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A podcast hosted by FAH’s Chip Kahn that shines a light on everything hospitals; from the advancements in patient care to how a hospital benefits its community.
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- They saw their cash deposits drop by 67%
over what their traditional
weekly cash deposits were.
Now to put that into perspective,
if any of us had our
paycheck cut by two thirds,
we'd have to make a lot of tough decisions
relatively quickly.
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- Welcome to "Hospitals in Focus"
from the Federation of American Hospitals.
Here's your host, Chip Kahn.
- Welcome to Hospitals in Focus.
We appreciate your listening.
The recent cyber attack of
United Healthcare Group's
Change Healthcare Clearinghouse
is putting patient care at risk
and creating an existential situation
for a large slice of the
nation's hospitals and doctors.
In this episode, we are
gonna take a deep dive
into the work of clearing
houses like Change Healthcare
and the role they play
from treatment to payment
in our system,
and see that the submission of claims,
which is beginning to return,
is not the end of this crisis,
but simply the end of the beginning,
to paraphrase Winston Churchill.
Once I heard today's guest
explain this complicated topic
in clear, understandable terms,
I knew we had to have him on a podcast.
So welcome Matt Szaflarski,
director of Revenue Cycle
for the healthcare data
firm, Kodiak Solutions.
Thanks for being here today, Matt.
- Absolutely, Chip, thanks for having us.
- So Matt, just to get started,
before we dive into the current crisis,
will you tell us a
little bit about the role
that Kodiak Solution plays in healthcare
and what you do there?
- Absolutely, Chip.
So Kodiak Solutions is a new
name in the healthcare market,
but we've actually been a practice
that's been around for
just about two decades.
Formally we were Crow's
Healthcare Consulting Practice,
and in the early two
thousands we got our start
with a tool called
Revenue Cycle Analytics.
This is a tool that helps
hospitals and physician groups
across the country help
calculate their net revenue
at the end of every month.
You mentioned earlier
making complex business problems simple.
One of the things we focus on
is really helping hospitals
and physician groups
value their open accounts receivable.
So how much cash are they
actually going to receive
on that open accounts receivable?
And so as that product has
grown really across the market,
we've gotten to a point
now where we've developed
a benchmarking database.
So really across 1800+
hospitals nationwide,
we receive every single
transaction, every single day,
as well as claims data and
remittance data from payers.
And that allows us to
really have a close pulse
on the revenue cycle market
on a day in and day out basis.
And so that's really
what our focus is today,
is really using that data in
order to inform our clients
of the pulse of the market
and where potential opportunities lie
or potential pitfalls also appear
that will impact their
financial performance.
- That's helpful.
So now let's get into it
and look at the basics.
So when a patient walks in the hospital
for an elective procedure,
or into an emergency room,
there has to be an
identification of the patient.
Are they eligible for health insurance?
And that begins a continuum
that goes all the way to a
point at which the hospital
and the doctors will actually
submit a claim to an insurer
and then ultimately get
paid for the service
that was provided to that patient
when that eligibility was determined.
Across that continuum of
care there's technology,
and that technology, for a large part
of the American healthcare,
is Change Healthcare,
it is a clearinghouse
for all that information.
Can you explain how this
clearinghouse works,
what role it plays,
and how our audience can
sort of conceptualize it
before we get into the issues of,
frankly, a bomb blowing up
in the midst of the largest
clearinghouse in the country?
- Absolutely.
And Chip, I'm probably
throughout this interview
going to use a a series
of different anecdotes
to help kinda simplify
what I want your viewers
to really visualize.
But the way that I see the
American healthcare system
is really a three-legged bar stool.
Where the three legs are
the patient, the provider,
and the payer.
Change Healthcare has a number of tools
that help the providers and the payers
communicate throughout
the continuum of care.
Those tools include, like you'd mentioned
at the beginning of a continuum of care,
the scheduling of a procedure
and the insurance verification
of that procedure.
