Overview
A top-tier nonprofit health system in Southwest Florida is ranked among the top 15% of hospitals nationwide. It serves a rapidly growing and aging population, managing over two million annual patient visits to its six hospitals and medical centers. The health system faced a significant financial challenge hidden within its operational practices—over $23 million in annual revenue being left on the table, deeply rooted in hospital utilization management strategies, particularly around patient status determinations and the criteria around inpatient (IP) vs. outpatient (OP) criteria. The question was, how could they identify the drivers and reverse the trend?
Challenge
As the marquee system in the region, they grappled with significant financial pressures that are increasingly common in healthcare today, such as shifting patient mix, rising payer denials, and high observation rates.
Driven by strict payer denial protocols, clinical teams often resort to a denial avoidance strategy by categorizing patients into observation status—even when they meet CMS’ 2+MN rule for IP status. This conservative approach, intended as a safeguard against potential denials, paradoxically results in substantial unrealized revenue due to the lower reimbursement rates for observation compared to inpatient stays.
In reaction to these cost pressures, the health system initially implemented a technological solution aimed at refining workflow processes and enhancing decision-making capabilities in status determinations. While efficiency gains were realized, the root cause of the health system’s continuing revenue opportunity for its Medicare Fee for Service (MFFS) and Medicare Advantage (MA) business remained unaddressed. This prompted the need for a robust hospital utilization management strategy that ensured financial sustainability while supporting continued growth.
CorroHealth evaluated the scope of opportunity using publicly available MedPAR data and projected that the system was forfeiting approximately $21 million annually related to patient status across its MFFS and MA patient base. With that information as a guide, the health system requested that CorroHealth dig deeper, evaluate the specific areas of opportunity, and propose a strategic roadmap to capitalize on their findings.
Solution
Recognizing the health system’s complex status determination challenges, CorroHealth introduced its comprehensive Admission Status Review program to help weave key decision points into the system’s UM workflows and solve the health system’s high observation rates and revenue losses. CorroHealth analyzed historical data, conducted team interviews, reviewed process protocols, pulled a statistical sample of charts for specialized MD review, and validated and refined the compliant financial opportunity initially indicated in the MedPAR data. The deeper analysis revealed even more net new compliant revenue opportunities than the original projection, totaling $23.5 million.