Midcycle Revenue Loss May Be Costing The Average Hospital $11 Million Annually

A recent study by the Advisory Board Company found that the average 250-bed hospital in the US lost between $4.7 and $11.3 million in 2016 from revenue loss in the midcycle. Advisory Board defines the midcycle as the revenue cycle functions that happen between patient enrollment and the back office – namely documentation, clinical documentation improvement (CDI) and compliance.

As most hospitals don’t even have a term for the midcycle, they may not be adequately measuring their performance in these key areas, and thus are likely losing money that they could re-capture with specific improvements. The report from the Advisory Board recommends 2 key improvement areas for hospitals to address to eliminate missed revenue opportunities in the midcycle:

“Recommendation 1: Understand the growing relationship between quality and finance

Payers are increasingly linking reimbursement to quality. CMS has set historic payment targets for the coming years, demonstrating a strong commitment to fee-for-service alternatives. In 2016, 85% of Medicare payments will be tied to quality, increasing to 90% in 2018. Commercial payers are also starting to look at quality data. More and more commercial payers are using their own data or Medicare data in contract negotiations for fee-for-service contracts.

Even executives who already see the tie between documentation and financial performance do not capture as much revenue as they could. Hospitals are struggling to optimize documentation for DRG contracts simultaneously within pay-for-performance. In the quest to improve documentation to capture DRG-based reimbursement, it is easy to forget about those penalties. But, they can be as severe as revenue loss from DRG-based contracts. For example, two thirds of acute-care hospitals in the Medicare Pay-for-Performance program saw a negative impact in the 2015 fiscal year. Even worse, among those adversely impacted, nearly 40% encountered a financial loss of more than $250,000 – and almost 10% saw losses of more than $1 million.

Despite this growing emphasis, many hospitals struggle to adequately capture the quality of the care they provide. Activities in the midcycle can have a significant impact on your quality scores. Quality is measured based on what is written in patient’s charts and ultimately coded. If that is not accurate, quality-based payments suffer. You need to have a strong query process to catch errors retrospectively, plus physician education to prevent errors proactively. The latter is particularly important, since teaching physicians to document better can reduce workload for increasingly strapped CDI programs.

Recommendation 2: Monitor your midcycle performance

You can’t improve your midcycle performance if you don’t know what your performance is. The better your understanding, the more you can do to proactively fix midcycle problems and capture full reimbursement. However, one of the biggest impediments to measuring midcycle performance is seeing all the data together in one place. Few hospitals have a term for their “midcycle.” Even fewer have tools to consistently monitor it. You may have a CDI workflow system or a post-payment audit tracking system, but you also need a way to measure how CDI impacts post-payment audits. In addition, you need to understand your current performance from a quality perspective. We recommend that you start by assessing your standing on specialties likely to come up as carve-outs in your contracts. Payers are increasingly likely to scrutinize the quality of those services during negotiations.

In order to keep a close eye on your midcycle activity, we recommend creating a comprehensive dashboard that integrates both finance and quality metrics and allows you to see all of these metrics quickly and in one place. Executives should check these metrics regularly and should be able to compare performance month over month and year over year to assess both where the organization is doing well and where to focus additional resources.

In addition to comparing your current and past performance, you need to benchmark your performance against peers, or even better, local competitors. Not only will peer data provide valuable insight into your greatest opportunity areas, but since your standing against your peers will ultimately determine whether you receive VBP penalties or bonuses, it is imperative to know how you stack up.”

Read the entire report at: Why Your Midcycle Matters

As the report states, “inaccurate or insufficient documentation means that coders cannot adequately capture the acuity of your patient population or the quality of the care you are providing, exposing you to a greater risk of audits and decreased reimbursement.” In order to capture every dollar owed to them, hospitals must make sure their documentation is always accurate and complete. If your hospital has any holes in its documentation program, consider software solutions such as iRISupply that can automate the capture and documentation of implants and supplies in surgical settings, where hospitals make and spend almost half of their dollars. These systems can reduce the documentation burden on clinicians to allow them to spend more time with patients, while ensuring the hospital is getting paid every dollar that it has earned.