• Maricopa Medical Center Case Study
Babies in any Neonatal Intensive Care Unit (NICU) are oftentimes hanging onto life by a thread. They rely on ventilators and bypass machines and are subject to a multitude of daily procedures, such as blood draws or IV starts, just to keep them alive. The doctors and nurses who care for these very sick babies are trained to manage the complexity and intensity of this unit. They perform miracles every day.
Due to poor financial performance, Maricopa Medical Center, part of the Maricopa Integrated Health System (MIHS), was faced with the prospect of having to close their NICU, leaving these very sick babies without that critically needed support.
The Maricopa Medical Center team was determined to find ways to improve their NICU financial picture without impacting the quality of care they provide to the families they serve. This determination and commitment was the foundation for the start of the project team dedicated to this initiative. The primary mission of the team was to understand the root causes impacting performance and identify specific levers for improvement that would result in financial viability for their Neonatal Intensive Care Unit.
Maricopa Medical Center (MMC) is an essential “safety net” hospital offering comprehensive healthcare services for the uninsured and underinsured residents of Maricopa County in Arizona.
Over 60 percent of MMC patients are on Medicaid (administered in Arizona by Arizona Health Care Cost Containment System, or AHCCCS) or don’t have other forms of insurance. Therefore, Medicaid is the lifeblood not only of the hospital, but also its patients.
In 2003 voters decided that MIHS would be converted from a county-run system to a state Special Healthcare District effective January 1, 2005. In 2007, when this project started, the hospital was facing some critical financial issues as it was completing this transition.
Whereas in most hospitals the NICU generates positive earnings, the unit at MMC was losing money and the hospital was facing the difficult decision of potentially shutting it down, leaving their patients with few alternatives. As evidence of the community’s need for MMC’s NICU services – and the hospital’s financial dependence on AHCCCS reimbursements – over 90% of the NICU revenue was, and still is, from Medicaid. The losses only increased as the number of patients grew.
MMC’s objective was to increase NICU revenue and improve the overall financial performance so they could keep the NICU open, continuing to provide needed community healthcare services at the quality level for which they had become known.
Recognizing they needed some help to solve the NICU financial challenges, MMC presented the situation to their business partner who was already administering their denials management program. The partner had previously uncovered some underlying documentation and process issues that were limiting reimbursements to Maricopa. As a result, the hospital decided to ask their partner to expand its role to review policies in the NICU that could lead to increased revenue.
A cross-functional team was quickly assembled to conduct a thorough investigation and recommend solutions. The success of this project hinged on the mutually respectful partnership formed and the commitment and expertise that both parties brought to bear.
The initial analysis indicated that costs – including nurse salaries and nurse: patient ratios – were in line with other hospitals. However, charges per day were below those of similar hospitals, reinforcing that the problem lay on the revenue side of the equation.
The data from prior year performance was used to quantify the issue.
The data showed that overall as patient days had grown, margin had decreased. The lack of organizational history about some of the details made it difficult to dissect accurately however, the relationship between the two parameters shown above is key given 92% of the revenue is paid on a per diem basis. The team’s efforts were focused on turning this pattern around.
The cross-functional project team that included key hospital personnel and business partner team members conducted a thorough review of policies and business processes / practices in place in the NICU. They invested in gaining a clear understanding of the current state and identification of opportunities that would result in improved financial performance. The project team was also tasked with ensuring buy-in was gained throughout the organization in order to actually implement the improvements identified. The internal alignment was an essential part of the overall project since multiple departments within the hospital could be impacted by some of the recommendations. Each of the team members representing the various areas was responsible for cascading project updates to their respective team members to keep everyone informed on the progress and improvements underway. This continuous communication approach proved to be invaluable to the overall success of the project. The team also developed a project plan that recorded and tracked each initiative, assigned accountability to team members, established estimated completion dates, and projected the financial impact for each action. This tool was instrumental in both keeping the project of track with meeting key milestones and updating key stakeholders.
The team began by reviewing policies and business processes with the objectives of – taking a closer look at clinical considerations; ensuring continued focus on appropriate level of care assignments; continuing education of medical and clinical staff; looking for improvement opportunities within existing AHCCCS contracts including reporting of denials and financial results; and other opportunities to maximize payor payments.
As previously stated, the team’s analysis first discovered that costs – including nurse salaries and nurse-to-patient ratios – were in line with Level III NICUs at other hospitals. Taken in light of the overall revenue picture, the team confirmed that the problem was on the revenue side of the equation. The analysis revealed that MMC patient charges were 36 percent lower than the average of other hospitals offering the same level of care.
