Health IT glossary: Healthcare financial management
Activity-based cost accounting.A new type of application known as activity-based cost accounting software gives healthcare organizations the ability to calculate the cost of each episode of care. While few hospitals and healthcare systems use this approach today, more are expected to adopt it because of the growth of value-based reimbursement and payment bundling. Instead of drawing inferences from billing or claims data, the new software allows organizations to analyze every cost element in the episode, including hospital, physician, medication, and ancillary expenses. This is going to be important for hospitals going forward as more of them accept bundled payments and global payments, both of which involve multiple providers of care.
Admission-transfer-discharge (ADT) systems.ADT systems, the core of hospital financial systems, track the admissions, transfers, and discharges of patients. They allow hospitals to know how many patients they have at any particular time and how long they have been in the hospital. Not only is this information important for operational purposes, but it enables management to calculate the average length of stay – a crucial metric for determining the rate of bed turnover. In the last year or two, some accountable care organizations (ACOs) and HIEs have been given access to hospital ADT systems. This enables them to tell primary care doctors when their patients have been discharged so that they can pick up their care right away.
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Business & clinical intelligence.Business intelligence (BI) applications address financial and operational aspects of healthcare systems, such as contract negotiations, facility management, measurement of resource utilization, and cost analysis. Clinical intelligence (CI) software supports activities such as quality improvement, care management, and population health management.BI and CI overlap in a number of areas, such as an organization’s staffing needs. Both are needed to evaluate the efficiency and quality of care provided by an organization or an individual provider. Measures of efficiency include average length of stay and readmission rates, both of which are affected by the quality of care.
Claims clearinghouses. Electronic claims clearinghouses are a vital link in the chain that connects healthcare providers to payers. While some providers directly bill their larger payers, such as Medicare and Blue Cross/Blue Shield plans, most claims go through claims clearinghouses to the multitude of health plans and government agencies that provide health insurance. Clearinghouses edit the claims so that they can be processed by the many different systems of private insurers and government intermediaries. In some cases, clearinghouses bounce claims back to providers if they're missing information or were submitted in the wrong format. In addition, the clearinghouses submit and return responses to provider inquiries such as eligibility and claims status requests. They also route electronic remittance advance that providers need for payment posting and claims denial management.
Computer assisted coding (CAC). Another new type of application uses natural language processing to help hospital coders pick the correct codes for a given office visit, test or procedure. CAC does this by extracting code-related terms from electronic text to supplement the coded elements in the EHR's structured fields. It has been shown to improve productivity by automating parts of the coding process. In outpatient departments such as radiology and pathology, CAC can automate most of the coding, but more human intervention is required in inpatient coding. CAC is expected to grow in importance after the advent of ICD-10 coding in October 2015 (see the regulatory section).
Electronic payment posting and funds transfer. Electronic payment posting is a feature of most practice management/hospital financial systems. When electronic remittance advice (ERA) comes into the system from a health plan, it can automatically post a payment to the account. This is a great time saver and is much more accurate than manual posting. Denial management staff can also use the ERA to pinpoint problems in denied claims so they can correct and resubmit them. Many insurers also transfer payments automatically to providers' bank accounts, speeding up their cash flow. For this system to work properly, payment posting and ETF must be in synch with each other.
Patient cost accounting systems. Cost accounting systems in hospitals record, analyze, and allocate costs to the individual services provided to patients, such as medications, procedures, tests, and room and board. These systems were once considered optional in healthcare. But in recent years, as value-based reimbursement has gathered momentum, most hospitals have started looking hard at their cost structure, from labor to supply chain costs. Physician costs are often measured in "relative value units," which assign work values to particular professional services based on an agreed-upon national formula. Hospitals usually analyze their costs and revenues within departments such as cardiology and surgery or service lines such as heart centers and maternity centers.
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Patient scheduling systems. Patient scheduling, known as registration on the hospital side, goes beyond simple appointment booking. For new patients, this is the part of the process in which "patient demographics" – including name, contact information, age, sex, and insurance – are documented. In some organizations, schedulers verify insurance at this stage, before the patient arrives at the healthcare facility. There are separate ambulatory care and inpatient registration systems, and most hospitals also have surgical scheduling systems. Because no-shows can be costly to healthcare providers, scheduling systems may be connected to third-party reminder systems that send automated phone messages to patients prior to office visits or scheduled tests or procedures.
Practice management (PM) systems. Most physician practices have PM systems that they use for scheduling, billing and financial accounting. Originally standalone, these systems were later integrated with EHRs and exchanged billing and patient demographic data across those interfaces. That is still true of less expensive EHRs and PM systems, but the leading vendors now integrate the clinical and practice management sides in a single application. That approach allows billing people, for example, to review clinical notes for coding purposes. Hospital financial systems are separate from the PM systems of hospital-owned practices, but the hospital's central business office often handles billing and scheduling for those practices.
Revenue cycle management.Physician practices and hospitals do revenue cycle management (RCM) to maximize their revenue and minimize bad debt. The key elements of RCM are insurance eligibility verification, copayment collection, coding of diagnoses and procedures for billing, claims submission and tracking, payment posting, accounts receivable management, and reporting and benchmarking. Practice management and hospital patient accounting systems are often coupled with third-party solutions for certain RCM functions. Some healthcare organizations outsource RCM, which can expand their resources but is costly and requires them to give up some control. To reduce the amount of bad debt because of the inability to collect from patients who are uninsured or have high deductibles, some hospitals have installed software to locate alternative sources of payment, develop payment plans, and find financial assistance for those unable to pay.
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