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A hard look at cost-cutting strategies

Expense growth is outpacing revenue growth for both payers and providers. There is emerging evidence that it is driven by two complex and costly areas of health care spend:

  • Provider supply-chain spend
  • Payer and provider administrative and operating spend

Let’s take a look at three of the worst culprits and the strategies payers and providers have employed to bring down costs.

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Care variation

Variances in care delivery across one system can be costly in time and quality measures. When designed within functional departments, improvement initiatives yield only modest and isolated gains.

An assessment of system wide performance can help identify priority opportunities for reducing variation in quality and costs. Adding process design and finance experts to the clinical leadership team lets you create efficient workflows and measure financial impact.
 

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Learn how Benevera Health consolidated patient information from multiple systems to improve collaborative care and reduce costs.

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Technology improvements

Many upstream issues manifest into core claims process problems and payment errors. Claims processing inefficiencies can increase call volumes, claims rework, denials and appeals. They also break down trust. This increases costs for both health plans and providers.

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View infographic
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  • The core claims process has seven stages:

    1. Intake and prep: Clearinghouses are only contracted for Level 1 editing only; the acceptance of “not clean claims” causes payment errors. Claims systems preprocessor selects incorrect provider record when multiple matches exist.
    2. Enrollment and eligibility: Retroactive member terminations cause claim payment errors.
    3. Provider contracts: Rate complexity and delayed provider fee schedule and contract loads impact auto adjudication process.
    4. Benefits: Incongruence in benefit plan design and system configuration cause errors (e.g., copays for diagnostic and therapeutic radiology).
    5. Authorizations: Bypassing authorization to focus on issuing payment.
    6. Networks: Delays in CMS fee schedule and rate changes cause processors and systems to apply incorrect rates.
    7. Post-adjudication: Overpayment assessments trigger adjustments re-work retro>2 years. CMS fee schedule updates that are retroactive cause overpayment.
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Identify key issues and create an action plan.

  • Identify root causes of auto-adjudication errors, resubmissions and adjustments. Include employee skill sets, organizational structure, departmental workflows and technology.
  • Compare your performance against industry benchmarks.
  • When planning improvements, include costs to implement, estimated time to achieve benefits and a prioritized list of specific workstreams.
     
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When Hallmark Health System improved their documentation and coding processes they reduced unbilled A/R by more than $8 million.

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Labor costs

Operations should be a source of strength, not a drain on resources or another opportunity for expense growth.

For providers, the revenue cycle is an area particularly suited for outsourcing. It is labor-intensive and requires specific expertise and technology to resolve bottlenecks and shorten payment cycles.

For both health plans and providers, it is important to make sure you are getting accredited experts who grasp the intricacies of the function that they are hired to perform.

And vet your partner for a long-term relationship. Finally, be certain the cost of outsourced services is projected to be lower than the savings you expect to achieve.

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Questions to ask:

  • Do your financial labor needs expand and contract?
  • Is training coders a rising line item?
  • Are you meeting productivity benchmarks?
  • Have there been historical compliance issues?
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Cost-cutting strategies to consider:

  • Outsourcing, temporary staffing and independent contractors
  • Custom-designed coding partnerships
  • Invest in workforce analytics, forecasting and strategic planning
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Truman Medical Centers achieved $7M in cost savings in overhead and equipment expense for remote coders over the course of the agreement.

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Executive Research Briefing, "State of the Union," Advisory Board.
Optum360 white paper, "Making the right choice: Evaluating outsourced revenue cycle vendors.""

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