Getting Tough with Home Health Accounts Receivable

By Lisa Cantone, RN, MSM, CLNC and Ann Bullock

Home health organizations seeking to improve the performance of their accounts receivable should concentrate first on establishing practices that promote the greatest percentage of clean claims and reviewing payments received to be sure rates paid are optimal. They also may find it worthwhile to survey their business office operations for potential improvements to key areas.

Like other healthcare organizations, those providing home health services regularly experience the negative financial effects of payer payment reductions, claims payment delays and denials, regulatory compliance, and staff shortages, all of which Seriously weaken agencies already limited to small operating margins. Despite the elimination of Medicare's sequential billing requirement in July 1999, serious lags in cash flow continue.

Organizations experiencing problems with accounts receivable (A/R) should look first to the direct factors that may he causing a receivable to age past 30 days. They also may find it valuable to examine the five elements that are critical to a successful billing function: leadership; welldesigned processes and procedures; adequate, qualified staffing; well-trained employees; and performance measures and improvement.

Troubleshooting Accounts Receivable

The status of all claims should be monitored constantly A review of the explanation of benefits (EOB) received from third-party pavers can provide valuable fee data.

The EOB can be used to determine how the organization's fees compare with the customary fees of a particular insurance carrier. If insurance carriers are allowing 100 percent of an organization's Usual charge in determining payment to the organization, then that organ izat ion's charge is probably less than or equal to the rate for the area of service. If insurance carriers are paying 100 percent of that organization's usual charge, chances are the charge is far below the going rate.

EOBs also should be compared with the originally submitted claim amounts. In cases where the allowed amount and actual payment are less than expected, the claim should be reviewed to make sure no mistakes were made in coding the diagnoses and/or procedures. Most insurance carriers provide free or low-cost software for filing claims electronically. Filing claims electronically almost always will reduce claim errors and increase the rate at which claims are processed.

Many denied claims can be reviewed and reversed over the phone. According to one source, insurance carriers note that "approximately 90 percent of denied claims fall into categories subject to this telephone review process."^a Reasons for denials that usually can be resolved over the telephone include incorrect patient identification number, missing or invalid diagnostic or procedure codes, missing or invalid place of service, missing or invalid provider number, duplicate charges, and insufficient information submitted with the claim.

To eliminate these simple, but costly, errors, it is recommended that organizations providing home health services implement a preinvoice edit procedure in which both clerical and clinical review occurs before bills are released. The following information should be reviewed:

• Insured subscriber's ID number is correct;
• Certification period and dates of occurrence are correct;
• Diagnosis codes are appropriate, complete, and match and support services provided;
• Charges are itemized and correct;
• Claim is legible;
• Patients are homebound (Medicare);
• Skilled nursing services are intermittent (Medicare);
• Services were medically necessary (Medicare);
• Physician orders are signed prior to bill release;
• A visit note is present for every visit billed;
• The frequencies of visits match physician orders;
• Skilled care is clearly documented on every clinician's note; and
• Hands-on, personal care is rendered for home health aide visits.

Once a Medicare claim has been billed electronically, the return to provider (RTP) file should be monitored at least weekly to determine the claim's status and allow corrections to be made online quickly The claims summary report should be monitored as well for any denials or payment variances. Additionally, either a new copy or updates of the 1CD-9 code book should be purchased annually, as many diagnosis codes are added, changed, or deleted. Failure to review and incorporate these changes in an organization's master charge schedule could seriously affect payment.

Home health providers currently receiving and relying on periodic interim payments (PIP) for cash flow should be sure their claims are billed in a timely fashion. It is anticipated, however, that PIP will cease as of October 1, 2000, and HCFA's prospective payment system will usher in a new set of cash-flow challenges.

Improving the Accounts Receivable Process

Five aspects of accounts receivable management critical to success are:

• Leadership committed to establishing and maintaining a "best-practice" A/R operation;
• Well-designed, compliant policies, processes, and procedures;
• Adequate staffing and resources to get the job done;
• Well-trained, empowered staff; and
• A performance improvement plan with measurable, objective performance indicators.

