Skilled nursing 5

-Claim

Probe and Educate Review

Read this if you are a Skilled Nursing Facility (SNF) providing services to Medicare beneficiaries.

There are a few Skilled Nursing Facilities (SNF) reimbursement opportunities on the Medicare cost report. Two of them could reimburse providers for sizable expenses that the majority of SNFs experience every year: the Utilization Review (UR) and Medicare bad debts. 

Utilization Review: Medicare cost report opportunities

UR meetings historically focused on managing lengths of patient stay and reducing costs. The implementation of the SNF value-based purchasing program and the related incentive payment adjustment, which resulted in a reimbursement rate increase or reduction by up to 2%, led some facilities to increase physician or medical director involvement in the UR management in order to improve clinical outcomes. 

With the increase in physicians’ UR time, there frequently is a cost increase for SNFs. CMS Provider Reimbursement Manual – Part 1, Chapter 21, Section 2126.2, outlines the requirements for 100% reasonable Medicare program UR cost reimbursement.  The only mechanism for SNFs to get reimbursement for these costs is through the Medicare cost report. 

Why is this important? BerryDunn maintains a database of SNF Medicare cost report filings and analyzes the data annually, looking for trends and opportunities to help providers optimize available reimbursement. The cost report data shows that in 2022, only 2.29% of facilities claimed reimbursable Medicare UR costs. Of the facilities claiming UR costs, the average requested reimbursement was $17,631 per facility.

Average SNF Medicare Utilization Review Reimbursement per Medicare patient day by ownership type

Average SNF Medicare Utilization Review Reimbursement per Medicare patient day by county type

Average SNF Medicare Utilization Review Reimbursement per facility 

Source: HCRIS most recently available full utilization SNF cost reports, 2018 - 2022

Optimize your reimbursement: Utilization Review checklist available

To support SNFs with reimbursement for these costs, BerryDunn’s healthcare consulting team has developed a checklist that provides insight into Medicare cost report opportunities. Download the Utilization Review checklist.

Read this if you are in the senior living industry.

The COVID-19 pandemic wreaked havoc on the country and created challenges across the labor force, and senior living facilities weren’t spared. For senior living, the pandemic contributed to the widening of the care cost shortfall- by decreasing the available workforce pool through voluntary resignations and a demand for higher wages. That situation has remained, and senior living facilities are faced with many challenges, including rising labor costs. Of note: 

• Across the nation, contract nursing labor utilization continues to increase, with an average 35% increase in contract agency hours used per patient day from 2020 to 2021.¹ 
• Occupancy has been declining nationwide, driven by both diminishing referrals (infection control concerns, reduction of elective procedures such as joint replacements, and hospital capacity limitations) and the ability of facilities to accept patients (suspension of admissions due to inadequate staffing).
• Rising costs and diminishing occupancy have resulted in an average SNF $178.65 per patient day cost of care increase from 2020 to 2021.
• Nationally, the US Bureau of Labor Statistics² (BLS) reports nursing and residential care facility employment declined 5% from 2019 to 2020, and further 5.7% from 2020 to 2021. Competition for workers resulted in noticeable wage increases, 10.4% in 2020, and 5.6% in 2021 (Table 1). 

Table 1: Employment and wages, 2019 – 2021

The first quarter of 2022 reveals a continuing reduction of employment coupled with continuing wage increases in the industry. The first quarter of 2022 showed an 11.4% increase in average weekly wage for nursing and residential care facilities over that same period in 2021, and continuing decline in employment (Table 2). 

Table 2: Employment and wages, Q1 2022

COVID-19-related staff burnout, lack of childcare or school schedule disruptions, infection control requirements- such as mandatory masking or vaccinations- and other factors resulted in a rapid and significant reduction of clinical staff available for work. 

Additional factors, such as migration of clinical staff from facility-based employment to a temporary contract agency, may have also contributed to the reduction of workforce in clinical occupations. CMS SNF Provider Information³ data comparison between August 2021 and August 2022 shows that all US regions reported a decline in average case-mix adjusted direct care hours per patient day (Figure 3) within a year. On average, 7.89% reduction in total hours reported, or 0.32 hours of services less per patient day. It is important to note that utilization of unlicensed staff (nursing assistants) has not changed significantly (57.2% in 2021 and 57.7% in 2022), indicating that nationwide availability of both licensed (RN, LPN) and unlicensed staff has decreased. 

