Increasing Margins During Difficult Times: How Second Pass Reviews Can Help Hospitals Survive

The past few years have been a trying time for healthcare systems.

The onset of the COVID-19 pandemic accelerated the shift of medical care outside of traditional hospital settings, leading to a decrease in patient volumes. Additionally, personnel shortages and structural issues have caused a steep rise in operating expenses. According to a January 2023 report by Kaufman Hall, hospitals on average were only able to achieve one month of profitability throughout the entire year.

Hospitals can survive. But to do so, they need solutions that will increase revenue and bring in profits without requiring substantial capital investments (either upfront fees or expensive staffing costs). Chief Financial Officers should select vendors that:

- Are additive, requiring no painful replacement of existing systems;

- Bring in genuine new revenue that can be fully attributed;

- Involve no risk, with payments rendered only when attributable value is confirmed.

One such vendor, SmarterDx, has helped hospitals achieve major margin improvement by introducing essentially a new software product category: second pass reviews.

Second pass reviews allow hospitals to conduct an additional documentation and coding review at the Prebill stage, after their existing processes have been completed, but before the final bill is sent out. This supplementary review augments existing Clinical Documentation Improvement (CDI) and Coding processes and is essential for ensuring that all potential revenue and quality gains have been fully captured.

Historically, the challenge with second pass reviews has been staffing. Manual re-review can be time consuming and thus low ROI. Some hospitals have addressed this by looking at just a small slice of “high priority” charts through services vendors or internal processes, but this leaves the majority of potential opportunities uncovered resulting in lost revenue.

To address this, SmarterDx has created proprietary AI technology to see the entire clinical picture. It can process data from labs, meds, orders, notes, radiology, and other chart sources, and automatically detect specific findings (not just charts, but exact diagnosis opportunities) for staff. This effectively allows CDI and Coding staff to “peek into” every chart to ensure all relevant revenue and quality-impacting opportunities are identified.

Hospital leaders might assume that these findings are marginal, but the effect has been surprisingly large. With margins being such a small proportion of revenue, an increase in documentation and coding accuracy from 99.6% to 99.9% (and a corresponding small bump in revenue) can lead to a significant boost to margin.

Dr. Michael Gao, CEO and co-founder of SmarterDx, brings an impressive combination of expertise to the table: a math whiz who’s done research in statistical modeling and a hospitalist who’s cared for patients at some of the most prestigious health systems in the nation. Before founding SmarterDx, Dr. Gao led applied AI for NewYork-Presbyterian Hospital.

“I started SmarterDx after seeing payors develop massive cost-containment programs. They’ve combined multi-pronged, layered multi-pass data mining, multiple AI tools, and a slew of third-party contingency fee vendors to recoup billions of dollars back from hospitals,” Dr. Gao explains, “and I thought – hospitals need someone on their side too.”

To achieve this goal, Dr. Gao assembled a team including DoD-funded clinical informaticians, Harvard physicians, and data scientists and engineers from Google and Amazon. They have developed novel AI algorithms that can accurately understand the nuances of clinical care and identify not just missing diagnoses but also data patterns corresponding to their monitoring, assessment, evaluation, and treatment.

Dr. Gao warns against ‘upcoding’ as a means to increase revenue: “As a physician, I’ve seen firsthand how incorrect diagnosis codes in a patient’s chart can be detrimental. That’s why it’s so important to me that our algorithms reflect genuine clinical management and are validated by a team of physicians.”

SmarterDx technology has been quickly adopted by a wide array of hospitals, from small community hospitals to large health systems and even elite academic medical centers. This technology has increased the overall margin of each hospital by millions of dollars.

For CFOs who are looking to improve margins without taking on additional risk, SmarterDx is an ideal solution. It comes after existing CDI and Coding processes and software, bringing in new revenue that is fully attributable. Moreover, it is zero risk, offering contractually guaranteed margin improvement.

 

Learn more about SmarterDx here and join us at Becker’s 13th Annual Meeting in Booth 113!

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