In the quest to improve profit margins, essentially there are two opportunities to influence the bottom line: reduce costs or find new revenue streams. While historically seen as cost centers, hospital pharmacies now play a critical role in improving outcomes to meet the reimbursement expectations under health care reform. Key to pharmacy’s evolving role is delivering quality care while exploring opportunities to improve cost efficiencies and ensure accurate reimbursement.
University Hospitals (UH) is an integrated network of 15 hospitals, 28 outpatient health centers, and numerous primary care physician offices in 15 counties in and around Cleveland, Ohio. Enabled by the adoption of Lean methodologies, two of UH’s community hospitals helped reduce the financial burden on the health system. UH Geauga Medical Center, a 225-bed facility, and UH Ahuja Medical Center, a 150-bed facility, developed programs to capture previously unidentified sources of pharmacy revenue in the cardiac catheterization (cath) lab and operating room (OR) areas.
Case Study I: Charge Capture in the Cath Lab
UH Geauga employs an electronic medical record (EMR) system with computerized prescriber order entry and bar code medication administration, and medication billing is performed exclusively through the hospital inpatient computer system. However, this created a challenge in the procedural areas, including the ORs and cath lab, where a standalone EMR (that does not interface with the inpatient system) is used. Further complicating matters, the cath lab does not utilize automated dispensing cabinets (ADCs). In order to bridge these separate systems, the cath lab would send a paper billing sheet via interoffice mail to the pharmacy for manual billing. As with any non-automated system, this process raised concerns regarding the accurate capture of cath lab medication charges.
Contributing to the effort to improve efficiency and quality while reducing costs, UH department leaders are trained in Lean and Six Sigma techniques. Inspired by a Lean training session, pharmacy leadership at UH Geauga assigned a PGY1 pharmacy resident and student to conduct a value stream analysis of cardiac cath lab billing, to ascertain whether medication charges were inaccurate or missing. Value stream analysis is used to break down and map a process with the goal of determining which steps add value and which do not. The initial map is reviewed with an interdisciplinary team to identify areas of waste and opportunities for process refinement. A second value stream map then is created to establish and document the ideal practice, and, finally, the identified practice changes are implemented.
Once the value stream map of the cath lab billing process was created, it became abundantly clear that the process was bogged down with unnecessary steps, most notably, nurses and technicians manually filling out and labeling paper forms (see FIGURE 1). Furthermore, the analysis demonstrated that charge capture in this department was far from complete, leading to unnecessary loss of hospital revenue. A 1-month sample of billing records revealed that 25% of medications administered and 27% of overall charges were not being billed. Drugs often went unbilled due to the misplacement of billing sheets, billing for lower quantities than were administered, or simply because the charges were not recorded on the billing sheet (see FIGURE 2).
In response, the process was refined to eliminate the decision of who would record medication use information and manually label the charge sheet. Experience has shown that when multiple individuals are able to perform a single task, quite often no one performs the task at all. Simplifying the ambiguity within the process allowed for clarity and accountability; likewise, changing from a manual to an electronic process allowed for instant documentation and eliminated the need to create a redundant manual record.
As a result of these process changes, the health system forecasted an annualized value of $119,000 in additional medication charges generated by the cardiac cath lab. While this is a sizable amount, it is important to note that a percentage of the recovered charges are for inpatient procedures, which are reimbursed under diagnosis-related group (DRG) billing and, as such, are bundled with inpatient charges, thus eliminating directly realized revenue. Further, given that insurance company payments are generally discounted, the net revenue may be only 15% to 25% of the total amount billed. Nonetheless, the success of this project should not be measured simply in increased revenue, but by the overall improvements in the accuracy of charge capture.
Case Study II: Missing Charges in the OR
UH Ahuja Medical Center utilizes automated dispensing technology in all procedure areas. Twenty anesthesia workstations supply 10 operating rooms, four cardiac cath labs, five endoscopy rooms, and one pain procedure room. In addition, two freestanding ADCs supply the OR core area. Because the procedural areas do not use the inpatient medical record system for medication documentation, all of the cabinets serving the ORs are configured as bill-on-dispense. Even with a highly automated electronic process for medication control and billing, it remains important to validate the integrity of the charge capture process and electronic hand-off between systems.
This concept was proven true when charge reconciliation audits performed over a 1-week period detected that 11% of medication charges (196 of 1823) from charge-on-dispense cabinets were not billed to patients. Upon further investigation, the problem was identified as a registration timing issue based on the exchange of information between the ADC and the EMR. When patients are in a charge-on-dispense area, such as the OR, medications are billed to the patient as they are removed from the cabinet. Conversely, for patients registered in a charge-on-administration area, such as an inpatient unit or the emergency room, charges are applied to the patient profile once the nurse signs for the medication in the electronic medication administration record.
