By Jonathan Cook, MBA, PMP
Senior Solutions Manager, Streamline Health, Inc.
When preparing to negotiate payer contracts that establish reimbursement rates, many providers don’t realize that this is also an excellent opportunity to assess and improve their overall financial performance. However, this will require operational insight into key metrics in order to objectively assess your organization’s performance while also managing the payer negotiations from a position of strength.
A key asset to this process, as well as improving overall performance, are payer scorecards. These help you monitor and benchmark payers on underpayments, denials and other unfavorable issues that inhibit your revenue cycle performance. Having these metrics enables you to enforce payer accountability in two ways: by supporting more favorable terms in the payer negotiations and also encouraging faster payments on a day-to-day basis.
When establishing scorecards, the following payer-specific metrics should be considered:
- A/R Days: the average time to collect payment on an account and reach a zero balance
- Agings: the amount/percentage of accounts and revenue across various age buckets (e.g., 90+ days, 180+ days, etc.)
- First-time Claim Pass Rate: the percentage of all claims submitted that are accepted on the first attempt
- Denial Rate: the percentage of all claims submitted that are denied (partially or entirely) on both an initial and final basis
- Denied Dollars: amount of dollars in the denial and appeal review process (i.e., initial denials) and amount of dollars ultimately lost to denials (i.e., final outcome)
- Appeal Rate Success: percentage of all claims that were initially denied but ultimately paid
- Appeal Response Time: the duration from an Appeal Submission to Appeal Response
- Average Interventions Per Account: the number of follow-up attempts, internal reviews, etc. required by staff to facilitate and collect payment
- Underpayments as a Percentage of Cases: percentage of total cases with an identified payment variance/underpayment
- Underpayments as a Percentage of Net Revenue: the total amount of estimated underpayment dollars divided by the total net revenue for that payer for a given time period
- Bad Debt: the amount of gross charges written off as bad debt
- Cash Factor: the percentage of payments divided by original gross charges
The data used to develop these metrics will come from a variety sources, including:
- Patient accounting
- Contract management
- Cilling editor/claim scrubber
- EDI files (i.e., 277, 835, 837)
- Department workflow software
The common challenge in creating scorecards is effectively compiling and aggregating the data from these disparate sources into a unified dataset for performance reporting and exploratory analyses. If providers do not have a solution that can accept and aggregate this data, they must weigh the burden on staff in terms of difficulty and time required to produce these scorecards manually (i.e., spreadsheets) with the costs of purchasing a sufficient solution that can works on a more automated basis.
Once providers have merged this data, the next step would be to incorporate the scorecard insights into workflow tools for frontline staff; in essence, “operationalizing” the intelligence gleaned from the scorecards to impact financial outcomes. For example, a provider might want to automatically route certain claim issues (underpayments over a certain dollar threshold, denials with a common adjustment reason, or claims without an insurance payment in the last “X” days) to staff specialized to handle the respective scenarios. With any HIT solution, the technology, reports and analytics by themselves are rarely sufficient in improving outcomes; they must be executed via adjustments to various process and staff/organizational components.
Additional considerations when implementing payer scorecards:
- What’s the meeting cadence to review these scorecards and who are the participants?
- Do involved participants have sufficient decision-making authority and readily available resources to impact change?
- Are the roles and responsibilities of those participants clearly defined?
- Do they have the ability to alter/favorably improve outcomes at the key points in the process (i.e., use of workflows)?
In addition to their current usage and benefits, these scorecards will be even more important as the industry transitions from volume- to value-based payment models. Given the inherently more complex nature of clinical data and outcomes, the content and “inputs” determining reimbursements will be subject to increased variances. However, establishing effective payer scorecards now can serve as a solid foundation for financial improvements—and increased cash flow—now and be expanded later to handle more complex payment models as conditions warrant.