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Using HIPAA technology upgrades to advantage

By John R. Thomas, MBA

Many physicians, practice managers and hospital administrators are wrestling with the difficult challenges of complying with the upcoming HIPAA (Health Insurance Portability and Accountability Act) are wondering, “Do I have to upgrade my computer system?” and, “What do I upgrade to?”

Unless you recently purchased an advanced computer system, you almost certainly will have to upgrade both your hardware and software. As for what you should upgrade to, the answer is more complex. HIPAA is not like Y2K, which was solved with a one-time technology fix. When HIPAA is fully in effect it will mark a new era in health care data collection and analysis. It will bring industry-wide standardization and will greatly simplify the administrative side of practicing medicine. The price for noncompliance will be paid in both financial terms as well as operational considerations.

In planning for HIPAA, physicians and practice managers should consider acquiring a system that will go beyond basic compliance. Instead, take advantage of the new standardization and mass exchange of electronic data and acquire a combination of computer systems that can provide new financial management capabilities and opportunities.

Cost is always a consideration, but keep in mind that the proper system should be able to pay for itself by reducing claim denials, improving collections, increasing patient self-payments and providing daily financial performance reports that can point out practice inefficiencies.

HIPAA Requirements and Consequences

HIPAA was passed by Congress in 1996 and dealt primarily with reforming employee health insurance. One section of the law called for sweeping new standards on the collection and transmission of most forms of health care information. The law is designed to provide new confidentiality for patient medical information and to enhance the capability of all health care organizations, including physicians, to aggregate information about transactions by standardizing electronic transmission standards.

The first deadline imposed by HIPAA is the adoption of the approved transaction and code sets requirement on Oct. 16, 2002. The deadline for compliance with the new privacy standards (which includes new restrictions on handling patient records) is April 14, 2003.

While many physicians initially reacted negatively to the news of another set of federal guidelines, the new regulations will actually yield many new benefit opportunities for them. The standardized data requirements will prompt mass adoption of electronic claims filing either through EDI (electronic data interchange) warehouses or by filing directly with insurers.

The new formats will greatly speed-up claims submission and payment. By enabling online electronic communications with insurers, the claims adjucation process can be automated, reducing the burden on office staff. In addition, a vast amount of new information will be available for practices to conduct enterprise-wide operational analyses. The Boundary Information Group of Denver, Colorado estimated recently that medical groups will be able to save some 37 percent in bad debt and postage and some 50 percent in overall business operation costs.

New Technology Can Reduce Costs and Improve Financial Management

Some physicians and practice managers, disappointed with previous software purchases and wary of moving prematurely before HIPAA’s final deadlines come into effect, may be tempted to wait until the last minute to act. After all, couldn’t the HIPAA regulations be changed or postponed?

In fact, the new code set and data transaction standards have been in place for some time and many organizations have already adopted them. There is some controversy about the new privacy standards, however most regulatory experts believe they will go into effect with few, if any, additional changes.

The most important point for physicians and practice managers to understand is that, by moving to electronic claims filing now, you can quickly improve revenue collections and improve practice efficiency. Postponing your technology upgrade will almost certainly cost you money, not save it.

Two of the most important benefits brought by the new technology are: online retrieval of electronic imaging and real-time analysis of practice financial performance.

Adoption of an online, integrated integrated imaging system enables practices to scan, store and retrieve documents such as EOBs (explanation of benefits), payer checks and patient registration forms. This capability allows practices to instantly access the documents and perform online eligibility verification, claims filing and payment status inquiries.

By automating these functions, practices can end the time-consuming process of calling different carriers to get eligibility and benefit coverage information. The new technology can also greatly speed-up claims filing and payment. For example, it can compile claims rejected by insurers and match them up against the practice’s own information base. Practice staff or an outside vendor can then compare all relevant data, correct the claim (e.g., fill-in missing information) and route the revised claim to appropriate payer.

In addition to handling initial or primary claims, the new technology can also automatically handle the management and submission of all secondary claims (e.g., to a medical supplement or coordinating health plan) at a fraction of the cost of manual processing. This new revenue can add up quickly. Because most secondary claims are for amounts under $25, many practices believe they cost more to process manually than they are worth.