Committed leadership. A high level of commitment on the part of an organization's leadership is essential for establishing and maintaining "best-practice" A/R management. Commitment is required to drive the overall vision and strategy throughout the organization. But most importantly, employees need to feel they have management's support. Realistic productivity targets and performance expectations should be established within the business department.

One way support can be demonstrated is through a regular, perhaps biweekly, meeting with the billing manager or supervisor and that individual's staff. The purpose of the meeting is to assess the unit's operations, focusing on any delays or problems and developing workable solutions.

Well-designed processes and procedures. While a billing department may benefit from new or upgraded information technology, it is important to remember that automation will not improve ill-conceived processes. Before assuming computers are the answer, consider that streamlined processes, appropriate staffing levels, and adequate training might be.

Financial managers should look carefully at the different functions within their home health billing and collections departments and take note of how they function on a daily bases. They should seek to identify elements of duplication and determine if such duplication can be reduced.

Another strategy is to solicit input from each billing department member for ideas on how to better reengineer the process. Most employees will welcome the opportunity and accept an invitation to improve a process, particularly if doing so means the process requires mere restructuring rather than downsizing.

Additionally, it has been more than a year since the OIG released its model home health compliance plan, but only about 40 percent of all home health agencies have implemented such a plan. In some agencies, billing and collections are among the areas at greatest risk of noncompliance.

Agencies should look closely at their billing and collections policies, procedures, and internal processes to ensure they are current and call for compliant actions on the part of staff members. Redesign or improvement alternatives should be analyzed carefully The temptations of the "quick fix" or other shortsightedness must be avoided because any changes made may have far-reaching and potentially adverse unintended consequences.

Resources to do the job. Effective staffing means the presence of a qualified workforce at all times, even in the face of a dynamic work environment with changing demands. The individual performance "equation" cited by Robert Schermerhorn shows Ability x Support x Effort = Performance.^b Therefore, careful selection of the most able people for the job, with adequate management support and sufficient employee and management efforts, will yield a higher level of performance.

Unless an organization's prevailing wage and salary structure is competitive, however, it will be difficult to attract and retain a staff of highly competent workers. An organization's employee-benefit program also plays a role in the attraction and retention of capable workers. A good performance indicator to monitor in this area is staff turnover rate.

Some home health agency billing operations may not have the staffing levels necessary to perform the required follow-up on outstanding accounts at all times. In these instances, it may be cost-effective to contract with an outside accounts receivable management or recovery company. With the accounts receivable management company focusing on collections and increasing cash flow, the home health agency's time can be focused on internal operations and performance improvement.

Well-trained staff Well-managed organizations offer appropriate training and development activities for staff to ensure that skilled individuals are always ready to assume new responsibilities as needed. Appropriate training for billing and collections staff starts with orienting new employees to their jobs, coworkers, and key aspects of the organization as a whole. This orientation includes clarification of the organizational mission and culture; explanation of the billing/collections department's operating objectives and job expectations, including compliance to the Fair Debt Collections Act; communication of important policies and procedures; and identification of key persons in the hierarchy of authority.

Training provides new and existing employees opportunities to acquire and improve job-related skills. The best training occurs when managers establish an overall climate within which people want to learn and are rewarded for learning.

Most Medicare and Medicaid carriers conduct seminars explaining how their programs work and supply valuable billing information. Financial managers should recommend that staff attend these usually free seminars.

In addition, written billing updates are provided to an organization's financial manager. Effective, consistent, and timely dissemination of billing and regulatory information by the manager to his or her staff is critical in helping to reduce billing errors and increases the staff's understanding of and compliance with changes.

Empowerment is another way to foster employee growth and maintain a supportive environment. When a manager delegates effectively, he or she empowers staff members to do their jobs in a more autonomous, efficient fashion, which in turn helps build a more effective team.