Challenges arose when patients registered to a charge-on-administration area received care in a charge-on-dispense area. The reason for this is that the system does not charge until an electronic signature is completed, which, in this scenario, never happens. In some cases, a short delay in processing resulted in the medication being removed from an ADC just minutes before the patient transfer occurred in the EMR. Alternately, there were occasions where, in the interest of efficiency, medications were removed from the cabinet prior to the patient arriving in the OR. Because the ADC did not recognize the patient as being registered to the OR, the charges were never submitted. There are numerous scenarios wherein a difference between the patient’s registration location and treatment location can stymie the system and result in missed charges.
The charge reconciliation process for highly automated electronic systems differed significantly from the reconciliation of the paper-based billing process performed at UH Geauga’s cath lab. We were able to export Excel spreadsheets with 2 days of charge history with patient-level detail from the financial system; likewise, patient-level detail reports were exported from the ADC system for the same time period. A cross walk of combined data, including the patient medical record number and date of service, was created and the v-lookup function in Excel was used to merge data from the separate reports into a single page. Finally, items were selected and filtered so that the final report listed all medications that were removed from the ADC but not charged to the patient. This list was then further validated against the financial system to ensure that inadvertent double billing did not occur. Ultimately, the charges were added to the patients’ bills.
At the time of the initial analysis, the financial impact of missing 11% of charges was annualized to an estimated gross revenue loss of $123,000. This high number inspired the facility to commit a pharmacy technician to audit the system daily for missed charges and then manually bill any missed medications. As this process has continued, the dollar amount of captured charges has increased significantly. The next charge reconciliation audit (conducted 1 year later, also over a 1-month period) found that 11.5% of charges required manual billing (1700 of 14,755 charges). These manual efforts equate to the capture of an additional $500,000 in gross pharmacy charges annually. While there are many causes for this drastic increase in newly captured revenue, including an increase in surgical volume and higher generic medication costs, perhaps the biggest contributor has been the increase in the number of cath lab cases incorporating high-cost drugs.
Because of the DRG billing and insurance discount issues discussed earlier, the net value recovered from these efforts will be less than the dollar value of the charges captured. While the pharmacy is now capturing charges for $500,000 worth of products that previously fell through the electronic cracks, the likely net realized will be closer to $70,000 to $100,000. Nevertheless, because the effort to recover these charges requires less than one-quarter of a pharmacy technician FTE, it is well worth the investment.
Ultimately, our goal is to build an interface that allows an override at the ADC so that medications can be billed based on the location from which the drug is removed and not the patient’s registered location. This also will allow the technician to resume previous duties.
Understanding and then auditing the pharmacy revenue cycle may not be at the top of every pharmacy leader’s priority list, but in many ways it is akin to mining gold. Like mining, sometimes you extend significant effort and find nothing; other times you strike it rich. Assigning revenue audit tasks to pharmacy students or residents is a great way to leverage the necessary labor to pore through report details and analyze findings. Moreover, these tasks provide an excellent opportunity to teach revenue cycle concepts and process improvement to future pharmacy leaders.
Paper-based systems often are prone to failures from human error and process deviation. In many health systems, electronically interfaced billing has not made it to all areas of the facility, leaving these manual processes at high risk for missed charges. When auditing or reconciling charges, it is important to establish a baseline (or denominator) of what the total medication charges should be and then compare it against total billings (numerator) on a weekly or monthly basis.
While electronic systems streamline and automate processes, they are not perfect and require monitoring through charge audits and reconciliation. The principle of establishing a baseline of the expected number of medications charged still applies and likely will be easier to analyze if both current medications billed and the total number of medications that should have been billed are available electronically.
Given the rising cost of generic medications and decreasing reimbursement in health care, billing accuracy is of increasing importance. Likewise, any increased charge capture must be billed quickly to avoid patient dissatisfaction via late bills. Identifying and billing for previously uncaptured pharmacy charges also can improve pharmacy productivity metrics for those hospitals that monitor productivity based on doses billed. Hopefully, when pharmacy leaders or ambitious pharmacy team members take on pharmacy revenue cycle projects, their endeavors will improve billing accuracy, increase pharmacy revenue, and contribute to a higher level of pharmacy productivity.
The author would like to recognize the many individuals who participated in these improvement projects, helping to identify savings, create processes, and deliver results. Thank you to Kilee Yarosh, RPh, MBA; Michelle Tilley, BS, CPhT; Tahani Mansour, PharmD, BCPS; Jeremy Hall, PharmD; Patrick Divoky, PharmD; and Colin Ecker, PharmD student.
Jason Glowczewski, PharmD, MBA, is the director of pharmacy services for UH Community Hospitals in Cleveland, Ohio, where he is responsible for new program implementation, strategic planning, process integration, and pharmacy service line development across the eight community hospitals. Previously, he was the manager of pharmacy and oncology at UH Geauga Medical Center, where he opened new medical and radiation oncology service lines, an outpatient pharmacy clinic, initiated PGY1 and PGY2 pharmacy residency training programs, and served as the PGY1 pharmacy residency director. Jason received his PharmD degree from the University of Toledo in Ohio, an MBA from Indiana Wesleyan University in Marion, Indiana, and most recently completed a Lean health care certification from Kent State University in Ohio.
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