Table 3: Average case-mix adjusted direct care hours per patient day – August 2021 and August 2022 comparison

Our interviews with long-term care facilities across the US have revealed that a number of facilities had to suspend admissions for a period of time, or close a portion of the facility, due to limited or inadequate staffing levels. Due to the nature of services, it mostly affects short stay rehabilitation unit admissions. For the majority of facilities, short stay revenue sources (such as Medicare) are more favorable and normally more profitable than long-term stays. The decrease in census (Table 4) drives the per diem costs up, and the loss of short-stay revenue continues to negatively impact the bottom line. Additionally, with a significant reduction of short stay rehabilitation volume, some highly trained employees of the facilities (such as therapists, clinical directors, dieticians, and others) may be less utilized, and potentially harder to retain. 

Table 4: Average Medicare-certified facility occupancy, 2019 – 2021

The increased cost of labor is one of the major per diem cost increase drivers for senior living facilities. The tight labor market has led to higher labor costs, increased utilization of contract labor, as well as reductions or suspensions in admissions due to lack of staffing. 

Table 5: Average Medicare-certified facility direct care labor cost per patient day (wages, benefits, contract labor), 2019 – 2021

Table 6: Average Medicare-certified facility direct care contract wages, 2019 – 2021

Many states facilitate labor-related programs aimed at increasing labor pool and staff retention through innovative programs, as well as considering waivers related to staff certification and delegation of duties requirements. Due to timing, the job outlook could not be forecasted with the effects of the new initiatives, as there is no data yet available on effectiveness of these programs.

If you would like more information, or have questions about your specific situation, please contact our senior living and long-term care team. We’re here to help.

¹ HCRIS as filed SNF Medicare (full utilization) cost reports, 2019 – 2021
² Bureau of Labor Statistics, 2022
³ The Centers for Medicare & Medicaid Services, 2022

Read this if you are subject to Medicaid DSH audits.

The Medicaid DSH program, created in 1981, provides funding to hospitals in the form of DSH payments. Federal law requires that state Medicaid programs make DSH payments to hospitals that serve a disproportionately high number of Medicaid beneficiaries and uninsured low-income patients, to help offset uncompensated care costs (UCC). With healthcare costs steadily outpacing income growth and inflation, these DSH payments serve as an important and sometimes necessary reimbursement mechanism. 

In most states, hospitals that receive Medicaid DSH payments are subject to an annual DSH audit, to determine the DSH UCC limit and to compare it against DSH payments received from the Medicaid state agencies. The DSH UCC limit uses information from the Medicare cost report, as well as Medicaid and uninsured patient detail, to calculate the UCC. 

Upon completion of the DSH audit, the Medicaid state agency or its contractor will compare the UCC to the DSH payments issued during the state fiscal year to determine if a hospital is in a shortfall, where DSH payments were less than the UCC, or a "longfall", where DSH payments were greater than the UCC. If it is determined that a hospital is in a longfall, the state’s Medicaid plan may require hospitals to pay some or all of the DSH funds back. With potentially significant financial implications, it is in the hospital’s best interest to understand the requirements and to complete the audit in a timely and accurate fashion. 

Completion of the DSH audit can be a daunting task. For some, the mere mention of the words “DSH audit” is enough to send chills down one’s spine. It is best assigned to those with solid reimbursement, revenue cycle, hospital operations, and information management system (IT) knowledge. 

It is not uncommon for hospitals to have a consulting firm, such as BerryDunn, complete the DSH audit on their behalf. While the DSH audit may seem like a heavy lift, we hope the following tips will assist you in tackling the audit and getting through the process smoothly and efficiently. 

