Why Clinical Revenue Cycle Remains Siloed

One of the biggest issues I find when working with clinical documentation integrity (CDI) departments is that the hospital clinical revenue cycle remains siloed.

Rather than working together as one cohesive unit, many departments within the revenue cycle are uninformed about how their work impacts others further down the hospital revenue cycle. I prefer the term clinical revenue cycle over middle-revenue cycle. The clinical revenue cycle, in my opinion, includes departments whose work is impacted by the documentation of healthcare providers. These include the following:

• Utilization Review (UR)
• Clinical Documentation Integrity (CDI)
• Quality
• Coding
• Denials Management

I use clinical revenue cycle because it is more inclusive than ‘middle-revenue cycle.’ For example, quality hasn’t traditionally been considered part of the revenue cycle, yet poor performance on quality measures can reduce hospital payments under pay for performance methodologies. Denials management is often a back-end process, defined as a process that occurs after billing.   

Ideally, the clinical revenue cycle would report through the same structure to promote alignment. If that is not possible, consider quarterly meetings across the clinical revenue cycle so each department can discuss the strategies employed by their department to support the hospital’s goals. Doing so will prevent departments from implementing processes that could be disruptive to the overall health of the revenue cycle, helping departments focus on the global picture rather than at the departmental level. The goals of each department should reflect the attitude of hospital leadership. At a minimum, the clinical revenue cycle departments need to know if they should be taking a conservative or aggressive approach.

Usually, the two most conservative departments are UR and coding. Remember the goal should not be denial avoidance, most denials are overturned on appeal. In today’s healthcare climate with low margins, hospitals should not forfeit earned revenue. Denials are an educational opportunity. The goal should be creating a feedback loop that incorporates strategies to reduce denials within the current clinical revenue cycle processes.  

The beginning of the clinical revenue cycle is UR, who are the gatekeepers. They set the clinical revenue cycle in motion by validating the admission order. Like most things in healthcare, there is some subjectivity in patient status validation, especially if commercial screening criteria is unmet. Conservative hospitals tend to default to observation for these types of cases, in contrast to hospitals that have an inpatient first mentality where they defer to inpatient status because they feel they can support their determination on appeal.

A patient with an order for inpatient care usually triggers a UR review. However, UR typically runs a day behind. For example, a patient presents to the Emergency Department for care which starts the hospital encounter. Although UR departments may have data feeds that continuously update, new reviews often occur the day after presentation, which is technically hospital day two. Depending on UR and CDI workflows both departments could be reviewing the case on the day following admission. UR reviews the case to validate the inpatient admission order and CDI would be conducting an initial inpatient review to establish the working DRG. If the UR department is conservative, once their medical necessity validation review occurs, the patient status could be downgraded to observation removing them from the CDI review population. It can be frustrating for the CDI staff to perform reviews on patients whose status later changes.

If this is a somewhat frequent occurrence, perhaps CDI should consider waiting an additional day to perform an initial review so that UR has time to validate the admission order. Or perhaps there is a way for UR reviews to be expedited so admission status is validated prior to CDI review. Either way, the goal is to reduce inefficiency from reviewing patients who fall out of the CDI population.

UR efforts also drive case mix index (CMI). An inpatient first mentality will increase the inpatient ratio while lowering CMI. However, the lower CMI does not tell the whole story because as I discussed in my last article, an inpatient admission is reimbursed at a rate at least a couple of thousand dollars higher than observation. A higher inpatient ratio should result in higher overall revenue even with a lower CMI.

This is one of the many reasons why I don’t like CMI as a key performance indicator (KPI) for CDI departments. CMI is based on the relative weight associated with the billed MS-DRG, admitting a high volume of lower acuity patients will also lower both CMI and the comorbidity/complication (CC) capture rate for the CDI department. In an inpatient first approach, UR efforts mute the impact of CDI efforts.

Yet, the hospital may be more profitable due to the higher revenue associated with the inpatient volume even with a lower CMI and CC capture rate. It is helpful for CDI leadership to know when the UR department has a mandate to increase their inpatient ratio due to its negative impact on CDI KPIs.

Additionally, a higher inpatient ratio can lead to lower performance on quality measures. Performance on most quality measures is based upon claims data or may be risk-adjusted by claims data. Case prioritization has become the standard for most CDI tools but are often built on prioritizing CCs and major comorbidities/complications (MCCs).

Lower acuity patients, who are less likely to have CCs, are unlikely to be prioritized for CDI review. This can be problematic because most healthcare quality outcome measures, like mortality and readmissions, are based on an expected to actual ratio.

The goal is to be below 1.0 as much as possible so that the expected rate is significantly higher than the actual rate. If finding diagnoses that risk-adjust are part of the CDI scope, all patients need to be reviewed, not just those that are prioritized based on the potential for finding CCs or MCCs. For example, only about 40 percent of diagnoses classified within the Centers for Medicare & Medicaid Services (CMS)-Hierarchical Condition Category (HCC) methodology are also classified as CCs or MCCs. Failure to review these lower acuity patients could result in a lower acuity population that translates into a lower expected incidence rate making it harder to offset the outcomes of death and readmissions when they occur. This ultimately translates into worse performance on these quality outcome measures.

An inpatient first approach will likely lead to higher initial denial rates. Please note that I mentioned higher initial denial rates because it is likely that most will be overturned on appeal if not through the peer-to-peer process, if available.

As I discussed in my last article, the goal should not be for hospitals to avoid denials, but the denials management team needs to be appropriately staffed to handle the potential volume of appeals.

Leaders within the clinical revenue cycle need to understand the interplay among these departments to better explain variances. One way to improve cooperation across these departments is for them to report through the same leadership. If that is not possible, efforts should be made for the leaders of the clinical revenue cycle departments and their staff to have at least quarterly meetings so each department can better understand how their activities can impact each other. Team meetings will create cohesion among these departments so they can feel more comfortable reaching out to each other to discuss potential issues.