Bringing outreach billing back to life
Anita J. Slomski
When Ann Harris, manager of the laboratory outreach program
at the Virginia Commonwealth University Health System in Richmond,
told hospital administrators she could double the outreach program’s
$3.2 million net revenue in three years, they paid attention. Hospital
administrators agreed to spend $375,000 to $500,000 for the separate
billing system with electronic ordering capability Harris said she
"The Medical College of Virginia Hospital at the VCU Health System
recognized that we were leaving money on the table as a result of
being hamstrung by the hospital billing system," says Harris. For
example, the hospital can only generate a bill on a UB-92 form,
but many third-party payers want to receive bills on a HCFA 1500
form. "It’s of no benefit to a physician to send his Medicare patients
to us and his other patients to a different lab because we can’t
correctly bill commercial insurers," she adds. "We want to make
it easy for clients to use our lab for all their patients and use
the Internet to register those patients and retrieve test results."
Hospital billing systems are woefully inadequate for outreach,
some say. Hospital billing departments often can’t or won’t generate
detailed financial data for outreach programs. And hospital billing
clerks often give short shrift to outreach claims, focusing instead
on high-dollar inpatient claims.
"Our clients have a Rube Goldberg-type interface with us now,"
says David S. Wilkinson, MD, PhD, chair of the pathology department
at VCU Health System. "They don’t get [fully automated] management
reports listing the number of specimens we received from their offices
in the last month and the cost to the patient. National reference
labs give them nice, consolidated reports, and that’s what they
expect from us. Our ability to grow the outreach business is limited
by our anachronistic business practices."
A dedicated billing system allows a hospital to customize services
to clients and makes it easier to generate spreadsheets to prove
that an outreach program contributes to the hospital’s bottom line.
An outreach program that has its own billing system can monitor
claims and collections as well as generate timely bills with correct
discount pricing for institutional clients. "To be financially accountable
as an independent business, you have to have ownership of the billing
process," says Harris.
That’s not to say every outreach program needs its own billing
system; many do fine relying on their hospitals’ business offices,
says Hal Weiner, president of Weiner Consulting, Florence, Ore.
"But a lab that processes more than 1,000 requisitions per day in
its outreach business can reduce days outstanding, achieve a higher
collection ratio, and improve cash flow if it manages its own billing
operation," he says. And how much does an outreach billing system
cost? "You can buy a reasonable billing system for under $100,000,"
says Weiner. "But there is nothing you can buy for $5,000 to slap
on your PC."
Consistent support from hospital administrators is crucial for
an outreach program to successfully run its billing service through
the hospital’s business office, maintains Doug Wussow, a Rhodes
Group consultant who contracted with Misys Healthcare Systems to
revamp the outreach program at Mary Washington Hospital, Fredricksburg,
Va. "At Mary Washington, we had tremendous support from administration
to create subprocesses so the hospital billing department could
handle outreach claims, including hiring two people to do followup
on those claims," says Wussow. "We haven’t found that support in
many other places, and, without it, it’s very hard to make the hospital
billing department work well for outreach claims."
Despite VCU Health System’s commitment to purchase a billing system
for its outreach program, Harris will have to wait at least 18 months
before Cerner’s ProFit module is installed. The billing system with
Web-based ordering capabilities is undergoing beta testing.
VCU Health System has delayed other information systems projects
while it rolls out a new clinical information system this fall.
Until then, the outreach program will continue its cumbersome five-step
dance of shuttling test orders and bills between the laboratory
information system and the hospital billing department. "It’s not
the best or easiest way to bill, but it works," says Harris. Eight
lab staffers are dedicated to processing outreach claims and editing
client bills so they are submitted correctly. "We found we can do
a better job monitoring those claims than the hospital staff does,"
says Harris. "We all want to have jobs in the future, so we try
not to write off anything that is billable."
The outreach department at Athens (Ga.) Regional Medical Center
has found a less expensive solution to purchasing its own billing
system. When the outreach program was started in 1995, the hospital
established the program at a separate facility, which allows it
to receive specific financial performance data.
"I’d like to kiss the person who made this smart move," says Charlene
Harris, CHE, director of regional lab outreach. "On a monthly basis,
we can pinpoint our charges, our collections, and our costs. We’ve
demonstrated that regional lab outreach is, financially, a valuable
service. Our charges are based on our costs per individual test,
rather than an average cost. A lot of labs don’t know what their
Clean claims are more crucial to an outreach program’s success
than an independent billing system, adds Melissa Moog, financial
analyst for Athens Regional’s outreach program. "If you can’t generate
clean claims, it really doesn’t matter whether you’re billing them
or the hospital billing office is," she says. "Provided you have
the cooperation of the hospital billing department, why go to the
expense of having a redundant billing system? The easiest solution
is to have dedicated staff in the business office to take care of
Athens’ regional lab outreach does, however, do its own billing
for client accounts—which represents a minor amount of the
hospital’s outreach services—to ensure that the information
system applies the discount pricing correctly.
Few would disagree that collecting correct patient demographic
and diagnostic information is the biggest challenge for outreach
labs. "The largest portion of cost incurred in running an outreach
billing operation is getting accurate data up front, not trying
to collect," says Joe Stumpf, senior vice president of Misys Healthcare
Consulting, a division of Misys Healthcare Systems. "Sixty-five
percent of errors occur at the front end, such as when specimens
show up with no insurance information or ICD-9 codes. Based on our
research, the average collection rate for an outreach program is
35 to 40 cents on the dollar. But if you reduce those front-end
errors, you can increase the AR for an outreach lab by as much as
When Misys consultants talk to hospital administrators about outreach
programs, they tell them only 60 percent are believed to be profitable.
At the time the outreach program at Mary Washington Hospital decided
to terminate its relationship with its outside billing company and
hire Misys, its collection rate was only 37 cents on the dollar.