1. Allow enough time for completion of the DSH audit. A considerable amount of time and effort is needed to collect, reconcile and summarize the internal claims data and to enter information into the required schedules. The time needed to complete the audit will depend on your organization’s available resources and complexity of the IT and financial systems. Typically, this process takes one to two weeks to complete, sometimes longer. Creating the patient data support files themselves is arguably the most time-consuming aspect of the process. 
2. Review the minimum federal requirements for DSH payment eligibility and document your organization’s qualifications. To receive DSH payments, hospitals must have a low-income inpatient utilization rate (LIUR) greater than 25 percent, or the hospital must have a Medicaid utilization rate (MIUR) that is at least one standard deviation above the mean rate of all hospitals in the state that receive Medicaid payments. States may distribute DSH payments to other hospitals provided they have a MIUR of at least one percent, and if they offer obstetric services that they have at least two OB/GYN on staff.
3. Take time to understand how DSH payments are calculated in your state and if any recent state Medicaid plan changes may affect your organization’s eligibility and amount of qualifying payments. 
4. Carefully review any audit instructions provided, paying particular attention to types of claims, service dates, and required supporting information. 
5. Gather all the data files needed for completion of the DSH audit before diving in, including the cost report(s) for the period under audit, patient data support files that support the Medicaid and uninsured populations, and audited hospital financial statements (if applicable). Remember: bad data in, bad data out!
6. Reconcile the state claims data. If the state claims data is used by the state Medicaid agency or its contractor to complete a portion of the audit, we strongly recommend a reconciliation of the state claims data to internal records, to help ensure all eligible claims, inpatient days, and charges are included.
7. Identify and capture all Medicaid and uninsured patients. When completing schedules, hospitals should ensure they are identifying and capturing all Medicaid and uninsured patients, and accurately report the charges and payments for these patients for the DSH audit. Certain data elements are required, including patient demographic data and hospital charge and payment information. 
8. Review insured patients' claims with no insurance payment. For uninsured patient charge capture, hospitals may benefit from reviewing insured patients’ claims with no insurance payment. Some claims, meeting state Medicaid plan coverage requirements, could be included as “uninsured” if they meet one of the three exclusion requirements: (1) service was not covered by insurance, but is covered by a Medicaid state plan; (2) patient’s benefits were exhausted prior to the admission/service date, and (3) patient reached the lifetime insurance limit. Some accounts that appear to be insured on the surface may in fact be eligible for inclusion in the calculation of the UCC. Remember, claims denied by insurance, such as untimely filing, lack of pre-authorization, or medically unnecessary services, should not be reported. In many cases, the only way to know for sure if an account can be included is through research of patient notes and financial information. Leave no stone unturned! It could be the difference between a longfall and a shortfall in your UCC.
9. Review your work prior to submission. Many states will provide a checklist with the audit package, to ensure all data elements have been included with the submission. Even if the hospital has resources to complete the audit, consider arranging for a third-party review of the DSH audit and other submission items to help ensure the accuracy and completeness of the data. 
10. Schedule time to review audit adjustments. The Medicaid state agency or its contractor will likely provide an adjustment report for your review. Plan your time for review of the audit adjustments, as the window for response or amendments may be very narrow. Take note of the adjustments, especially the high dollar ones, and either confirm that they are accurate or make revisions as necessary. This is another opportunity to bring in an advisor for a second review. 

Should you have any questions about or during the DSH reporting process, please do not hesitate to reach out to Olga Gross-Balzano at BerryDunn, who would be pleased to serve as a second set of eyes to your process or alleviate the time requirements on your finance team. 

Olga Gross-Balzano
OGross-Balzano@berrydunn.com
207-842-8025

Read this if you are a Skilled Nursing Facility (SNF) providing services to Medicare beneficiaries.

Skilled Nursing Facility (SNF) bad debt expenses resulting from uncollectible Medicare Part A and Part B deductible and coinsurance amounts for covered services are reimbursable under the Medicare Program on a full-utilization Medicare cost report. SNF providers can report allowable Medicare bad debt expense on Worksheet E, form CMS-2540-10. Currently Medicare reimburses 65% of the allowable amount, less sequestration, if applicable.  

BerryDunn maintains a database of SNF as filed Medicare cost reports nation-wide. We analyze data annually, looking for trends and opportunities to help providers optimize available reimbursement. Cost reports data shows that in 2018–2020, on average, 75% of facilities nation-wide reported allowable bad debts, and claimed, on average, close to $63,000 of reimbursable bad debts for Medicare Part A. 

