Case study

Fine tuning the payment machine: How one regional health system got “SMART” about improving their revenue cycle

Client: Regional healthcare system

Our role: Use SMART® Outpatient to help them improve their outpatient HIM coding, revenue cycle and revenue integrity.

Industry: Health Services

Services: Data and analytics, Technology, Operations, Risk, Control and Security Transformation Solutions

Solution: SMART®

Client Challenge:

How to optimize outpatient billing efficiency and revenue integrity

Hospital systems are like very complex organisms, constantly adapting to their environment and trying to attain a state of equilibrium. In addition to changing patient and market dynamics, a major challenge is just getting paid for the services they provide, which is not as easy as it sounds. Just ask our client, a major multi-facility regional health care system. The services they provide to patients each day results in thousands of records that need to be coded and billed. That should be a good thing, right? Well, yes, theoretically. The difficulty lies in accurately assigning codes for all of the services detailed in those thousands of records in order to receive accurate reimbursement. This is not as easy as it sounds, as these codes are assigned and processed by human beings, and human beings are prone to error. If a claim is submitted to a payer with inaccurate or incomplete coding, the payer denies the claim to the hospital with reduced or no reimbursement, and the process must begin again.

Billing and coding complexity presents numerous challenges within the healthcare industry. To address some of the key challenges, PwC developed a proprietary solution called SMART® (Systematic Monitoring and Review Technology) to help its healthcare clients identify incorrectly coded claims. SMART is an automated system that identifies coding errors for both inpatient discharges and outpatient visits, with over 1,000 standard flags in each product, and unlimited custom flags to support an organization’s specific business needs. PwC continuously updates the product to address changes in the regulatory and business environments. Our client had been using SMART Inpatient very successfully for a long time and then made the decision to implement SMART Outpatient to help them improve their outpatient HIM coding, revenue cycle and revenue integrity (i.e., assisting the health system in getting paid for the services being provided).

“We have been using the inpatient version of SMART for a long time and we are very pleased. We had high expectations for the outpatient version as well, but found that in addition to the core functionality that we were used to, our discussions with the PwC team helped us to take our use of the solution to a new level, gaining insights we didn’t know were possible with the tool.”

Client, Director of HIM


Asking the right questions

Since the client was already familiar with SMART Inpatient, the implementation of the baseline outpatient product went very smoothly. The SMART Project Management team partnered with the client’s Health Information Management (HIM) and IT teams to design their workflow and prepare everything for “go live” ensuring a smooth workflow transition for all stakeholders.

In addition to identifying coding errors, SMART also allows clients to develop custom filters to scrutinize and identify gaps in other aspects of their coding and billing processes. As part of this process, we facilitated focused discussions with the client to determine particular areas of vulnerability they wanted to address, along with questions they wanted answered through the SMART business rules customization process.

The client’s outpatient coding team was interested in taking a broader organizational view of the insights that SMART could provide. As a result, they asked all the right questions, such as: “How do we improve the revenue cycle? Are we leaving money on the table? Are there gaps in our billing coverage? What rules could help us identify additional coding and charge capture inefficiencies? How do we integrate flag management into our workflow process so that it streamlines the process and eliminates duplicate activities?” These questions are at the heart of improving the revenue cycle and revenue integrity. Identifying missing charges can help clients tighten their charge capture processes. Together, we implemented standard and customized rules in SMART to address areas of concern and focus for them, and continued to monitor their performance to ensure that improvements were evident. We then moved on to answering other questions, gradually gaining more insights and improving the performance and value of the system for the client.


Optimizing the system one flag at a time

Effecting positive change in the outpatient billing environment takes time, persistence, and focus. That said, the results to date have been impressive. Within 6 months of SMART Outpatient usage, they are off to a great start with a Flagged & Reviewed rate of 98%. The client has experienced a positive potential net reimbursement impact in the first six months of using the tool. Their overall flag rate averages 48%, down from an average of 58% at implementation. We expect this flag rate to reach and maintain our client benchmark of 35% as we work through high-value target areas of focus and continue to work towards achieving a steady state. Given the complexity of outpatient coding, the fluidity of the regulatory environment, and the reliance on multiple external participants in the payer system, perfection is an elusive goal. Remaining diligent around continuous process improvement is key.

“This client was unique in that they already had a sophisticated understanding of what SMART could offer in an inpatient context. Helping them to implement outpatient SMART, gave them the opportunity to expand their use of the product to include deeper analytics; ultimately providing a high-value solution customized for our client.”

Shannon O’Shea, Principal, PwC

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Shannon O’Shea

Principal, PwC US