Raghu Vir

Hospitals are not ready for bundled payments

Effective April 1 many hospitals will be paid a bundled fee for Knee and Hip replacement surgeries. This is a part of the overall strategy by CMS to move providers away from Fee for Service to Value Based Payment model. CMS’ goal is to make such payments reach 30% of all reimbursements for this year. It is a lofty goal but we all know that is the direction all providers have to transition to.

Bundled payments create a host of challenges for hospitals. CMS still pays everyone involved in the care process on the fee for service model but at the end of episode of care (90 days) CMS either pays the hospital for efficiency or penalizes them by asking hospitals to pay back the excess money that CMS paid over and above the hospital’s standard rate. There is no doubt that to make healthcare providers more responsible for outcomes rather than just for providing services, value based payments is a great idea. But many hospitals in the country are nowhere near ready for such a payment model.

At the current time hospitals do not have technologies in place that they can use to monitor and measure a patient’s care across hospitals and providers. An acute care facility and a post-acute care facility may or may not talk to each other. The doctors in one acute care hospital do not communicate with the doctors in another post-acute care hospital. The post-acute care hospital may or may not have an EHR system. Even if they have one, the two EHRs may not be talking to each other. Same is the case with primary care physician offices, surgeons offices, outside rehab facilities. So how can a hospital keep track of the care being provided to a patient for 90 days after the surgery? Most of the hospitals today do not have an idea of how each of their own service costs them in their hospital. How are they supposed keep track of costs across the care settings?

Hospitals now not only need to communicate closely with each other but also get involved in each other’s operations. All discharges and discharge medications have to be reviewed by the doctors from the acute care facility with the doctors from the post-acute care facility. Not only that, they have to continuously monitor the care and progress of the patient outside of their facility. They need to start implementing systems that will enable 360 degree communication and interface with all the providers involved in each episode of care. They need to start doing this now because it is hard to stop a train.

US Healthcare providers seem to be doing fine under the new healthcare law

According to the recently released Quarterly Estimates for Selected Service Industries (which includes healthcare services) report by US Census Bureau, the estimate of US selected services total revenue for the 4th quarter of 2015* increased by 1.5% when compared with third quarter of 2015 and by 2.1% when compared with the fourth quarter of 2014.

Overall Hospital Revenue Growth

The overall hospital revenues increased by a healthy 6.2% year over year (2015 over 2014). The growth in fourth quarter is 1.9% compared to the third quarter of 2015, and 2.9% compared to the same quarter in 2014.

Ambulatory Services Revenue Growth

The ambulatory healthcare services grew by 1.7% in the fourth quarter of 2015 compared to the third quarter of 2015. But the growth is a substantially higher at 5% compared to the same quarter of last year. The year on year growth is still a healthy 6%.

Physician Offices Revenue Growth

Physician offices revenue increased by 2.2% compared to the third quarter and by 4.2% compared to the same quarter last year. The year on year growth is at 5.6%.

Outpatient Care Services Revenue Growth

The outpatient care centers’ revenues grew at a healthy pace of 8.3% year over year. The quarter on quarter growth is estimated at 3.4% for the fourth quarter and compared to the same quarter last year the growth is at 6.2%

Psychiatric Health Services Revenue Growth

The star performers in the healthcare sector during the fourth quarter of 2015 seem to be those psychiatric health facilities. Their revenues grew at 8.2% compared to the third quarter of 2015 the year on year growth is at 4%. The interesting point to note here is that the taxable psychiatric care facilities grew year on year at 11.7% compared to tax exempt providers who only grew at 1.5%!!

In general, all settings of care in the healthcare industry seem to be doing fine under the new healthcare law.


*(not adjusted for seasonal variation or price changes)

Why Hospitals have to urgently redesign their revenue departments

Recent statistics from American Medical Association (AMA) reveal that patients are responsible for almost a quarter of all medical costs, be it through copays, deductibles or coinsurance. This is in addition to the trend that insurance companies are increasingly pushing only higher deductibles plans into the market.

Traditionally all hospitals and other provider settings have designed their revenue departments to deal primarily with reimbursements from small group of insurance companies. But the trend is increasingly clear that providers have to now design systems that will enable them to collect payments individually from a large number of patients during, after or before the care is provided.

This is easier said than done because calculating the amount that needs to be collected from a patient is currently way too complicated. Insurance companies have to provide tools to hospitals and physicians to quickly and accurately calculate patient’s responsibility of the payment for care provided.

American Medical Association has estimated that the average cost of unnecessary administrative processing of each claim is $2.36 (2013) for physicians and insurers. Up to $21 billion a year can be saved just by streamlining and eliminating unnecessary administrative tasks. Even with such high administrative costs the error rates of claims paid by insurers is about 7.1% (2013). All these make it extremely difficult, if not impossible, for the physicians to estimate accurately the patient’s responsibility of cost of care.