To compare facilities of different sizes and Medicare utilization rate, we also show bad debts on per Medicare patient day basis (figure 2). In FY 2020, all US regions experienced an increase in reimbursable Medicare Part A debt, averaging $19.43 per Medicare patient day.  

Understanding the requirements for bad debts and utilizing this reimbursing opportunity could help your facility’s bottom line. 

Medicare bad debt checklist now available

To support SNFs with reimbursement for these costs, BerryDunn’s healthcare consulting team has developed a checklist that provides insight into the Medicare cost report opportunities. 

Download the checklist, and please contact us if you have any questions about your specific situation or would like to learn more.

Read this if you work in senior living. 

We are all pressed for time these days, especially in senior living and long-term care facilities, where the pandemic has taken a toll on the health of our residents, the well-being of our employees, and the state of our finances. Across the nation, losses from patient care have increased significantly from 2016-2020. In the Northeast, losses from patient care increased 17% from 2016-2019, and in the western United States, they increased by 52% from 2016-2019.

With so many time and financial pressures, why is the development of a labor management program an important investment of your time? Because labor management is important to the financial success of your facility.

Labor management factors to consider:

• Labor is the largest expense in a facility—between 2016 and 2019 labor-related costs, including contract labor and employee benefits, represented between 48%-53% of the expenses reported on the Medicare cost report 
• With a growing trend of hiring outsourced therapy, housekeeping, laundry, dietary, and other functions, actual labor related costs could be significantly higher
• Increased COVID-19 expense may not be fully covered by reimbursement rates
• Facilities are experiencing increased agency use to fill nursing vacancies, resulting in higher direct labor cost per patient day

The senior living industry is already facing severe nursing shortages and, according to the Bureau of Labor Statistics, at least 2.5 million more workers will be needed by 2030 to care for the so-called “silver tsunami”. Argentum has projected that 1.2 million new workers—mostly Certified Nursing Assistants, aides and Registered Nurses—will be needed in senior living through 2025.

Workforce shortages are not only occurring in nursing departments, but throughout all of our departments, as senior living competes with the retail and hospitality industry to fill ancillary positions.

The benefits of creating a labor management program

The development of a well-executed labor management program may result in:

Clarity on optimal staffing and competency levels in all departments
Labor budgets and schedules adjusted for both census and patient needs can help facilities have the right people in the right place at the right time. Time invested in this initiative improves patient outcomes, staff morale, and your organization’s bottom line. 

Stronger community integration and leadership
Most senior living facility positions are filled by recruiting locally. Understanding local demographic trends and developing a forward-looking strategy for staff acquisition, retention, and development (both personal and professional) may help a facility become an employer of choice and minimize vacancies. 

Achieving community recognition
A labor management program may help your facility better understand your CMS star rating as it relates to staffing, and tailor a response to publicly available ratings. 

Improved regulatory compliance and response to changes in tax and other policy
Many recent laws have varying provisions for organizations based on size, which is measured by number of employees or full-time employee equivalents. Well-structured labor reports may help your organization respond to regulatory changes promptly.

Opportunities for reimbursement optimization
By understanding your labor structure and compensation arrangements, you may be able to increase reimbursement though more accurate cost reporting (such as utilization review reimbursement on the Medicare cost report). Medicaid reimbursement methodologies vary by state. In many cases, correct classification of labor into reimbursable and non-reimbursable departments, as well as allocations between units, may be key. 

Improved bottom line
Understanding and managing labor statistics may help facilities improve their bottom line, both short and long term, by aligning costs and revenue trends.

Labor management is a key tool to drive efficiency and increase quality across all departments in your facility. Building a high-performing workforce culture and implementing labor management tools will help you gain efficiencies, reduce costs, and produce quality outcomes. The stakes are high right now—facilities that can build a strong culture and workforce will be the facilities that are successful in the future.

If you need assistance or have questions about your specific situation, please contact our senior living consulting team. We’re here to help. 

Read this if your senior living facility is receiving Medicare payments.