Well, there's technologies
that Change Healthcare employs,
as well as other vendors,
that allow the hospital
to verify insurance and to also check
how much patient
responsibility you may have
in order to provide you
an accurate estimate
of how much these services
are going to cost you
at the end of the day.
And those tools, those technologies
are across the entire continuum of care.
So let's say your
visit's already scheduled
and you're going in,
and you're having a procedure
that will require you to be inpatient.
Well, there's also tools
that Change Healthcare has
that allow the provider and
the patient to communicate
during your continuum of care.
So making sure that the
level of care is agreed upon
and things of that nature.
And then finally, once
your your episode of care
is complete, the provider
will prepare a claim
in order to send to your insurance
in order to get paid for the services.
Well, the clearing house that
many have heard in the news,
that is really the pipeline
by which the provider
sends the claim over to
the payer for adjudication
or for processing, so that
ultimately payment can be made
to the provider, and
then patient statements
can be sent over to the patient
for any patient responsibility
that may be there.
- Matt, that's a great opening.
So let's now look at what's
happening on the ground
because of what I described here
as this technological
explosion that took place
in the clearinghouse Healthcare Change.
You at Kodiak have a
direct view of claims data,
at least for hospitals,
and can give us some
sense of real numbers here
as to what's happening.
I will do something here
that I don't usually do
in our podcast, because
we like to think of them
as being evergreen into the future,
but I think it's important to say
that today is March 20th, 2024
and the numbers will
change on a daily basis,
but I think it's important to establish
what the hit has been
from this hacking event.
So give us a sense of what
your numbers say today,
and we'll probably be on
air starting next week,
but I think these numbers are something
that's important to get on the table.
- Absolutely Chip, and I'd
agree this situation is changing
day by day, but to share with you
a bit of what we're seeing to date.
So really the disruption
began on the 21st of February,
and as I mentioned, within our data feeds
of the 1800 plus
hospitals, we also receive
a daily feed of 837, this is claims data,
and 835, which is remittance data
from the payer to the
provider in terms of payment.
When we look first at the claims data,
we see a steep drop off.
So generally within our dataset,
we have about $32 billion
worth of claim charges
that get sent from the
provider to the payers
on a weekly basis.
After the 21st of February,
on a weekly basis,
we've seen that number dip
down to the low twenties,
so about a decrease of $10
billion on a weekly basis.
Now, payment rates vary
by payer and provider,
but a conservative estimate
there is you get paid
about 20% of the total
charges on a given claim.
That's an estimate.
That would indicate about a $2
billion impact on cash flow.
And what I mean by that
is how payers usually,
or how providers usually get
paid is you send a claim in
and in about 15 to 30 days,
about 85% of those claims
will remit a payment
to your organization.
So we've seen a pretty
steep decrease initially
from 837s, and we're now
seeing the very same thing
happen on the 835s, or the
payments back into organizations.
And so that's really been our main focus
in terms of supporting
our benchmarking clients,
is really feeding them the
information of what we are seeing
and what we model that cashflow impact
for them to be down the line.
And that's really, as you put it earlier,
the end of the beginning.
I can put it a little less
eloquently than you did there.
- That's helpful, Matt.
And just to put an
exclamation point on it,
we are just talking here
about the slice of hospitals
that you work with.
So without knowing the
precise number, I assume,
what portion of the total
pie do you think this is,
just sort of seat of the
pants, if we then projected it
to the entire system of
hospitals, and doctors,
and other providers?
- I think conservatively,
I'd say it's about 20%
of all hospitals out there.
So you could take the numbers
that I was quoting there,
the $10 billion drop in overall claims,
$2 billion in cash flow impact,
and multiply that by five,
they'll have about a $10 billion impact
across the entire system
if proportionally they have
utilized the same tools
as our slice of the pie.
- So clearly, Matt, the
hospitals and physicians
couldn't just sit and wait for United.
So many of them have workarounds
that they've undertaken,
and even United Healthcare Group itself
has its own workarounds and
has opened up a new platform
that's different from Change,
but which does most of the
basic functions of Change.
