Key Performance Indicator: Watch Revenue Increase with a Proper Compliance Program

compliance programBy: Valery Bond

It’s been stated time and time again by healthcare compliance folks, “the result of a compliance program is revenue”, but what exactly does that mean and how does a provider understand the impact of regulatory compliance on a business’ bottom line?

Metrics, tracking and trending reports are essential optics for any healthcare business.  Along with metrics are Key Performance Indicators (KPIs). Tracking and measuring DRO (Days in Revenue Outstanding) in connection with appropriate coding, claim denial rates, bad debt, lost cash due to unbilled claims, dealing with pre or post pay payor audits, ZPICs, UPICs, and ADRs are examples of time consuming tasks that take away from the organization’s overall productivity and always negatively impact the revenue cycle.  With an average cost of $118 per claim to process and submit requested records, dollars certainly add up quickly on top of lost productivity away from everyday duties.

Let’s look at a few of the most popular quality measures and the target range in relation to where the compliance should stand for a profitable revenue cycle. 

  • Patient Access Quality:
    1. Physician Authorization: 96-98% compliance is required
    2. Inpatient Admissions & Outpatient Registration Error: Less than 1-2%
    3. Point of Service cash collections from patient (self-pay and deductibles): Collect an average of $75.00 per visit – they must be collected in accordance with Stark Laws.
  • Case Management:
    1. Payor Acceptance of Treatment Plan, based on authorization: 95-95%
    2. Clinical denials overturn rate: 95%
  • Health Information Management Quality:
    1. DNFB or Discharged Not Final Billed or bill holds: Less than ½ day in A/R
    2. Charge capture quality: 98% compliance required.
  • Patient Accounting:
    1. Outstanding A/R: Less than 52 days outstanding
    2. A/R over 90 days: 17-20%
    3. A/R over 120 days: 10-20%
  • Revenue Cycle Departments:
    1. Denial overturn ratio: 95-98%
    2. Underpayments overturn ratio: 95-98%
    3. Payment to gross charge ratio: 100%
    4. Cost to collect ratio: Less than 2.5%
    5. Bad debt expense of gross revenue: Less than 4-5%
    6. Bad debt expense of net revenue: Less than 2-3%

Incorporating metrics and targets helps to keep a healthcare business streamlined.  Improvements to clinical documentation should happen as part of any effective compliance program and can ultimately improve the case mix index. In turn, revenue cycle is improved as well. For example, in 2013, Baptist Hospital of Miami’s baseline Medicare case mix index was 1.56. After implementing their Baptist Health South Florida’s CDI program with their physician clinical documentation improvement specialists, their case mix index improved to 1.74 as a direct impact of the physicians reclaimed ability to capture the severity of the illness allowing for appropriate reimbursement.

Routine self-auditing and compliance work hand in hand with revenue.  For instance, a self-audit should include a review of payor contracts which might result in the incorporation of improved coding and billing practices which would very likely improve revenue cycle. Another real-world example, a Tampa anesthesiology group outsourced their coding, but found their revenue performance did not improve.  The group had a third party conduct an audit of their contract management process, and only then were they were able to take corrective measures and build stronger contracts, ultimately improving their revenue cycle.

Finally, as in health care, “prevention is the best medicine.” Preventing adverse incidents and compliance violations protects earned revenue.  Clinical documentation improvement should be used as an exercise in compliance.  Appropriate documentation supports medical necessity, which in turn supports provider reimbursement.  A recent Healthcare Advisory Board report determined that the largest source of estimated revenue loss in hospitals varying in size (0-500 beds) was directly attributed to inadequate documentation. The revenue loss was between $2- $5.5 million for an average 250-bed hospital!  This was concluded after a midcycle revenue analysis that included coding, compliance and CDI.  Contributing to revenue loss was the increase of audits ($1.7-$3.3 million) and coding deficiencies ($1-$2.5 million).  Combined, there was an average revenue loss of $4-$11.3 million for one average sized hospital.  With losses like this, a small provider could never sustain business.

The common misconception is that compliance is like insurance and it’s there “in case.” However, an effective (and protective) compliance program should be treated like a living, breathing thing.  When regulatory compliance requirements meet compliance program action, revenue is the result.


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