Historically hospitals have failed to collect more than 35% of what has been billed to individual patients. This means that they have lost 65 cents on every dollar billed. Now close to a quarter of US population has a deductible of $2000 on their medical insurance plan. Juxtapose that data point with the fact that nearly two thirds of Americans have less than $1000 in savings. The estimated uncompensated care, meaning the hospital did not receive any money either from the patient or from the insurer is $42.6 billion in 2014.

It has become imperative for hospitals and physicians to redesign their revenue departments in such a way that they can not only accurately estimate patient’s portion of the payment, before care is provided, but also efficiently collect a large number of small payments from patients.

They need to start working on this now, not later.

What are doctors up to, these days!

Recently I had to take my son for a doctor’s appointment. He had to go see a Gastroenterologist for a stomach issue he has been having since past few days. As many of us do, we arrived at the doctor’s office a few minutes ahead of time. We go in, submit our new patient paper work and take a seat, waiting for my son’s name to be called. Sitting there I wondered why every single one of the physician office that I visited since last few years still collected paper work instead of some electronic documentation. What made this visit even more interesting is that they wanted some of the paperwork that we submitted to be notarized! Notarized?? Really???

Eventually my son’s name was called we were lead inside consultation area. But before we could see the doctor, we had to meet a nurse sitting behind a desk. She asked my son a few questions and my son started replying to her questions and the entire conversation the lady was working one her computer, noting down the chief complaint, the vitals that she took, height, weight, current medications, allergies etc., and religiously entered the entire data into an electronic medical record system. After she completed her data entry she leads us to a consultation room and informs us that the doctor will be seeing us soon.

After a wait of another 10 minutes or so the doctor walks in holding a open laptop. He greets us, sits down and starts typing before he even says a word. After many a keystroke, he turns around and starts asking questions to my son about his problem. When my son starts responding, he turns about 100 degrees on his rotating stool to reach the laptop and starts typing on his laptop. He does not look at my son, he is only listening and entering the data into his computer. Watching this a thought triggered about how I work at my computer every day and wondered if I could ever type on my computer keyboard and also engage myself with someone in an important conversation at the same time. How effective will I be if I had to do this task myself? Many times I can’t even hear my wife calling me when I’m reading a book or replying to my emails. I always keep telling her that I’m wired to do only one thing at a time and I cannot focus on more than one task at any given time. At the cost of sounding sexist, I think most men are also wired that way. If you are not sure, just ask any wife! On a more serious note, if I had to have an important conversation with someone at my office, I’ll try to remove all the distractions that could divert my attention from that conversation. I’ll silence my cell phone, put my laptop on sleep, tell others not to disturb while I’m with this person, etc.

So, while I was wondering how this doctor is able to pay utmost attention to what the patient is saying and also type on his laptop at the same time, he did something on this computer which made it hang! Somehow that did not surprise because how could he be doing two critical tasks at the same time and do justice to both of them! One of the tasks obviously had to give in. I could notice that his focus is split between recording the information in his system and listening to my son’s responses to his questions.

After a quick reboot, his laptop comes up fine and he completes his note taking. Then he starts clicking on icons, selecting from drop down lists, closes a few alert pop ups, consults a few more screens, reviews his decision support system, enters his orders into an order entry system, chooses labs, writes his prescriptions and then finally starts to explain why he thinks my son is having the stomach problem. In the end he says that the lab orders have been sent to the hospital lab and that the prescription has been sent to our pharmacy.

Sitting there and watching this young doctor, do what he is doing really perplexed me. I got the feeling that even with all the talk going on in the industry about patient centered healthcare and patient centered medical homes, we are still a long way from that goal. It looks to me that physicians these days are spending time treating virtual patients and not real patients. The real patient just happens to be there validating the virtual patient and the virtual patient is getting all the attention it deserves. In fact, the doctor’s focus is being constantly pulled between this actual patient and the virtual patient.

It is only going to get worse before it becomes better because so much of documentation, reporting, and compliance work is being pushed onto the doctors that they are hardly finding time to practice medicine. Their inboxes these days are filled with tasks that have got less to do with actual patient care and more to do with reporting, administrative and financial matters. People did not go to medical school to do these things, and this one I’m sure. I’m really starting to sympathize with the doctors and their tasks.

In my next post I will try to address the issue of what is keeping physicians busy in a practice setting.

Are hospitals missing the woods for the trees? A classic example of clinical documentation

I recently got back from the HIMSS conference which happened in Las Vegas this year. During my visit I met several companies and startups and was really excited about the ideas, concepts and solutions that were presented at the conference. It was really exciting to see so many companies working on improving the way care is provided by physicians and received by the patients. The overarching themes found in the exhibit hall were analytics and population health. They seem to be the real hot buttons in the industry.

