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The Cath Lab is a Business: Do You Have the Knowledge to Stay Afloat?
Several years ago, I attended an educational seminar that focused on healthcare finance and economics. While I don’t remember a great deal about what was presented that day, one thing stands out in my mind as clear as if it happened yesterday: the keynote speaker, a leading healthcare accountant, said that one of the greatest risks faced by the healthcare industry is the lack of business knowledge and savvy of its middle management and clinicians.
I knew, before he expanded on his statement or even quantified it with data, that he was absolutely right. There has long been a huge divide in healthcare, fueled by the belief that clinical people place little value on financial performance, and finance people have no faith in the business ability of clinical staff.
To that end, I remember my first clinical manager posting an inventory reconciliation sheet on the door of the report room showing all of the items that were used but were not billed to a specific patient. She went on to explain in a note attached to the print-out that all of these missed charges cost our facility large sums of money, which could have translated into a profitable quarter. Unfortunately, she, herself, was missing the big picture. It would not be until a number of years later, when I had my own staff reports and budget accountability that I would learn the entire picture of charges, reimbursement, and payment. And one of the first things that I did was teach it to my staff.
Unbeknownst to me at the time, the decision to educate my staff on the finance of our department turned out to be one of the best management strategies I have ever implemented. Once the staff began to realize how finance can impact clinical decisions, and how profit could relate to them directly in terms of bonus, schedule, or even job security, they were much more in step with making prudent financial as well as clinical decisions.
While one article cannot replace hours of in-service training, it can provide a solid outline for a formal education plan. Whether you are a manager that needs to teach his or her staff, or a staff member looking for direction on how to improve your fiscal knowledge base, the following will provide a solid guideline for learning the fundamentals.
In order to get a complete picture, your education should focus on the following areas:
Payers
One of the most important things to understand in learning about hospital finance is to understand payers, and their key terms and requirements. This is a lot easier said than done. A great place to begin is to ask for the Finance and Contracting Department’s assistance to develop a ‘ Contract Data Sheet.’ This sheet should contain information that directly relates to the department in terms of payment base (case rate, percent of charges or per diem), approval mechanisms, carve-outs for high-cost supplies (such as pacemakers and ICDs), specific vendor requirements and other expectations such as whether these type of cases are traditionally considered, and therefore reimbursed as, outpatient. While no one expects that clinical care should be completely dependent on who is paying the bill and how, it can save a great deal of heartache for the hospital, and the patient and their family down the line if specific attention is paid to payer requirements, specifically in terms of documentation for medical necessity, aberrancies about the specific case, and reasons why specific supplies were used.
Chargemaster (CDM)
The Centers for Medicare and Medicaid Services (CMS) clearly dictates that all costs incurred in patient care should be appropriately documented and charged. CMS has gone as far as to lump certain costs together, or ‘bundled’ them, to allow ease in accomplishing this. Many programs fail to realize that by not charging appropriately, they are putting future reimbursements in jeopardy, as CMS, as well as many other payers, uses historic charge data to justify future reimbursements. Additionally, savvy program directors use the CDM to track case costs that otherwise may be missed due to the lack of a formal cost accounting system. Any fiscal education should include a review of the CDM to make sure it is accurate, appropriate and to understand how often it is updated and by whom. (We will address the CDM more specifically in a future article.)
Bills for Service
Most people who work in a clinical area do not what a final bill looks like, and that is unfortunate. The universal billing form used for hospital billing, or UB-04, is a simple format used by most payers. Even a review of some UB-04s can help staff understand the complexity of billing and what appears on the final invoice. It is an excellent idea and one Corazon uses in its consulting practice, to attach and review the final bill and payer payment remittance form when completing any type of quality or other chart review. It helps the reviewer understand what was important from a payer standpoint and to see how clinical documentation is when it comes to payment.
Reconciliation and Contract Allowance (Capitation and Case Rate)
These are processes that are essential in learning about the finances of any department, especially the cath lab. It is a definite eye-opener for clinical staff to learn that only a fraction of what is billed is paid at the end of the day. As mentioned before, Case Rates and Per Diems are exactly what they sound like — the encounter is either paid by a flat total rate or a rate that is determined by each day the patient stays in the hospital. Because of this, it is essential for staff to understand what the costs for each procedure and supply equate to and understand whether the procedure will end up being a loss for the hospital at the end of the day. It is also important to understand that certain payer contracts take a portion off of the bill before any of the supplies or procedures are questioned. This ‘allowance’ or ‘capitation’ is a tool that hospitals and payers use to negotiate contracts that allow for some economies with higher volumes and push risk away from payers toward the hospital providers as agents who can more directly control costs. Unfortunately, these mark-offs can send an encounter into the red before the patient has even left the recovery area. Again, who is paying the bill cannot be a factor in deciding clinical care, but it can impact decisions on whether a patient can do just as well with a less costly supply or less intensive form of treatment.
In summary, the reality of our healthcare environment is that no one wins when hospitals lose money. The impact list of a facility that is in the red can go on for pages and is even felt by local economies. The key to helping to prevent this is education. As our clinical staff, managers, and even physicians begin to understand the impact of even the simplest of decisions, such as sizing a stent correctly to preventing the need for multiples or making sure the correct dosage of medication is selected to prevent waste, it can go a long way. Keeping our facilities in the black insures that everyone will be around for the long haul, and that our patients will always have access to timely and cutting-edge treatments.
Look for our article next month that tackles the complexities of true cardiac and vascular integration, and future articles that will expand on this and other topics.
