Ambulatory surgery centers’ focus should be no different than any other sector of healthcare or, for that matter, any other industry — the unending quest for improved, sustainable profitability. From the smallest stand-alone surgery centers to the very largest ASC management companies, the need to squeeze out more net income is essential as the ASC market dynamics change, regulatory pressures increase and reimbursement tightens.
When polled, every ASC administrator agrees with the importance of boosting net profitability in principle. But when all is said and done that imperative often erodes to a myopic focus solely on monthly cash flow, rather than ongoing profitability.
Today the reality is that many ASCs are content to operate based simply on a projected cash budget. But there is more to profitability than meeting cash flow. Every ASC should first be looking at revenue trends, of which cash flow is but one indicator.
There are many influencers that directly affect every ASC’s profit and loss ledger; labor costs, supply costs, utilization of facilities, etc.
One direct influencer perhaps less apparent is the efficiency of an ASC’s revenue cycle processes and systems, and, the specific benefits and costs associated with its proper management.
That is the focus of this discussion.
Parts and Pieces
The traditional model for managing an ASC’s revenue cycle has been to purchase different components of the continuum independently. It is also common practice to handle other discrete functions internally. Typically transcription is contracted out to one vendor, coding to another, billing and collections to others, if not handled in-house. Sometimes, even within the overall category of billing, different types of billing are parceled out to different vendors: billing to patients is handled by one vendor, billing to insurance companies is given to another, and still another vendor tackles workers’ compensation.
Often the ASC revenue cycle is a piecemeal process akin to running a relay race. The baton is passed between vendors, but there is no “holistic stake” in the overall outcome beyond each participant’s own parochial view regarding their portion of the relay race. While some may argue that buying different functions from different vendors may help optimize cash flow in the short term, there is a diminished ability to stay focused on an ASC’s overall profitability.
This is especially so early in the revenue cycle, during transcription and coding. How these are handled has an enormous impact on an ASC’s final reimbursement. That’s because the missions are unaligned.
The transcription vendor has one objective: put on paper exactly what the physician has dictated, which is as it should be. But there is minimal interest in going beyond that literal transcription, no incentive for pinpointing when something was left out or implied but not specifically verbalized.
For example: a particular procedure has an implant associated with it; if those implants are not expressly indicated in the physician’s dictation, they are not added to the final report.
So the implants don’t make it on the Op Report, which moves on to the coding process. The coders are a different company, they review the report, see it was an ankle repair. They assign the proper CPT — which doesn’t include the implants or a reason to question the accuracy of the report or to look for potential gaps. Implants can cost around $200 to $300, so the two missing implants represent as much as $600 in unbilled revenue. The baton was successfully passed, but the client lost the revenue race.
A recent study by Wolters Kluwers Health found that 88 percent of health information management professionals believe their facilities are at risk, and that 42 percent believe that claims or the medical record are incorrect. Managing revenue cycle administration as separate components is not only more time-consuming, it can be risky. Optimally, all participants should be aligned around common incentives and purposes, with infrastructure and processes that ensure compliance and accuracy. Each step carries a risk that will impact the level of accuracy of the bill that is generated and the payment that is received. Risks include revenue left uncollected, and, government audits and penalties for inadequate documentation and improper coding.
The more an ASC can implement integration of the revenue cycle process, the greater the realization of aligned, uniform purpose and efficiency. When there are fewer vendors to deal with, there is greater focus of accountability for maximizing revenue and cash flow.
Greater integration provides more synergy, cohesion and ultimately, the ability to reduce costs and increase revenue.
Information, Please
Today, the need for accessing and evaluating key information for decision-support — typically called business intelligence — is unequivocal. Leveraging such data to improve performance is another top-level strategy for improving profitability.
Industry consultants who possess a high-level view of the total ASC industry are the most reliable “benchmarking” resource. Also, vendors providing business intelligence solutions allow an ASC’s administrative team to pull ad hoc data that can better illuminate procedure-by-procedure costs and many other perspectives.
If an ASC is an in-network provider, its negotiated contract rates drive everything. Since they are the “price list” for how much can be charged to a particular payor for a particular procedure, having the right information up-front makes the negotiation process easier, more effective and potentially more profitable.
Equally important, it’s essential for the ASC administrator to ask: “Do we fully understand what an appropriate reimbursement amount is for each procedure in our geographic area?” If the answer is no, there are industry resources that can deliver that kind of insight. This is an essential perspective because charges are very much driven by a given local market. The old adage that all healthcare is local, holds true.
Another way in that information can be mission-critical in helping improve profitability is to specifically look across the revenue cycle itself. Every ASC should have the ability to:
- Analyze the payment patterns of all its individual payors
- Glean what percentage of total charges each payor remits
- Understand what payors reject, and why
It’s no secret payors are not necessarily consistent in their reimbursement for the same procedure; they may remit $1,000 one time, $900 the next. The profit-centric ASC should have the ability to understand that, to analyze such patterns on a frequent basis.
Out-of-network providers have an even greater challenge. Say an ASC bills $5,000; ultimately it is actually paid only $3,000, and it may take 90-120 days to get it. Today there is still a disproportionate focus on the $3,000, and not enough emphasis on accurately evaluating what happened to the other $2,000 and why.
Armed with solid information, an ASC may be able to determine its charges are not “reasonable and customary.” Charges outside the boundaries will have a negative impact on revenue and cash flow.
Another way it’s possible for ASCs to wring out incremental gains in net revenue is having a firm, quantifiable grasp of the costs to actually execute the revenue cycle. Knowing the metrics makes all the difference when evaluating outsourcing.
The bottom line: ASCs can greatly improve financial performance by evaluating and modifying their revenue cycle solutions.
Ed Gallo is chief executive officer at GENASCIS, a leader in ASC revenue cycle management and business intelligence. GENASCIS offers an unmatched understanding of ASC commerce, powerful proprietary technology solutions, and high quality in-demand human resources. The company maintains corporate headquarters in Los Angeles and offices in San Diego and Oklahoma City.