"A lot of claims were being written off because the billing company
wasn’t accountable for the number of successful bills they generated;
they were paid monthly regardless," says Rebecca Damiani, director
of laboratory services at Mary Washington.
Basically starting from scratch, Misys helped the outreach program
create a billing interface between the lab and hospital financial
system, developing a new requisition form to prompt clients to supply
necessary information, and hiring registrars to register patients.
(Under its at-risk agreements, Misys splits the AR gain with a client
for 13 months.)
The outreach program also purchased five $6,000 optical imaging
stations for its draw sites to scan advance beneficiary notices,
requisitions, physician orders, and insurance cards. "No matter
where the patient is seen, both the lab and patient accounts have
immediate access to this information if there are questions about
the registration, orders, or insurance information," says Damiani.
Two lab billing clerks spend several hours each day tracking down
information on the 20 percent of requisitions that are incomplete.
"These claims never go to the billing office until all the errors
are corrected," she says. The claim denial rate: under two percent.
Since its overhaul, Mary Washington’s outreach program collects
48 cents on the dollar. "The revenue per outreach lab claim was
$13.12 per test initially and $19.20 per test when we finished—an
increase of 46 percent," says consultant Wussow.
And with improved billing, retaining clients and signing up new
ones will be much easier for Mary Washington’s outreach marketing
department, he adds. "They now have a product that allows them to
provide an accurate bill three days after the close of the month.
And because they can show a 40 percent increase in reimbursement,
they have support in their own organization to market the program."
Adds Damiani, "We’re now in a position to expand our courier service
and to demonstrate to potential managed care clients that we operate
a cost-efficient program."
No question, gathering accurate and complete billing information
is less problematic when the patient is present. At Athens Regional,
where 50 percent of the outreach business involves direct patient
contact, the phlebotomists not only draw blood, they register patients
and order tests. "Our patient service representatives are the best
people to understand the diagnostic information and to make sure
it’s correct," says Charlene Harris. "Our departmental registration
accuracy rate is consistently in the 99 percent plus range. Having
one person do the entire process is also efficient and faster for
patients." The patient service representatives receive training
in registration and test ordering, as well as phlebotomy, and their
salaries reflect the added responsibilities. Registration accuracy
and clinical accuracy are considered in their performance appraisals.
The headaches start when a specimen arrives with missing diagnostic
or demographic information, or worse—a handwritten script
from a physician. Outreach programs should not only rely on client
service representatives to teach clients what information must accompany
a specimen, but also supply requisitions preprinted with the client’s
name and address, says consultant Weiner. "The next step is to add
a pre-printed, bar-coded label so the requisition matches the specimen."
For high-volume clients, he says, outreach programs may want to
invest $500 per client to license software that prints a 2-D bar
code that stores all patient demographic and diagnostic information,
which is then scanned into the laboratory information system.
Collecting ABNs for Medicare patients, however, is a losing battle
for most outreach programs—at least for now. "Even if an ABN
is printed on the back of a requisition form, the doctors’ offices
won’t have patients fill them out," says Athens Regional’s Moog.
"They don’t have the tools to stay updated on which tests Medicare
won’t cover." Adds Dr. Wilkinson: "Our requisition forms force them
to at least consider the need for an ABN. But, in practice, this
is almost impossible to comply with." And once a specimen arrives
without an ABN, most labs do the test and write off the cost since
the patient can’t be billed without prior notice.
Instead of writing off those claims, some advise billing a nursing
home or client directly. "Until they see a bill because they failed
to comply with federal legislation that requires an ABN, they will
continue their bad habits," says Harris. "Of course, you stand the
chance of losing that customer. But if you’re writing off a lot
of work, it’s not good business anyway."
Harris estimates that the outreach program at VCU Health System
writes off two to three percent of claims due to missing ABNs and
another two percent due to such missing information as ICD-9 codes,
provider name, or third-party insurers’ addresses. Harris has yet
to take her own advice, however. "Our billing office doesn’t necessarily
communicate with us that they are writing off claims, so we can’t
correct that problem," she says.
But a solution is in sight for VCU Health System. Once outreach
clients begin ordering tests electronically, the software won’t
allow a requisition to be submitted without an ABN if one is required.
Nor will any test be ordered without the client supplying the required
billing information. Electronic order entry is the panacea outreach
labs are banking on. "Anything you can do to get rid of paper and
follow an electronic pathway will be the key to success in the future,"
Selling clients on the concept is another story. "All the labs
we work with are looking at an electronic order-entry system for
clients," says Wussow, "but a physician’s staff doesn’t want to
enter a patient’s [demographic and diagnostic] information first
in the physician’s management system and then in the lab system.
It’s a lot faster to print off information from their own system
and check a few boxes on the requisition form."
Outreach programs have to offer clients something in return for
doing the lab’s data entry, agrees Weiner. "And the bait is to give
them online access to test results in real time."
As more hospitals convert to electronic inpatient order-entry
systems, outreach programs say it’s just a matter of time before
all physicians and health care facilities become accustomed to ordering
lab tests online. "We plan to start electronic order entry in hospital-owned
physician offices," says Damiani. "And if that works, we’ll roll
it out to other clients."
Labs have several electronic order-entry options. Application
service providers offer browser-accessible electronic order-entry
systems for about 25 to 50 cents a requisition, Weiner says. Or
the lab can provide clients with EDI (electronic data interchange)
terminals and software to directly access an LIS.
The ideal solution for the VCU Health System is for it to run
its own Web server and have clients order via the Internet. "The
most cost--effective approach for us," says Harris, "is to have
clients use their Web browser. We certainly didn’t want to install
software in every client’s office."
Anita Slomski is a writer in Evanston, Ill.