CFO Roundtable: How Will 3 Major Changes for the Year Ahead Impact Finances?

By Heather Punke for Becker’s Hospital Review

Four hospital and health system CFOs discuss ICD-10, the two-midnight rule and price transparency.

Hospital and health system CFOs are used to dealing with change. However, 2014 brings a few significant developments that could significantly impact the financial health of organizations. With the new two-midnight rule, the switch to ICD-10 just months away and talks of price transparency looming large, hospital and health system finances are undergoing unprecedented change. These issues have made CFO leadership as important as ever for the nation’s hospitals.

Here, four CFOs from hospitals and health systems share their views on ICD-10, the impact of the two-midnight rule, price transparency and more in this roundtable discussion.

Question: The ICD-10 nationwide transition is coming up on Oct. 1. How is your organization preparing?

Bill Boyer, CHFP, CFO and corporate compliance officer of Community Memorial Hospital (Redfield, S.D.): A lot of coding we did have outsourced, and those coders have been getting training on ICD-10 to be able to cover us. We also sent our health information management director to school to get her coding certification and she is doing ICD-10 classes now.

Everything I’ve read says it will be a bad thing because it’s slowing down the coding and expect more denials. But I’m an optimist. Maybe we’re going to have fewer problems with RAC audits if we code it properly. ICD-10 expands the number of codes so we can specifically say, “this is what we’re charging for.” It may be a little harder to code, but in the long run, it could help us with denials and to be able to get through a RAC audit cleaner and not giving money back because of overcharges. I think it’s going to make things more definite and less gray.

Pam Hess, CPA, CFO of Saint Thomas West Hospital (Nashville, Tenn.): It feels like we’ve been talking about ICD-10 forever. We have had a committee in place for the last 18 months to prepare for it. We started education sessions for our staff and we send out more high-level updates for executives and physicians.

I think it’s going to cause delays in coding and billing that could affect our cash, but I’m not able to predict how bad it’s really going to be.

Greg Johnston, CFO of Baptist Health System (Birmingham, Ala.): We have a multidisciplinary steering committee, established in 2011, which works with external consultants to ensure organizational readiness. Our efforts are focused on educating our coding staff on ICD-10, and we will be adding additional coding resources to help with the productivity declines that we will see with ICD-10. We will also have educational sessions for our physicians, and are looking at opportunities to hard wire some of the additional specificity in our EHR that we will need to properly code the patients’ records.

We’re forecasting a growth of five or six days in accounts receivable as a result of physician queries and the time it will take to code the additional specificity. We’re hoping that will decrease over time, but that’s the major area we believe will be impacted. We are not anticipating a significant increase in denials or services that are unreimbursed, but we are anticipating a cash flow delay.

Douglas Shirley, senior executive vice president and CFO of Cooper University Health Care (Camden, N.J.): We started the journey about six or eight months ago by forming our high level executive steering committee. We’ve engaged multiple partners throughout the process, including a consulting firm, to help us reengineer health information management functions. We’ve launched several training programs in classroom, on the Web and even podcasts on iPads and iPhones to try to get information into provider’s hands. For HIM staff, we’re sending a lot of them to in-depth training courses and offering some training internally. The biggest thing is engaging the key stakeholders — it will affect most people in our organization, from physicians to nurses to coding. There’s no such thing as too much education about it, and we’ve planned to have additional coding staff available in the first 90 days to hopefully minimize the effects of transition during the rollout.

Initially, I do anticipate a slowdown in claims processing and cash flow. Hopefully since we’re being proactive that will be at a minimum. Long term, I believe the healthcare industry as a whole is good at adapting to challenges. We’ve dealt with the balanced budget act, HIPAA and the rollout of EHRs. The industry is pretty resilient and we’ll figure it out, hopefully sooner than later.

Question: CMS included a new regulation in its 2014 Medicare inpatient prospective payment system final rule: the two-midnight rule. What strategies have you used to deal with this new regulation?

