Utilization Review: 5 Reasons Hospitals Lose Revenue

Lisa Bragg and Amanda Koroly, HFMA

U.S. hospitals are losing millions of dollars each year because of denials by health plans and government payers for acute care. But rather than continuing to take write-offs or forced reductions based on authorization issues, technicalities, or shifting care designations, hospitals can take proactive measures to ferret out what’s going wrong and prevent future losses. In most cases, an assessment and evaluation of the utilization review (UR) process will uncover numerous opportunities to improve organizational oversight, systematize processes, improve training, and create a feedback loop to ensure the right steps are taken at the right time to secure appropriate payment for the hospital and coverage for the patient.

For acute care hospitals, an assessment of their UR processes often uncover hundreds of thousands — or even millions — of dollars in lost revenue opportunity that could be realized by addressing medically appropriate patient status and adhering to the Centers for Medicare & Medicaid Services’s Two-Midnight Rule.

Although every hospital has unique challenges, major breakdowns in the UR process tend to fall into the following five areas:

  • Department organization and management
  • Understanding and adoption of regulatory guidelines
  • Clinical acumen and understanding of clinical criteria
  • Revenue cycle integration
  • Efficient and accurate processes

Department Organization and Management

In U.S. hospitals, UR tends to report up through various departments and is frequently shuffled around as part of reorganizational shifts. Increasingly, this task lands in revenue cycle management. Wherever it sits, UR tends to be treated as a departmental function rather than as a critical discipline that requires nuanced understanding, robust processes, and surveillance mechanisms. Healthcare organizations need to commit to UR to be sure that what needs to be done is getting done, within the time frame necessary to meet regulatory and insurer requirements.

Compounding the issue oftentimes the person in charge of UR has either clinical or financial acumen but rarely both. That means only half the UR equation is understood, and the nuances of providing quality patient care and managing revenue while meeting insurer requirements are lost.

To address these issues and ensure sustainability and effectiveness, UR must be a discrete discipline managed by a hybrid leader who has the time, expertise, and resources to put actionable processes, monitors, and controls in place.

A UR program must have personnel and processes in place to ensure compliance. At the core, a hospital’s UR program is meant to optimize the quality and cost efficiency of healthcare services, while helping insured patients understand the benefits and limitations of their healthcare coverage.

Hospitals must ensure that both medical necessity and insurer compliance points are met when submitting a claim. Any missteps — from missing a deadline, to failing to get authorization prior to rendering services, to a host of other technicalities — can lead to reduced or denied payment and impact the payment the hospital receives.

An assessment of the UR department will help determine where gaps exist and make way for interventions such as UR training modules and recurring update touch points for clinical staff.

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