Increasing Procedural Revenue

For the past several decades in healthcare, inventory has been managed independently from the rest of the business of providing healthcare. When you step back and look at how supplies impact the business of providing healthcare, you’ll see that hospitals can benefit greatly from extending the visibility of supplies to clinical documentation and billing. Charges that were previously going uncaptured, and thus unpaid, can be re-captured and generate significant income that flows straight to the bottom line.

Solutions such as iRISupply help make supply management a strategic asset for hospitals – on par with other American industries that have embraced the supply chain as a competitive advantage. In addition to the inventory management benefits they provide, these software tools for supply documentation and management in the procedural areas also help hospitals increase procedural revenue in 3 ways:

  1. Maximize Charge Capture
  2. Improve Procedural Documentation
  3. Improve the Case Mix Index (CMI) Score

Maximize Charge Capture

Before you say, “For inpatient cases we get paid by the DRG, and we get paid the same amount no matter what items are used,” consider that a procedure may start off with one plan in mind, but change during the actual procedure. For example, a catheterization procedure may start off as a single vessel procedure, but after the surgeon gets a better look at the arteries she could conclude that multiple stents are needed. If the change in procedure type is not updated in the procedure notes, then this can lead to lost revenue. In addition, “we get paid the same amount for a DRG” isn’t entirely true. The next section provides more information on this.

The reality of today’s hospitals is that not every item that gets used in a procedure gets documented. As a result, this causes a revenue leak. Why does this happen? First, it’s nobody’s fault. If you work inside the procedural areas, then you already know that some of the best talent can be found here. In short, it’s the nature of the beast. The talented nurses and techs within healthcare do their absolute best to follow proper protocols and document every item, but distractions can arise inside a surgery suite that shift the focus from proper protocols to life-saving procedures. Other distractions like staff shortage, longer work hours for staff, or even a longer complicated case can also add into the mix and as a result some items don’t get documented.

You can help detect revenue leakage in your procedural areas by looking for the following signs:

  1. Identify one procedure type and look at the average cost of supplies that are used for those procedures over fixed time period. Determine an average cost of supplies for the procedure type. Next look for procedures where the total cost of supplies is less than the average. Procedures where the total cost of supplies falls way below the average could be a sign that something didn’t get documented.
  2. At some hospitals, as items get documented for a procedure, inventory levels are also decremented. If an item doesn’t get documented or decremented, then the inventory counts become out of sync with what’s on the shelf. If you need to do a physical count (or cycle count) before reordering items, then this could be an indicator that not every item is being documented in a procedure.

Documentation and inventory management systems such as iRISupply don’t require staff to scan barcodes or push buttons when surgical staff take an item or return an item. These steps are eliminated using a simplified work flow powered by RFID technology. When distractions arise during procedures, procedural areas can rest assured that these systems are capturing activity and preventing revenue leaks. Every item that is used during a procedure is automatically captured and electronically documented using RFID technology. Electronic documentation includes: who (which staff member), took what items (catalog #, serial #, lot #), and for which patient. Charge capture is maximized and documentation is improved.

Generally, hospitals can agree that there is some level of non-compliance in staff not documenting item usage, but how much varies and is often under estimated. The Journal of American College of Radiology (JACR) did a study on the impact that iRISupply had inside 2 surgical rooms over a period of 10 months. What JACR discovered was an increase in charge capture of 20%. This means that they were only getting 80% compliance from surgical staff with a barcode based solution. The JACR study concluded that this 20% increase in charge capture resulted in an additional $2.1 million in charge capture which led to an additional $750,000 in revenue.

Improve Procedural Documentation

To get properly reimbursed for a surgical procedure, you must be able to prove through electronic documentation that the procedure being billed matches the work performed.  If you can’t prove it, then you may not get paid for it, or may receive a reduced amount. Government programs such as Medicare and Medicaid have been reinforcing this policy, and have notified hospitals that claims submitted without documentation that supports the charge will be contested or denied.

This makes complete sense. If you are requesting payment for a procedure, then you should be able to prove that what you did equates to the payment amount. However, this can be challenging for procedural areas. This requires surgical staff to accurately document each procedure (i.e. what was used, changes in a procedure, etc.). This also requires surgeons taking the necessary time to accurately document what they did in a procedure. The procedure notes and physician notes need to support one another.