Bill Boyer: We have not been really concerned with that yet since we are a critical access hospital, but we probably should be. We don’t use observation very much here. Our physicians are really conservative on admissions, and when patients are admitted, a lot of them are hitting three or four day stays, so we’re not admitting the ones who will have to be changed to observation.

Pam Hess: Our revenue cycle team has been on top of this since it went into effect. There has been a lot of education with our physicians, but we still have more to do. We also have a team of nurse auditors reviewing accounts.

We’ve been working with the Tennessee Hospital Association to lobby against it and are hoping that if we consolidate as a group, CMS might reverse the ruling.

We’ve already seen reimbursement go down because of the new rule. The challenge has been getting physicians to document if a patient will be in the hospital for two midnights when they are admitted so we can bill it correctly.

Greg Johnston: What a mess. The rule was pushed on hospitals with little notice and CMS’ recommendation was to add a paper attestation to the patient chart. The industry is receiving billions of dollars in incentive payments to move to electronic health records and CMS’ suggestion for a new rule is to have a paper attestation for the two-midnight rule. It’s just very frustrating.

We put together a team led by the vice president of nursing at one of our hospitals who has case management experience. We engaged our IT department and worked very quickly to try to get that attestation statement into our admitting orders electronically; that was fairly successful. We still have physicians who are very concerned about trying to make a time estimate when they don’t yet know the clinical results of tests or are not exactly sure what sort of complications will come up with a patient. But I would say, I think we have a fairly good handle on it. We monitor it weekly and report out monthly by hospital. Any time a patient who was not admitted stays over two midnights, we look at what happened and try to plug the holes. It’s definitely a payment decrease, essentially a payment cut hidden in regulation. It’s ludicrous that the clinical condition of the patient doesn’t matter anymore. Payment should be based on resources used on the patient, not length of stay.

Douglas Shirley: First, we formed a multidisciplinary work group of our finance, case management, informatics and revenue cycle areas and our hospitalist group to try to really dig into what information is out there. The biggest problem is that we received very little guidance until the 12th hour. It will evolve over time. Right now, initially, we put all the two midnight claims under full review. It was a cumbersome process in the beginning, and we had to make some changes to our EHR to accommodate this and increase documentation on the claims. I believe with those efforts we mitigated the majority effect of the rule.

Question: The price of treatments in hospitals has been under fire from the public and media lately, and the push toward price transparency in healthcare is picking up steam. What are your thoughts on price transparency?

Bill Boyer: Currently we have no procedure in place for publishing our rates. We want to make sure we don’t drive our patients somewhere else. Hospitals are not like oil companies that can raise the prices and people are still going to buy. In healthcare, patients will find a cheaper hospital if you price yourself out of the market. We look at what our labor cost is, supplies for that procedure and be reasonable with our mark-up. We have polled area hospitals on a few procedures, and would not be afraid to publish our rates

Pam Hess: That’s a tough one. We need to get there. Even me being a consumer getting a service done, I don’t know what I’m going to pay, and I’m a CFO — I should know to the penny! It all depends on minutes in the procedures, physicians in the room or if you need an X-ray. If we could come up with an easy way to say, “Come in for an appendectomy and it will cost X,” that would be wonderful. But it’s going to be a long time before we get there.

Greg Johnston: It is hard to argue against price transparency. Why should healthcare be any different than any other business or service provider? However, it is extraordinarily complicated. It is very difficult to translate your chargemaster into the actual price that is going to be paid on a prospective basis. When we are asked about specific prices, we provide ranges of estimates and put some caveats to our estimates.

I wish I could take a magic wand and redo my entire chargemaster to reflect a true “retail” price. However, it is impossible to do this given existing payer contracts and Medicare outlier reimbursement formulas that rely on prior relationships between cost and charges. A major reduction in chargemaster prices would result in a major reduction in Medicare outlier payments until the formula caught up with the new pricing.

Douglas Shirley: Overall, it will continue to become more of a focus and an issue that has to be addressed. We have a system based on a cost-based Medicare reimbursement structure, and it’s shifting to a more consumer-focused pricing structure as the exchanges roll out. I think price transparency will continue to be as important as quality and safety for hospitals are now.