Funding difficulties represent just one of the challenges hospital and health system CFOs must contend with. Alongside new reimbursement models and an increasingly intricate revenue cycle, the complexities really start to add up.
Being responsible for the financial stewardship of a hospital or health system is becoming an increasingly difficult task as the healthcare industry prepares for full implementation of the Patient Protection and Affordable Care Act and the move toward population health management and value-based purchasing.
What do finance leaders consider to be their biggest challenges? Four executives recently told me about three issues that make their already-tough jobs harder:
1. Healthcare Reform
David Cox, CFO at Marin General Hospital, a 235-bed institution in Greenbrae, CA, says his organization is working hard to adapt quickly to the new healthcare economy that he believes will result from reform legislation.
"We are assembling the components of a local integrated delivery system, including physician organizations, other area hospitals, and related services," Cox says. "We are moving rapidly into delegated risk contracting and aligning incentives between providers."
Cox says Marin General is also preparing for the challenges posed by new reimbursement models by working to improve outcomes and certain key metrics.
"We are focused on clinical quality metrics," he says. "[We] monitor them monthly with our senior management team and have assigned accountability to the appropriate individuals. We are looking at the requirements from the various payers to qualify as centers of excellence and continue to improve our clinical programs and outcomes."
"In some cases, we have partnered in certain service lines with the specific objective of improving care and reducing costs. For example, we have recently developed protocols for treating some diagnoses on an outpatient basis, thereby reducing emergency department admissions," he adds.
Tim Nguyen, corporate controller at Palomar Health, a 690-bed system based in San Diego, says the health insurance exchanges being established under the PPACA are a major obstacle for providers because of the uncertainty surrounding how they will operate once they are up and running.
"California is going to have a state-run exchange program. It is going to be a nightmare. We will have to decipher what plan the patient belongs to, which tier they belong to, their deducible, and co-pay. The state has no clue—they are just learning as they go along," Nguyen says.
2.Funding Woes /Lack of Automation
Palomar is trying to meet the HIX challenges with increased revenue cycle automation, which will make it easier to determine if patients are eligible for insurance through the exchanges; get authorizations before procedures are performed to make sure the health plan will consider it medically necessary, and estimate patient deductibles and co-pays, Nguyen says.
However, funding this technology initiative comes with its own set of hurdles, he adds.
"The biggest challenge that we have at the present is unique to our facility because we opened a brand new hospital in August 2012. A lot of IT resources are being funneled there, which means there are fewer resources to help the revenue cycle automate processes."
Without increased automation, Palomar is leaving money on the table when it comes to collecting from payers, Nguyen says.
"There is an explanation of benefits attached with a payment, and payers tell us what they are paying and what they are denying. Let's say they pay $5,000 of a $6,000 bill. When the payer denies, how do you know if they are right? Right now we have to eat that cost, but the technology will be able to check and appeal denials. Automation technology could really help us to overcome some of these challenges."
At Marin General, funding concerns are centered on the hospital's construction projects.
"Our particular challenge is funding significant capital needs while we continue to improve operations and build our balance sheet," Cox says. "Our hospital disaffiliated from a larger system several years ago, and we were left with very little liquidity and significant unfunded capital needs."
The organization has employed several strategies to meet its funding difficulties, Cox says.
"[We have] made some key investments, built support within our community, and hope to receive approval to issue tax-supported general obligation bonds later this year that will allow us to initiate our major construction plans," he says. "[W]e have done very well."
3.Revenue Cycle Complexity
As the healthcare industry evolves, it is becoming increasingly complicated for provider organizations to operate the revenue cycle successfully, says Kris Zimmer, senior vice president of finance at St. Louis-based SSM Health Care, a 4,000-bed health system covering four states.
Zimmer sees this as one of his organization's largest challenges.
"Complexity is increasing at an alarming rate and while, theoretically, that complexity results in more precise payments, there is a lack of recognition of how inefficient that complexity is in terms of the infrastructure providers need to bill correctly and what payers need in order to monitor payments," Zimmer says. "If you add the cost of all that up, it's very, very inefficient on the whole."
Marlene Zurack, senior vice president and CFO for New York City Health and Hospitals Corporation (HHC), agrees that revenue cycle complexity is a big challenge and says the onerous job of maintaining accurate data doesn't make it any easier.
"[It is] complex and difficult to get all the data right in your revenue cycle," Zurack says. "Every time there is a reimbursement reform, a new level of data collection gets overlaid over the old one, and you never drop the old one. It's difficult; it's one of the problems with healthcare."
In the past few years, HHC has used LEAN methodologies to improve the revenue cycle process in an effort to reduce complexity and boost collections, Zurack says.
"We have now really hard wired in some of those standard workflows, and they are having an impact on collectability. We're seeing improvements in outpatient collection rates, and we're getting more insurance claims right the first time," she says.
While revenue cycle intricacies vex healthcare finance executives, they know it won't be getting any less complex as the industry moves forward. The best they can hope for is to find strategies for making it more efficient.
Zurack says HHC is in the process of installing a new revenue cycle management system to replace the 25-year-old system that is currently being used. The new system will enable HHC to integrate functions such as the revenue system, patient access, decision support, and scheduling that were formerly managed by separate applications.
"There are a few real improvements that we will get from this," says Zurack. "We will have an enterprise-wide patient master index so when you register in one facility, you are registered everywhere. … It will be great for an accountable care environment."