As the team continued their focus on opportunities to maximize per diem and outlier reimbursement they identified numerous actions that could be categorized into the following four main areas for change:
1. Improved Process & Documentation – MMC had not been consistently documenting all of the services provided. The project team identified the need to justify appropriately higher levels of billing, recommended improved processes for documenting the babies’ clinical status, and developed tools to make it easy for staff to provide appropriate documentation. The team created an algorithm to assign correct AHCCCS level of care for NICU babies. In addition, based on the team’s recommendation, MMC revised billing policies to bill at an appropriate level for particularly sick babies – in line with practices already in place at hospitals across the U.S. This resulted in higher average per day cost, exceeding the threshold needed to warrant “outlier” billing that yielded higher reimbursements over AHCCCS’ standard per diem reimbursement rate.
For example, they reviewed and updated the room rates, and changed billing of supplies from a fixed per diem rate to the actual cost of individual supplies used. Another example involved the nursery. MMC had been calling their nursery for the merely sick babies – as opposed to the critically ill babies – the “Stepdown Nursery,” which indicated to AHCCCS that a lower level of care was all that was warranted. The name “Stepdown Nursery” created orders like “Transfer to Stepdown,” resulting in many days paid at lower per diems than were appropriate. The NICU team aptly named it the Sunshine Nursery which resolved the issue and reflected the continued higher level of care that was still required by the babies in this facility.
2. Education – MMC established on-going education for medical and clinical staff so they understood the new billing tiers, the importance of thorough documentation, and the financial impact.
a. Nurses – The team educated nurses on the importance of documenting all services provided. They identified numerous services that were not being tracked and billed or were being under billed (e.g. neonatal nurse, bedside procedures). The partner’s clinical staff had a deep knowledge of state-level Medicaid policies resulted in a recommendation to use AHCCCS (Arizona) criteria to determine the acuity of patients vs. InterQual or Milliman, which are stricter and result in lower reimbursement levels.
b. Physicians – The team educated physicians on the importance of documenting all procedures, writing orders for all procedures that otherwise would be denied, and completely documenting each baby’s status. Another example: to be compliant (and therefore able to bill) required a start and stop time on each procedure, yet the stop time was not being recorded for over 90% of the procedures that were audited. The team set up a tool to make it easy for physicians to enter stop times, therefore enabling more comprehensive billing.
3. Concurrent Review Process –At the team’s recommendation, MMC hired a dedicated NICU Utilization Review (UR) Nurse within the Revenue Cycle Division, instead of in the Case Management group, to improve documentation, collaborate with physicians, ensure babies met payors’ payment criteria, and to work in real time (instead of after the fact) with payors. The UR Nurse proactively met with the plans’ utilization reviewers to agree on the appropriate level of care, ensure proper documentation, and hold payors accountable to meet initial payment obligations. The UR Nurse brought all internal stakeholders into the process by conducting multiple physician meetings and on-going communication with case managers and unit-based Nursing staff. By establishing a concurrent review program in the NICU, MMC was able to ensure that every baby day would be reviewed to determine and communicate appropriate level of care.
This nearly eliminated retrospective denials and enabled hospital case managers to focus on patient care and discharge. Creating a role to perform concurrent review and focus in real time on financial considerations allowed the case managers to place their focus on discharge planning and improved patient outcomes.
4. Payor Management – As part of this project, the team also reviewed all payor contracts. One frequent change was that they began to insist that the AHCCCS sub-contracted managed care health plans used AHCCCS criteria instead of InterQual. They also started monthly meetings with plans to review cases, identify patients that warranted outlier status, and hold plans accountable to prior commitments.
For example, Arizona Physicians IPA (APIPA) is one of the AHCCCS contracted health plans. Instead of using two billing tiers, as established by AHCCCS, APIPA had contracted with Maricopa to add an additional level in between the two. The 3 tiers enabled the health plan to place fewer babies in the highest (most expensive) tier. Based on the partner’s recommendation, Maricopa renegotiated the contract with APIPA and dropped the middle tier, enabling MMC to place more babies in the higher tier, thus increasing reimbursements to a level appropriate to their care.
The efforts of the cross-functional project team comprised of MMC team members along with their business partner team members, who were experienced in solving complex Medicaid issues, resulted in MMC receiving increased reimbursement for care already being provided. The changes implemented were not just temporary fixes but sustainable changes that would continue to increase reimbursement for the NICU.
Specific results revealed one year after the project concluded:
• The NICU increased revenue to fully cover costs and is now operating financially at break-even
• Outlier reimbursement increased by 50 percent
• Net reimbursement increased by eight percent. For example, of just 10 cases audited during this engagement, six were found to have been under-billed, resulting in $25,000 in potential incremental reimbursement revenue.
• Concurrent reviews identified 450 patient-days that were not billed over just a three-month period – the equivalent to over $1 million in revenue.
MMC was able to achieve its objectives because of the commitment they made to get all the right people involved in understanding, from both a clinical and a technical perspective, of very complex Medicaid programs (such as AHCCCS in Arizona), billing criteria, payment levels, and outlier criteria. As a result, and perhaps most importantly, the Maricopa NICU remains in operation today, providing needed services to the community.