A year ago the senior living industry was challenged with the transition to the Patient-Driven Payment Model (PDPM). In the months leading up to the implementation of PDPM providers prepared for new regulations, conducted employee training, and forecasted financial performance. By all accounts the implementation of PDPM went off with very few glitches. 

That all changed in the beginning of 2020 when the coronavirus (COVID-19) pandemic upended the industry and Medicare occupancy levels diminished. COVID-19 overturned the way providers were providing care at their facilities. Providers have seen a decrease in utilization of therapy services and an increase in medical management cases. Providers anticipated delivering more concurrent physical therapy, which has become impossible with COVID-19. We understand how demanding COVID-19 related change management has been for skilled nursing facilities, and want to help you re-focus your attention on the critical tasks and procedures driving your Medicare reimbursement.

New federal fiscal year, new rates

The Medicare Final Rule for fiscal year 2021 did not contain any major policy changes to PDPM but did contain routine updates to coding and Medicare billing rates effective October 1, 2020. After changing Medicare billing rates, you should test your system by carefully reviewing a remittance advice and the accounts receivable report for October service dates. Look for any balances, big or small, to help ensure billing rates and contractuals are correct for all payers following Medicare rules. Note:

• Small balances may indicate errors in system configuration, such as PDPM rates, sequestration, or value-based purchasing adjustment.
• Larger balances may indicate a claim missed in the facility's triple-check meeting and billed at an incorrect PDPM rate. View the FFY2021 Medicare Rate Calculator.
• Providers should review ICD-10 mappings on an annual basis for new and discontinued ICD-10 codes. 

Medicare Advantage plan enrollment is growing. What does it mean for your facility?

With the continuing growth of Medicare Managed Care/Advantage plans, it is important to review your facility’s contracts. 

• Most Medicare Advantage programs have adopted PDPM, but have differing requirements for pre-authorizations and payment rates, so be sure you understand how each of these contracts reimburses your facility
• If there are new Medicare Advantage plans in your area, evaluate the need to negotiate a contract to admit patients covered by the new plan. 
• Update the list of plans your facility contracts with:
   
  • Carefully review contract rates and request rate changes if the payor does not follow the Medicare fee schedule. 
  • To avoid denied claims, update contact information and understand preauthorization requirements and any patient status updates. Distribute the updated list to your admissions and case management teams.

Check on your MDS coordinator

• With the COVID-related shift in responsibilities, we see an increase in MDS position turnover. We recommend reviewing or developing a backup for your MDS coordinator, as completion of MDS is critical for billing and regulatory compliance. 
• If your facility has limited resources for backup, evaluate sub-contracting options or reach out to your state’s Health Care Association for available resources. 

Update your consolidated billing resources

Consolidated billing errors could result in significant reductions of your bottom line. CMS updates guidance on consolidated billing regularly. We recommend checking the CMS listing and ensuring your admissions, clinical, and medical records teams use up-to-date information for admission decisions and coordination of care with external health care providers. Get more information.

COVID-19 impact

• CMS provided a number of flexibilities to help facilities with COVID-related care. Please note, a number of these provisions are temporary, and are only effective during the state of emergency. We recommend at least a monthly review of regulatory guidance to help ensure compliance. Get more information.
• While the COVID-19 diagnosis and codes were not specifically incorporated into PDPM in the 2021 final rule, be sure to appropriately code isolation stays in the nursing component, and document additional costs of testing, PPE, and labor, as well as support of skilled status need to protect against audit risk.

Have questions? Our Senior Living revenue cycle team is here to help. 

Follow these six steps to help your senior living organization improve cash flow, decrease days in accounts receivable, and reduce write offs.

From regulatory and reimbursement rule changes to new software and staff turnover, senior living facilities deal with a variety of issues that can result in eroding margins. Monitoring days in accounts receivable and creeping increases in bad debt should be part of a regular review of your facility’s financial indicators.

Here are six steps you and your organization can take to make your review more efficient and potentially improve your bottom line:

Step 1: Understand your facility’s current payer mix.

Understanding your payer mix and various billing requirements and reimbursement schedules will help you set reasonable goals and make an accurate cash flow forecast. For example, government payers often have a two-week reimbursement turn-around for a clean claim, while commercial insurance reimbursement may take up to 90 days. Discovering what actions you can take to keep the payment process as short as possible can lessen your average days in accounts receivable and improve cash flow.