So these workarounds mean that
claims are being submitted,
but it's not that simple.
And can you sort of explain why the fact
that claims may be beginning to roll,
that that's only a part of the total story
that gets us ultimately to the payment
that hospitals and doctors depend on
to provide the care that they do
for serving their patients?
- Let me first say, I
think, as of March 20th,
I think one encouraging sign
is just the amount of movement
that we've seen, and how proud
I am of many of our clients
in terms of how they've
rallied as organizations
in order to find workarounds
and different ways to get
their claims over to the payer.
And in many cases there's
also technology vendors
out there trying to help and
kinda get these claim volumes
back to where they need to be.
The challenge is, although we
can stand up a new solution
to get claims over to
payers in a matter of weeks,
oftentimes these clearing
house implementations
are months long, because they require
a significant amount of
testing and making sure
that the right edits are in place.
So the way that, to use another analogy,
one of the main values of leveraging
these clearing house vendors is,
within their technologies,
they have the edits
within those tools to
help a claim get through
the two doors of a payer's
claim processing system.
So the way I usually kind of
have clients visualize this
is a payer usually has,
they'll have the storm door,
which is the initial line of edits,
and then they have
their actual front door.
And tools like Change
Healthcare's clearing house
and other tools out there,
their core competency is by
maintaining those sets of rules
so that claims can cleanly be processed
into the adjudication tool.
As technology has grown across
the continuum of healthcare,
both payers and providers
leverage a lot of technology,
a lot of logic based rules
in order to process claims.
So just getting a claim
form to the front door
of a particular payer doesn't mean
it's just simply going to process there
and get paid cleanly.
So there's a lot of things
to be on the lookout for
over the next few months,
including an increase in
denials and challenges
such as that.
- Frankly, we're already
seeing a significant increase
in rejections as well
as denials of claims.
How long will it take, do you think,
to get over this hump in
any kind of reasonable way?
And is there a difference between
hospitals and doctors here
in terms of being able to
overcome these problems
from this standpoint?
I know you work mostly with hospitals,
but are we gonna see
the whole thing solved
in a matter of weeks or is
this gonna go on for months?
- I think easily it will
be a matter of months
before all of this is cleaned up.
So right now I think the initial focus
for many health systems out there,
and I'm sure for physician groups as well,
is to return their claim volumes
and their claim dollars back
to normal operating numbers.
How do we get the overall
benchmarking claims
back up to $30 billion a month
as we saw prior to the issue?
So that's problem number one.
Let's get the pipeline back flowing.
Once that's done though,
we're going to have
a significant amount of cleanup.
There's going to be claims that,
because they weren't billed on time,
maybe will receive timely filing denials
or other denial reasons.
In addition, these claim
rejections have skyrocketed.
Those claim rejections often
require manual intervention
in order to clean the claim up
to get it passed into the system.
So there's a significant
amount of manual workload
that will have to occur.
And I'm sure as these
denials start to flow in,
there's going to need to be
reviews between the provider
and the payer to ensure
that there are no inappropriate
denials that are occurring.
Right, no lost revenue
at the end of the day.
- So it's not just
providers and physicians
that we're talking about here, is it?
This is gonna have an
effect on patients too,
don't you think?
- It 100% will.
So oftentimes, for any
listeners out there,
you may have experienced
this in the past as well,
you have an episode of care,
and then two, or three, or
four months down the line
you're thinking to yourself,
oh, I never got the bill
for that episode of care.
Well, I wonder why that is.
Well, I think with this
slowdown in claim adjudication
with the payers, that feeling
is just going to be amplified
across the market, right?
Generally, you're not
going to get your statement
until the insurance has
fully adjudicated your claim
so that the provider knows exactly
what your patient responsibility is.
And now with this uptick in denials,
and this delay in getting
claims out the door,
there's gonna be a greater
delay in those statements
going out to patients.