Performance measures and improvement. To monitor performance improvement, some organizations use the "balanced scorecard" method-a review of a set of measures that provide managers a fast, yet comprehensive, view of the business. "The 'balanced scorecard' includes financial measures that indicate the results of actions already taken. And it complements the financial measures with operational measures on customer satisfaction, internal processes, and the organization's innovation and improvement activities-operational measures that are the drivers of future financial performance."^c

Key financial performance measures used for balanced scorecards may include:

• Overall days outstanding in A/R;
• Days in A/R by payer;
• Days to bill (from month end);
• Dollar amounts and percentage of initial billing release after claims have been audited for appropriateness;
• Dollar amounts suspended due to missing or unsigned physician orders;
• Amount of write-offs (with reasons);
• Quantity, status, and dollar amount held up pending results of additional development requests (ADRs);
• 485 plan of treatment compliance with signature requirements;
• Number of denied claims;
• Client and physician satisfaction levels;
• Referral rate; and
• Visits per patient.

Periodic performance analysis can help financial managers identify opportunities for improvement and determine appropriate restructuring of the policies, procedures, systems, or workflow to facilitate efficiencies. For example, assume an organization is having trouble getting physicians to sign orders in a timely manner, thus delaying submission of claims for payment. A course of improvement activity, according to Diane Omdahl, would include^d:

• Establish a performance improvement committee or subgroup to study the issue.
• Identify the desired result of performance improvement for billing or collections (the outcome indicator). In this example regarding physician orders, the desired outcome might be "95-100 percent of physician orders will be signed in a timely fashion."
• Conduct a brainstorming session to gather ideas about structures and processes that contribute to the outcome.
• Study all ideas to eliminate duplicates and clarify thoughts.
• Group ideas in related categories. in this example, the categories might be clinician, order tracker, physician, and supplies.
• Draw a cause-and-effect diagram (ie, a diagram depicting the structures and processes [causes] that contribute to the outcome [effect] see Exhibit 1).
• Study the diagram and determine the most important structures and processes. Remember, indicators guide data collection; the more important the structure and processes are to the activity, the more important the indicators.
• Write the indicators. In the example, four high-level process indicators might be: (1) Clinicians will accurately, completely, and legibly write all orders and submit to the office daily; (2) The order tracker will process all orders received the same day; (3) Physicians will demonstrate compliance to signature requirements; (4) Supplies and/or resources will be available to the order tracker.

Depending on the level of detail an organization wishes to scrutinize, indicators can be grouped into four categories: people issues, policy issues, process issues, and supply and equipment issues. These categories can be subdivided and refined to yield more specific indicators, if desired.

if, following analysis, it is determined that the cause of the problem lies with an employee, that employee should be retrained, counseled, or replaced. if the cause lies within the system, assigning blame to an employee will only cause frustration. Instead, the system and its structure and/or processes should be analyzed and constructively changed. Managers, supervisors, and staff should keep in mind that the emphasis should be on targets, rather than the measurements, as measurements tend to focus on short-term controls, whereas targets will lead to breakthrough performance.

Conclusion

Organizations providing home health services face a tremendous challenge balancing their revenues and expenses, trying to minimize the days outstanding on their receivables, all the while attempting to remain competitive.

In addition to troubleshooting the direct factors affecting accounts receivable, organizations should strive to establish a business office headed by committed leaders who maintain a supportive, learning environment with well-designed policies; adequate, qualified, well-trained staff; and performance improvement measures incorporated into the office's functions. Experience tells us that the longer an amount is outstanding, the less likely it is to be collected. Yet, the need for positive cash flow is more important than ever. implementing changes today to improve A/R processes can help organizations increase their positive cash flow and prepare for future payment changes.

a. Davis, J.13., Health Insurance Carrier Directory Los Angeles, California: Practice Management Information Corporation, 1999.

b. Schermerhorn, J.R., Management for Productivity, New York, New York: John Wiley & Sons, Inc., 1993, p. 370.

c. Kaplan, R., and Norton, D.P , "The Balanced Scorecard-Measures That Drive Performance," Harvard Business Review, Jan.-Feb., 1992.

d. Omdahl, D., "Choose Indicators to Measure Quality in Processes," Homecare Administrative Horizons, Volume 4, Number 8, 1997, p.2.

Reprinted, by permission, from Healthcare Financial Management, April, 2000, pp. 44-49. Copyright 2000 by the HEALTHCARE FINANCIAL MANAGEMENT ASSOCIATION.