I also met several people who are working in the clinical documentation space in the healthcare industry and I had an opportunity to see some of the exciting things they’re working on. I had a very interesting conversation with a senior executive from a company who was sharing with the visitors to her booth about a large healthcare system that started using their integrated front-end speech recognition system as part of their enterprise EHR application. Being a member of the clinical documentation industry, I always received mixed feedback about speech recognition whenever I spoke to doctors, CEOs, hospital administrators, HIM professionals etc. While the technology companies are really gung-ho about how speech recognition technology is really enabling physicians to complete their care documentation faster and cheaper, I always wondered about the macro level implications of using this technology. Even from the provider side I have received mixed feedback. While some of the providers are really happy about having the ability to complete their documents themselves using front-end speech recognition, some of the providers find it very intrusive in their day to day routine. The latter seem to prefer traditional dictation over speech recognition because they seem to enjoy the peace of mind knowing that a trained and experienced professional on the other side is listening to their dictation and transcribing their notes. They also know that in many instances the documents get reviewed by QA staff to make sure that the documents are accurate and complete. This ability to dictate, these physicians feel, gives them the luxury to spend quality time with their patients and document all aspects of care that has been provided to the patient while the patient is in their office or in the hospital.

The industry is really excited about the adoption of front-end speech recognition technology as an integrated part of an EHR, and they continue to highlight how fast physicians are able to complete their clinical documentation and how physicians are becoming more productive and efficient in using this technology. However, I’m yet to come across a physician who told me how excited they are about doing clinical documentation themselves. They always feel that is a chore which they wish they didn’t have to do in the first place. It is much like how my teenage son feels about tidying up his room every week. He does it not because he loves it but only to avoid his mom’s nagging. I know more and more hospitals and their managements are pushing their doctors to use this technology, but does fast and hasty documentation compromise quality, integrity and completeness? I always wondered if there is any hospital out there that has really studied the overall impact of the utilization of speech recognition technology on the quality and integrity of clinical documentation.

With the adoption of ICD-10 coding and the transition of hospital reimbursement systems from volume to value, I think the ramifications of using such technology could be significant. In an environment where it has become extremely important to capture laterality and specificity that is required by ICD-10 coding, and in an environment where the severity of illness and risk of mortality measures have become critical not only for reimbursements but also for hospital’s quality rankings, I’m really unsure whether hospitals and physician offices, in the process of saving money on transcription, are losing out on these important metrics. These are important factors to be considered because more and more patients are looking at hospital and physician quality rankings, which are now regularly published on the Net before they choose a hospital or a provider. The healthcare providers are not only facing decreasing revenues but are also facing increasing competition.

When the burden of maintaining high quality clinical documentation is moved from back office and onto the lap of the physician, who is least trained in performing that task, quality and integrity will suffer. The emphasis on speed and productivity from the physicians by the hospital could result in the physician being brief in his or her documentation and in the process omit important details.

So if a hospital system with annual net patient revenues of $250 million and 15,000 discharges in a year, saves $250,000 per year on transcription costs that equals to 0.1% of revenues. But let us look at what the system could be losing by focusing on that 0.1%. Even if one in 50 charts (an extremely conservative estimate) an inaccurate DRG that does not reflect the severity of illness or risk of mortality of a patient who has received the required care, the loss in reimbursement could be at least $2500 (again a conservative estimate) per chart. For 300 charts that potential loss could be close to $750,000. This cost does not include any denials due to incorrect coding of charts. Poor documentation could also result in RAC audits which again are very expensive. Bear in mind that all these could result in lower quality rankings for the hospital which could result in potential loss of patients. When you add up all these other costs, the loss could be much larger than $750,000. So in the process of saving $250,000 the hospital could be losing more than double that amount. Is this a classic care of missing the woods for the trees?

I think it would make an interesting project for anyone interested to research and analyze the macro level impact of shifting the onus of clinical documentation from back office to the physician and from transcription to speech recognition. I think there is more to it that meets the eye.

Why it makes sense to review your transcription services

Clinical documentation service is a cost center and not a revenue center. Hence in the eyes of the hospital’s management it always takes a lower priority and is always put off to a later time. However, now more than ever, it makes huge sense to revisit your clinical documentation services.

1) Poor quality documentation can really hurt you – with the transition from Fee-for-Service to Value Based reimbursements, the importance of high quality documentation has increased exponentially. Poor quality documentation can not only impact patient care but can also affect your hospital’s quality rankings and reimbursements.

2) Technology has advanced a great deal in clinical documentation – transcription is no longer what it used to be. Technology has really impacted this area in a big way. With the availability of apps based dictation, document editing and eSigning features on smart devices, physicians are becoming more efficient and effective.

3) With the use of speech recognition technology services have become cheaper and staff have become more productive. With Cloud based technologies, licensing fee, hardware costs and annual maintenance fee have become obsolete.

4) Slow turnaround causes you pain – if you are reports are not getting turned around within the stipulated time, it could impact patient care, slow down your revenue cycle, cause physician frustration, and you could be out of compliance.

5) Lack of transparency creates doubt – modern solutions can provide on-demand and customized performance reports that let you dive deep into data, generating valuable insights for you and your hospital.