Real Time Financial Reports Improve Practice Revenues

Another important benefit from the new technology is the generation of real-time financial performance reports. By collecting and analyzing information using a relational database, a complete profile of the practice’s strengths and weaknesses can be developed. They can pinpoint what services are making the most money for you and what is the daily activity of each physician broken-down by procedure code.

For example, one of our clients found in a review that one physician had recorded 21 of 44 cases in a one-week period where the claim should have been collected from the patient as a self-pay for a variety of reasons (deductible was not met; patient was no longer covered by the plan).

By identifying these patterns, practice managers can reduce denials, improve self-payments and increase overall revenues. Reduced denials means reduced accounts receivable (A/R) and more cash collections. As an example, one of our clients experienced 144 claim denials in the month of January. In August, the number dropped to 44 claims denials. Fewer denied claims means fewer account receivables and more collections.

These capabilities are clearly very valuable, but administrators of smaller practices may be concerned that such an advanced system may require advanced technical skills or a major capital investment. Not necessarily.

You have two basic choices for upgrading your technology: you can purchase, install and manage the new system yourself, or you can turn to an outside vendor to handle it for you. Many small and medium-sized practices are realizing that it makes sense to use an outside vendor to obtain the needed technology through an Application Service Provider (ASP).

A reliable ASP vendor will guarantee that the software will be installed and maintained at a high-level of efficiency and take responsibility for installing upgrades as they become available. This significantly eases your administrative burden and may eliminate the need to hire highly paid IT staff.

ASPs use high-speed (T-1, DSL or cable modem lines) links to store and retrieve your data from one or more software vendors. In the past, some customers have been concerned about having their data stored outside their offices and possibly losing access to it. However, a check with current ASP customers can assure you that these systems’ reliability has been proven repeatedly in recent years. However, beware of ASPs who claim to be all things to all people. Like every decision made by a practice administrator or physician, you should understand the relationship between your financial success with the services and the ASP provider.

Unix vs. SQL Systems

In evaluating new systems for HIPAA compliance, you should consider two key factors. First, will the vendor commit to assisting you in achieving compliance? This means going beyond simply updating their software and pledging active support for your efforts in your office.

Second, you need to understand the difference between Unix and SQL-based software. The Unix operating system was created almost 30 years ago and is considered reliable but unsophisticated. Unix uses a “flat file” database, a simple format in which each database is contained in a single table. In contrast, a relational database system like those in SQL format applications, uses multiple tables to store information and each table can have a different record format. This allows a database to be analyzed for a variety of factors (e.g., age, gender, location, diagnosis, plan type, payment history) almost instantly.

In evaluating new software systems, you need to determine whether they use a Unix or SQL database. For example, most current practice management software is based on the Unix system. You should check with the vendor to make sure current and upgraded practice management software will be able to interact with SQL data base systems. The stable nature of the Unix platform, combined with the data mining capability of a SQL reporting system, provides a physician or practice manager with a solid base of financial management systems.

It is the SQL or relational data base systems that provide the online analytical capability that makes possible online imaging, automatic claims management and real-time financial reports. This critical ability will produce major benefits over the long term and should not be sacrificed in the interest of maintaining a familiar but obsolete practice management system.

A final word of caution. I have talked with some physicians who believe they have found a “loophole” or an “end run” to avoid having to face HIPAA compliance. You will need an attorney specializing in regulatory issues to give you proper advice on the legality of these schemes. However, I can tell you from a businessman’s perspective, that it is foolish to think you will be able to use paper-based claims in the future without incurring substantial financial costs.

The big health plans and insurers are already starting to adopt the new standardized forms and data transmission standards. After the HIPAA deadlines pass, they will expect physicians to meet the new standards. If your practice does not comply, they will almost certainly either refuse to process your claims or impose a special fee for handling a non-standard transaction such as a paper claim.

John R. Thomas, MBA is Chief Executive Officer of MedSynergies, Inc. a health care technology and financial data processing firm based in Dallas, Texas.

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