“Trust but verify and track everything you possibly can so that no revenue is lost and costs don’t get out of control.”
Healthcare systems are constantly adding new products to the mix to continually increase their capabilities as well as improve outcomes for their patients. There is no debating which is more important as health systems need both cost savings and new revenues today to continue to be competitive. They must maintain high levels of financial stability and growth that will help provide high levels of care for the communities they serve. This is the name of the game but there are many key aspects that you need to consider as you move ahead in 2025 and beyond that will improve your VA Teams.
Even though you may have a mature Value Analysis Program, which many health systems do, you may still need to have an even sharper focus on the cost and revenue side of new product requests which most advanced VA programs are doing today. The game is always changing and upping the bar on the new normal and new product request evaluations by VA are also changing. Below are my four immutable rules that every health system must operate by.
Rules to Ensure Revenue Integrity
1. Ensuring the Promise of New Revenues – Many new products do come with the promise of new revenue, which is great as it enables health systems to offer more levels of care while getting reimbursed to make new revenue. All organizations’ request forms and most VA Workflow Software ask the requesters to provide the Revenue Codes (CPT, etc.) for their respective new product device/system that will enable you to verify the reimbursement for this new or existing procedure. If you are not verifying reimbursement by sending the new product revenue information off to your Finance/Revenue Integrity Department to verify, then you must do so ASAP.
2. Not All Payers are Alike – Okay, you have verified that you will get reimbursed but there are many different payers that you need to also verify. Most modern VA Teams are not only having their Revenue Integrity Departments review the revenue information for them which needs to happen, but they are going a step further. Normally after the revenue is approved, that is when the product is sent for trial to a Surgical Suite and then the VA Team looks to see if it meets the functional requirements of the surgeon(s) who are requesting the new product.
Instead of just going by one or two product trials and then reviewing the reimbursement of those payers, hospitals are allowing more trials of the same product to capture all payers that they may encounter with this new procedure. Not all payers are alike in their reimbursement and that is why you allow additional trials to make sure that you can see real payer results for all your major Medicare, Medicaid, and private pay (will be a number of these). The worst thing that could happen is that you think you are getting a profitable new procedure that’s paying for the new product only to find out that most cases are with a certain payer – and it becomes a loss leader. Trust but verify!
3. It’s Not Just Revenues but Profitable Revenues – Even if you can verify revenues and they all make sense for a case, you have to keep in mind that just because revenues may pay for your new product, that does not mean that it is profitable. Just turning the lights on and setting up an OR Suite could cost you upwards of $2K to 3K so that new product that costs $4,300 per case but the reimbursement is only $5k is not a profitable case. Remember, there is much more overhead involved than just the Surgical Suite and profitable cases. Reimbursement must exceed costs by as much as 30% to 60% for a case to be truly profitable. Remember all the other clinical and non-clinical costs that are all part of your organization’s overhead for your OR Case. Think of Billing to Central Sterile to Environmental Services to Physician/Nursing/Tech labor costs to Trash Removal and everything in-between as an overhead cost.
4. Ongoing Validation of New Product Revenues is a Must in 2025 and Beyond – You cannot leave anything to chance with new products and the age-old issue of a product being approved for one modality/procedure and then the next thing you know it has propagated to unapproved surgeons or patient care areas without your knowledge. This could mean that $75K annual spend has now turned into $350K annual spend and growing all without revenue verification or cost optimization, let alone VA approval. The best way to ensure that this is not happening is to employ a Savings Validation System that uses patient volume centric measures to track the ongoing cost per case or cost per patient day, etc. For example, if a $350 RF ablation instrument was added to Urological Cases, you should only see a $350 increase on average, but if suddenly it is now $700 to $1,000 more per case, you know something is off and the Savings Validation System will alert you automatically. You cannot leave anything to chance so you need to put validation in place today because you can’t be everywhere, but your tracking systems can.
Manage Revenue and Costs by Tracking
My philosophy on this is simple when it comes to managing costs and revenues and that is to trust but verify and to track everything you possibly can so that no revenue is lost and costs don’t get out of control. If you want to see a demonstration of what a savings validation system can do for you to automate this whole process, let me know by replying to this email or visit our website for more information.
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