Step 2: Gain clarity on your facility’s billing calendar.

Using data from Step 1, review (or develop) your team’s billing calendar. The faster you send a complete and accurate bill, the sooner you will receive payment.

Have a candid discussion with your billers and work on removing (or at least reducing) existing or perceived barriers to producing timely and accurate bills. Facilities frequently find opportunities for cash flow optimization by communicating their expectations for vendors and care partners. For example, some facilities rely on their vendors to provide billing logs for therapy and ancillary services in order to finalize Resource Utilization Groups (RUGs) and bill Medicare and advantage plans. Delayed medical supply and pharmacy invoices frequently hold up private pay billing. Working with vendors to shorten turnaround time is critical to receiving faster payments.

Interdependencies and areas outside the billers’ control can also negatively influence revenue cycle and contribute to payment delays. Nursing and therapy department schedules, documentation, and the clinical team’s understanding of the principles of reimbursement all play significant roles in timeliness and accuracy of Minimum Data Sets (MDSs) — a key component of Medicare and Medicaid billing. Review these interdependencies for internal holdups and shorten time to get claims produced.

Step 3: Review billing practices.

Observe your staff and monitor the billing logs and insurance claim acceptance reports to locate and review rejected invoices. Since rejected claims are not accepted into the insurer’s system, they will never be reflected as denied on remittance advice documents. Review of submitted claims for rejections is also important as frequently billing software marks claims as billed after a claim is generated. Instruct billers to review rejections immediately after submitting the bill, so rework, resubmission, and payment are timely.

Encourage your billers to generate pull communications (using available reporting tools on insurance portals) to review claim status and resolve any unpaid or suspended claims. This is usually a quicker process than waiting for a push communication (remittance advice) to identify unpaid claims.

Step 4: Review how your facility receives payments.

Challenge any delays in depositing money. Many insurance companies offer payment via ACH transfer. Discuss remote check deposit solutions with your financial institution to eliminate delays. If the facility acts as a representative payee for residents, make sure social security checks are directly deposited to the appropriate account. If you use a separate non-operating account to receive residents’ pensions, consider same day bill pay transfer to the operating account.

Step 5: Review industry benchmarks.

This is critical to understanding where your facility stands and seeing where you can make improvements. BerryDunn’s database of SNF Medicare cost reports filed for FY 2015 - 2018 shows:

Step 6: Celebrate successes!

Clearly some facilities are doing it very well, while some need to take corrective action. This information can also help you set reasonable goals overall (see Step 1) as well as payer-specific reimbursement goals that make sense for your facility. Review them with the revenue cycle team and question any significant variances; challenge staff to both identify reasons for variances and propose remedial action. Helping your staff see the big picture and understanding how they play a role in achieving department and company goals are critical to sustaining lasting change AND constant improvement.

Change, even if it brings intrinsic rewards (like decreased days in accounts receivable, increased margin to facilitate growth), can be difficult. Acknowledge that changing processes can be tough and people may have to do things differently or learn new skills to meet the facility’s goal. By celebrating the improvements — even little ones — like putting new processes in place, you encourage and engage people to take ownership of the process. Celebrating the wins helps create advocates and lets your team know you appreciate their work. 

To learn more, contact one of our revenue cycle specialists.

Cost increases and labor issues have contributed to the rise of outsourcing as an option for senior living and health care providers.  While outsourcing of all types is a growing trend — from the C-suite to food service, it is a decision that should be considered carefully, as lack of planning could result in significant long-lasting financial, public relations and personnel losses. Let’s examine the outsourcing of billing services and collections.

If you are concerned with efficiencies and focusing on your core business needs — nursing care and rehabilitation — then your facility owners and management may have or are currently considering outsourcing one or both end stages of the revenue cycle.

There are some compelling reasons to outsource.

When choosing to outsource, your facility can reduce or even eliminate the challenge of keeping up with increasing complexities of medical billing, staff development and retraining, software costs, and workforce challenges. Smaller facilities can mitigate billing office resource shortages caused by staff vacations, medical leaves and turnover via outsourcing portions of their revenue cycle processes.