So I would also be wary of,
when you do receive those statements,
if something doesn't look right,
make sure to call your provider,
make sure to ask questions
to make sure that during
all of this cleanup,
all of these increased denials,
you're not being charged
for something that may not be appropriate.
I'm not sure that will happen,
but that is a risk for us
here in the not too distant future.
- At some point we'll get
back to status quo ante,
we'll get back to a point at which things
are operating appropriately.
But in some ways a hack
like this does great damage,
but things always could have been worse,
and it is a wake up call.
So now that this has happened,
and has affected so much of
the healthcare ecosystem,
how do you think things
will change going forward
in terms of patients, in terms
of providers and physicians?
What do you recommend
and see people doing differently
with now having been
burned in this process
by what happened to healthcare change?
- What I think should happen,
at least initially is,
especially for those clients
who may not be directly impacted
by the change healthcare cyber attack
is really an understanding
that this cyber attack
hit an achilles heel
for our healthcare system.
So these clearing houses,
these direct connections
to the payers, when all of
our claims, 100% of our claims
are flowing through one pipeline,
we're at significant risk
because we don't really have
a redundancy of said pipeline.
So even if you're not
initially impacted by this,
I would hope healthcare providers
are looking at adding redundancies
into their claim delivery models,
potentially even calling
on the payers and providers
to leverage this as an opportunity
to work together to create
more direct connections
between healthcare
providers and payer systems,
so that an attack on one particular entity
doesn't bring down a good
portion of our healthcare system.
And I think there's opportunities
and technologies in place to do that,
and really leverage this
as a learning opportunity
to build more redundancy
and add more risk mitigation
into strategies like leveraging
multiple different technologies
across your payer mix
in order to reduce the
risk of one of these hacks
really bringing down the whole system.
- I'd like to ask one more question
just to make sure we put
another exclamation point on it.
That one, there are
providers and physicians
that probably haven't done
the workaround successfully
and literally are not getting paid
for the services they're providing.
And even those that have
the submissions flowing,
I think it's important
to sort of communicate
to our audience what the effect
of rejections and denials is,
and also look at the gap that will appear
between the time that
submissions leave the computer
of the provider or physician,
actually arrive through a clearing house
into an insurer's computer,
and then the time lag between that,
even if it's a claim that's gonna be paid
and will ultimately be paid.
I think there's either no
money or there's a gap,
and people need to understand
that, don't you think?
- Oh yeah, absolutely, and I
think that's the importance,
the challenge that healthcare
organizations are facing today
and why the focus needs to be,
how do we get claims out the door
and into these processing buckets?
Why that's the number one priority today
is just how quickly those
claims turn into cash.
So as an example, one of
our benchmarking clients
actually just last week,
so week ending, I believe the 16th,
they saw their cash deposits drop by 67%
over what their traditional
weekly cash deposits were.
Now to put that into perspective,
if any of us had our
paycheck cut by two thirds,
we'd have to make a lot of tough decisions
relatively quickly.
And so that's the importance
of getting this cash flow
back up and running is to
really get that cash in the door
and to allow providers to get back
to what their core duty is,
and that's take care of patients, right?
It's difficult to do that
when you don't have the cash
to operate normally.
- Matt, that's just been so helpful,
all that you have told us
today about this problem,
and trying to boil it down to something
that even I can understand,
or those in our audience can understand
who are not involved so sort
of intimately like you are
with this process, that
continuum really of patient care.
From that first eligibility determination,
from making an appointment,
all the way through the process
to having a bill payed by an insurer.
So thanks a lot and we really
appreciate you being here.
- Thank you Chip, I really
appreciate the opportunity.
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- Thanks for listening
to "Hospitals in Focus"
from the Federation of American Hospitals.
Learn more at FAH.org.
Follow the Federation on
social media @FAHhospitals
and follow chip @ChipKahn.
Please rate, review and subscribe
to "Hospitals in Focus."
Join us next time for more
in-depth conversations
with healthcare leaders.
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