Why is it challenging for surgical staff to accurately document a procedure? In the previous section, we discussed the distractions that can occur for support staff during the procedure.  So why then is it challenging for surgeons to document a procedure? In a perfect world a surgeon should document the procedure immediately after, but that isn’t the way it typically happens. Time for surgeons is generally in high demand, and sometimes they get pulled into other procedures to advise or they are booked back-to-back. These activities add up and the documentation gets pushed to later in the day, or even week. Remembering the details of a specific procedure after performing other procedures then becomes a challenge for surgeons.

How can supply documentation and management software help surgical staff and surgeons with better documentation? If a hospital had technology that provided a hands-free solution to capturing and documenting what supplies were used in a procedure, then that technology could help surgical staff and surgeons in the following ways:

  1. For surgical staff, they currently document supply usage during a case manually. Having the supplies documented electronically over to the electronic medical record and other information systems would save surgical staff time, mental resources of having to remember, and eliminate any human-error in documenting what items were used.
  2. For surgeons, imagine if you had a report with a chronological list of supplies that you used in a procedure. This usage report would serve as a roadmap to help recall the details of the procedure. An Interventional Radiologist at a leading academic medical center commented, “Sometimes I use so many devices, I can’t remember what I used and the sequence.” This roadmap report provides insights for surgeons that help them recall the details of the procedure. In addition, this same Interventional Radiologist commented that iRISupply increased the speed for completing documentation because it enabled him to copy/paste information from the report into the surgeon’s notes for the procedure.

In the previous section we said, “We get paid the same amount for a DRG isn’t entirely true.” A DRG is meant to be a mechanism for quantifying the cost for performing a certain type of procedure. In some ways, a DRG equates to the average cost for performing a procedure. There are exceptions in procedures where it takes more surgical resources to perform a certain type of procedure due to the patient requiring more care. Thus, there are 3 variations of every DRG to accurately reflect how much in surgical resources were needed for a given patient procedure. Each variation has a different average cost associated to it. The more care that is required in a procedure should translate to more money received by the hospital for a procedure. The key to driving higher reimbursements is accurate documentation. If a surgeon has access to a roadmap of information that can help to recall the details of the case, then this can help improve documentation that can drive higher reimbursements.

Improve the Case Mix Index (CMI) Score

Medicare and Medicaid created a Case Mix Index (CMI) score to help properly reimburse hospitals for services provided to inpatients (CMI doesn’t apply to outpatients). The CMI is an attempt to measure the resources needed to provide proper care for patients. An article from Health Leaders Media titled “CDI Programs Drive Up Case Mix Index, Revenue” states that, “a higher CMI means more reimbursement dollars for providing care because it indicates that a hospital is treating a sicker patient population. Increasing the CMI hinges on having clinical documentation that accurately reflects the severity level of patients’ conditions. Without thorough records, hospitals can miss out on substantial revenue”.

CMI and its measurement can be a complicated topic requiring spreadsheets just to understand the basics. CMIs can be set at the DRG-level and also at the hospital-level. The end result that hospitals need to keep in mind is that the smallest improvements made to a hospital’s CMI can result in much more revenue for hospitals. Each case where CMI is maximized results in correspondingly higher reimbursement dollars for all future cases. Alternatively, if CMI is not maximized, all future cases will be reimbursed at a lower rate than the hospital deserves to be compensated at.

All hospitals are aware of this, though only some are keenly focused on CMI as a strategy for improving revenue. The #1 way to improve CMI is through better documentation by staff. Many hospitals have invested money in creating a new group of personnel often referred to as Clinical Documentation Improvement (CDI) specialists. CDI specialists review documentation for accuracy and identify gaps or descriptive wording in the documentation that can help bring in more reimbursement dollars.

In seeking maximum reimbursement for procedures, all the information needs to be present (including what was used in a surgical procedure). As we discussed in the previous sections, supply documentation and management software maximizes charge capture and helps surgeons recall the details of a procedure. This helps fuel better documentation which enables medical coders to seek higher reimbursement for procedures. All of this leads to improved CMI scores.

Inventory for a procedural department is their biggest non-labor cost and takes great effort to manage. As mentioned before, supplies have been isolated from the rest of the business of providing healthcare. Breaking down isolated silos and opening up the visibility of which supplies are being used can help increase procedural revenue and also help hospitals determine their cost for providing care.

If you would like to learn more about CMI, then please check out this YouTube video.