Because of a variety of software options, extensive coding and evolving reimbursement policies, professional billing and collection companies may be more efficient, delivering a stronger cash flow by reducing the rate of denied or rejected claims and assuring accurate coding. As facilities normally pay either a “per claim” fee or a percentage of their patient service revenue for this service, the facility’s cost fluctuates with changes in census or payer mix. Facilities may serve their customers better by decreasing insurance denials and reducing balance transfers to patients.

Outsourcing may help organizations to focus on their core business: senior living services.

Your facility should assess your organization’s readiness, fit and contract limitations prior to outsourcing. Here are some things to consider.

1. Be accountable. It is your facility’s ultimate responsibility to comply with all applicable rules and regulations, including HIPAA. And while signing a business associate agreement is a step in right direction, it may not guarantee peace of mind.

• Ask a potential vendor about data transmission, storage, sharing, access and destruction policies, as well as processes designed to monitor compliance. Question any recent breaches or unauthorized access incidents — how were they handled? As HIPAA non-compliance and unauthorized access to protected health information (PHI) may result in financial penalties and bad publicity, you should evaluate the need to consult with an expert.
• Ensure the vendor knows your state’s facility licensing regulations. For example, some states prohibit charging patients or residents any collection fees. Some states or payers require refunds for any overpayments to within certain defined periods. A good vendor will meet your state’s regulations. Ask to review their standard collection forms and collection procedures and protect your organization from unexpected non-compliance tags. 

2. Communicate. Discuss what information they require, when, in what format, and how they will make corrections. In-house billing staff can normally access a resident’s medical file, whether electronic or paper, or inquire with the facility operations team regarding a particular claim. This is not the case with an external vendor. 

• To outsource effectively, you need to designate an in-house position to respond to missing information requests promptly. Facilities operating on web-based medical records software should evaluate the risks of granting a billing vendor even limited access to residents’ electronic medical files.
• Review contract terms for any up charges assessed by the vendor if your facility can’t respond to information requests in a timely fashion. 

3. Understand and agree upon the scope of the contract. Contract scope misunderstanding can have long-lasting financial implications for the facility, and result in increased bad debt. Your management team should compile a list of assumptions and agreement terms not stated clearly in the contract, and address them in a meeting before accepting the terms. At a minimum, get answers to these questions:

• Is the vendor submitting bills for all types of payers, levels of care and billing forms, including private, private long-term care insurance, adult day and outpatient, or only certain electronic claims?
• Is the vendor responsible for notifying your organization of any delays with claim processing, payer requests for supporting medical records and any other identified administrative requests and rejections? If so, how fast and in what format?
• Is the vendor responsible for assisting with regulatory compliance reporting, such as required data for a cost report preparation, audit, etc.?
• What minimum quality assurance steps does the vendor apply when generating and processing claims, and how do they remedy identified issues?
• Is the vendor only submitting bills or are they also working on collections?
• Is the facility or a vendor responding to resident requests for additional information or questions about the billing statements?

4. Maintain alignment with the organization’s philosophy and vision. As with any other area of operations you consider outsourcing, outsourcing billing and collections requires careful examination of its impact on customer service and community relations. If a vendor produces co-pay and private pay invoices or statements, will you have control over the format and presentation of these mailings? If a vendor is engaged to perform collections follow up, your management team needs to understand collections procedures and methods used and ensure they are a good fit with your mission.

5. Set goals and benchmarks. Your management should analyze days in accounts receivable, accounts receivable aging trends, and cash as a percent of net revenue monthly, and then meet with the vendor promptly to understand the causes of any undesired trends and work on remedial plan. 

6. Understand your organization’s reasons for outsourcing. If your facility struggles with completing resident pre-admission screening, obtaining prior authorizations, or staying on top of Medicaid applications and recertifications — stop. Outsourcing is very unlikely to remedy these situations and could even make them worse. We recommend seeking the assistance of an experienced revenue cycle or process improvement consultant before outsourcing any portion of the billing and collections process.

The BerryDunn Senior Living team welcomes your feedback, and is always one phone call or email away, should your organization need to take a deeper look at revenue cycle and process improvement opportunities.