Inefficiency in hospital management a serious problem

An article from the October 2005 edition of Health Care Financial Management describes the state of one sector of hospital operations as follows: "

No matter the size of the organization, billing inconsistencies affect all healthcare facilities to some degree--even those that are on top of the problem. On average, providers lose 5 percent of gross revenues, and that can translate into millions of dollars for a single organization.

"There's no hospital in this country that is accurately charging for all the services it provides. There's none," says Joe Pajor, executive director of patient access and business services at Stamford Health System, Stamford, Conn.

Getting paid for all the services and supplies that a hospital provides would seem like an elemental strategy in order for any hospital to function, but many CFOs are not even aware of the scope of the billing mismanagement issue.

While those in finance positions may know that their hospitals cannot stamp "paid in full" on every claim, Pajor believes the industry in general is not being proactive in implementing measures that will ensure accurate charging and reduce the amount of denied claims.

"And I think that's because a lot of CFOs still say there's not that much money there," says Pajor, noting that some CFOs brush aside the issue, arguing that so many services these days are paid on a fixed rate case basis anyway.

That may be true, but Pajor still believes that many CF Os are missing the point, if not the dollar sign.

And, he should know. Pajor says that by better managing Stamford's billing processes, the hospital was able to recover approximately $750,000 in net revenue that otherwise would have been lost. He says total net revenues for Stamford are about $240 million.

"So, it's significant," he says. "In this day and age, you start looking at the nickels and dimes, they add up. They add up over time."

One study by America's Health Insurance Plans found that 14 percent of claims submitted to payers are denied and one out of every seven claims had to be resubmitted, appealed, or written off by providers. That represents millions of dollars in lost revenue that some CFOs aren't even looking for.

Aside from the direct impact from the loss of revenue, there's an additional impact on resources because of the expense associated with reprocessing denied claims."

I highlighted in bold several shocking statements. This type of inefficiency would result in failure of the business in most other industries.