The $23.5 Million Difference in Patient Status Determinations

How One Strategic Partnership Catalyzed Hospital Utilization Management Strategies and Revenue Growth

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.

In late 2023, CorroHealth implemented a tailored strategy initially targeting the system’s MFFS population. Following the early success of the program, the strategy was expanded to include MA patients. Key components of the program included:

• Strategic alignment with CMS’ 2+MN rule.
• In-depth training to equip staff with the skills to adhere to regulatory nuances.
• Regular audits to solidify the effectiveness of training and refine operational processes.
• Establishment of multi-tiered escalation pathways to challenge and overturn denials.
• Utilization of data-driven insights in contract negotiations with payers, improving compliance and accountability.

Results and Impact

With the entire Medicare patient population within the scope of the partnership, the health system is realizing annual compliant revenue gains for MFFS above initial targets and is on pace to achieve MA annual revenue goals as well, which will result in $23.5 million for MFFS and MA combined. Significant improvements were observed with the onset of educational efforts and workflow realignment in each program’s implementation phase. Their outcomes go beyond realignment of the patient status strategy. In evaluating impact, the program has improved cases paid as inpatient (after denials and appeals efforts) from 58-63% to consistently above 75%.

Conclusion

The partnership between this prestigious health system and CorroHealth has driven significant compliant financial impact, streamlined operations, and enhanced efficiency in utilization management. This strategic partnership has optimized patient status determinations and ensured compliance with regulatory standards, supported the provider in holding payers accountable and securing proper reimbursement for care.

The program’s success demonstrates the transformative potential to enhance operational efficacy and financial health through focused, data-driven strategies and one strategic partnership with CorroHealth.

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