay leaving the hospital to foot the bill.

These small variations can add up to significant amounts of money that are lost through rejected claims.

You would expect safety and quality to be drivers in any part of healthcare but that is not strictly the case. As the healthcare landscape changes all hospitals will see safety and quality becoming increasingly important with the adoption of an Activity Based Funding (ABF) model.

The Independent Hospital Pricing Authority (IHPA) defines Activity Based Funding (ABF) as “a way of funding hospitals whereby they get paid for the number and mix of patients they treat. If a hospital treats more patients, it receives more funding. Because some patients are more complicated to treat than others, ABF also takes this in to account.”

Previously ABF has remained neutral to safety and quality but many countries, including Australia, have or will introduce Hospital Acquired Complications (HAC) Reduction Programmes that use the ABF model to promote safety and quality. The impact is already being felt as funding arrangements are not reimbursing hospitals for certain diagnosis codes if they are regarded as HACs.

It is therefore important to know from the start what patients are at risk so that best practice protocols are in place to manage any safety problems identified such as the list of HACs. If systems are not put in place to improve safety and quality, revenue leakage in this area will increase in the future.

Documentation gaps prevent the coding team from doing its job effectively which is to ensure that the hospital can correctly bill for the services it has provided. Clinical coders read clinical documentation and assign ICD-10 codes to conditions and actions which go into algorithms to determine the level of reimbursement.

Without good documentation hospital coding staff cannot accurately determine the complexity of the patient, or how the patient’s complexities were managed by the clinical team. Sometimes, even good clinical documentation requires clarifications because of quirks in the ABF system.

In Public hospitals if there is uncertainty about documentation clinical coders generate a form that asks doctors clarifying questions, these are called coding queries. Doctors in public hospitals have time to answer these queries because there is a team of them looking after every patient, they are also an employee of the public hospital, so there is more control over what is expected as part of their role than in a private hospital where the VMO is the customer who can pick where they want to work from.

In Private Hospitals the doctor visits the hospital to see the patients they have there, but they see patients in many other locations. This busy workflow means it’s harder to get VMOs to fill out coding queries. Without these clarifications the hospital is vulnerable to audits from Health Funds that can expose gaps in the documentation/coding process when applying the ABF rules strictly, even if it is obvious that the patient had the condition.

For example, if a patient has high blood pressure repeatedly measured, the doctor still must write down ‘Hypertension’ in the notes for it to be considered for funding (strictly according to ABF).

Revenue leakage is caused by many factors which can have a significant impact on one another. At the very heart of it all is patient complexity.

It is important to capture patient complexity prior to admission and during the patient’s journey as things change. This holistic patient view allows the hospital to plan their resources accordingly and put into place any best practice safety measures that will reduce the impact of any adverse events taking place.

The importance of documentation at every stage of the patient’s journey will be what plugs the revenue leakage gap, so Private Hospitals need to identify how they can improve the quality and flow of information to make it easy for VMOs and other clinical staff to quickly view and update patient information in real-time.

The real challenge as mentioned at the earlier is how this is done without frustrating the VMOs and adding to their workload. We have the answer with Miya Revenue and Reimbursement Manager.

Our new solution has been designed using AI and Machine Learning along with adaptive user interfaces to detect clinical complexity from existing data feeds, and then make it easy for VMOs and clinical staff to access and update patient information in real time without impacting their daily schedule. For example, the Ward Round App allows VMOs to confirm significant issues as they happen and potentially trigger orders to improve patient safety — all with a single tap. The MBS data a VMO enters in the hospital can be shared electronically, so that they can view in their office to coordinate consistent billing.

These are just some of the ways Miya Revenue and Reimbursement Manager can help.
To find out more download our free whitepaper.

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