How Small Changes Can Have a Huge Impact Preventing Denials

In simplified terms, the butterfly effect refers to a concept in modern chaos theory that shows how one small change can cause much bigger changes in the future. Edward Lorenz, a mathematician and meteorologist, coined the term to explain how the path of a tornado could be influenced by something as insignificant as the flapping wings of a butterfly a continent away.

What does chaos theory have to do with improving the hospital revenue cycle? It’s an apt metaphor to describe how small changes in the way hospitals manage the front end of the revenue cycle can have disproportionately large effects—both positive and negative—on the back end of the process with denials, point-of-service collections and net revenue.

The Butterfly Effect on Denials Management and Profit Dilution

The beginning of the revenue cycle is rife with potential small issues that can easily turn into big problems.

The butterfly effect in the revenue cycle starts before the physician order, a hospital procedure or the generation of a bill. Over the course of that continuum, dozens of people may touch that patient’s account and it can be affected by a huge number of variables. That means dozens of opportunities for schedulers, coders, physicians and others to positively or negatively influence that account.

The front end, where patient registration, eligibility verification, medical necessity, prior authorization and financial assistance screening take place, is where the smallest changes can make the biggest impact.

An easy explanation is a dollar is only worth a dollar before the patient walks in the door. Dilution of the value of that dollar occurs along the revenue cycle continuum. If the account reaches the final stage—sending the patient’s bill to collections—that dollar is worth only a fraction of its value because of all the operational and administrative costs that have whittled away its value. Then a collections agency removes one last chunk of value if they can recover any of the account.

The revenue cycle leader’s job is to retain as much value of each dollar for every account. Moreover, shortening the revenue cycle at every opportunity yields positive results. Every time a person must touch an account, the value of that account is diminished. The good news is technology can help hold that dollar’s value by limiting touches through machine learning, automation and artificial intelligence.

Optimize Patient Access Processes for Denials Prevention and Patient Experience

The first touches to the account at patient scheduling, patient registration, insurance eligibility verification and the physician order have a disproportionately large effect on whether that experience is positive for the patient and profitable for the hospital. Many claim denial causing issues, errors and omissions typically arise at patient access, the first stage of the revenue cycle. That means focusing on and improving the front-end can result in significant financial improvement down the line. Is your patient access function optimized? What happens if it’s not?

Often, hospitals are unaware these issues are occurring because historically the focus has not been on the back end or middle of the revenue cycle. The problems are exacerbated by a widely held and incorrect belief that EHRs and/or HIS software “can do it all.” In a typical revenue cycle, hospital patient access staff often repeatedly touch accounts to fix a myriad of problems. Many of those touches arise from problems with insurance verification or lack of auditing the pre-reg and registration process. Without real-time and benefit-specific insurance eligibility verification and a sophisticated rules engine to predict denial patterns before they happen, these touches, all of which dilute the value of the engagement, are inevitable.

So, what is the solution? How do you drastically reduce these costly touches? The answer lies in patient access solutions that learn from your organization’s previous experiences with each payer’s rules and contracts, the patient’s eligibility and coverage and the physician’s usual ordering tendencies.

Simultaneously, you increase the likelihood of accurately collecting more cash at or before the point of service—the patient’s co-pay and coinsurance—making it more likely the claim will be paid in a timely manner and reducing the chances the claim ends up in collections or is written off as bad debt.

In our next blog on this topic, we’ll go into more detail how real-time eligibility verification improves patient scheduling, registration and physician ordering—three areas where the butterfly effect in the revenue cycle is prominent.

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