Lucile Packard Children’s Hospital Boosts Revenue with Sunrise Decision Support™

Identifying and resolving underpayments is essential for the financial well-being of any healthcare provider. Yet the task requires both advanced analytics tools and intimate knowledge of in-house operations. Despite significant investment in outsourced underpayment analysis services, Lucile Packard Children’s Hospital’s (LPCH) continued to lose revenue to underpayments. Today, thanks to the advanced analytic capabilities of Eclipsys Sunrise Decision Support, LPCH’s in-house team is tracking the variances between actual and expected payments and maximizing revenues beyond expectations.

In 2000, Mary McIntyre, RN, director, DSS & Clinical Analysis, decided it was time to expand the use of the hospital’s core analytics solution: Sunrise Decision Support. Since 1993, LPCH had been using Decision Support for flex budgeting, clinical analyses, and patient-level database analyses, but McIntyre believed the organization could also use the solution to improve underpayment analysis. At the time, the job was outsourced, limited in scope, and costly. Many at LPCH believed that the process was sufficient, yet McIntyre was able to convince management otherwise.

“I knew the product had phenomenal capabilities,” said McIntyre. “I also knew that our neighbor, Stanford Hospital, had implemented the revenue management module, and they were extraordinarily successful in identifying underpayments.”

A Contract Methodology for Complex Times
In early 2001, McIntyre and LPCH’s IT department started setting up an underpayment analysis system with Patient Financial Services (PFS), and created a daily processing system and a payment-post-interface. In August of 2002 they implemented Sunrise Decision Support’s revenue module. The system enabled PFS analysts to scrutinize more payers than in the past, and they soon started identifying more underpayments. Still, McIntyre believed they could do even better. The problem, she realized, was that LPCH’s contract methodology hadn’t kept pace with the growing complexity of the contracts, which often included intricate stop-loss provisions.

In 2004, with the help of Eclipsys Consulting Services™, McIntyre upgraded the LPCH methodology with new sections and terms. “We changed how net revenue was calculated,” said McIntyre. “The newer methodology allowed us to do analysis between payers, so we could see which contracts were particularly profitable.”

Proactive Payment Analysis
With the upgraded contracts in place, the underpayment analysis project produced significantly more underpayment identifications. Today, Hamid Barakzai, PFS Team supervisor, oversees a team of four analysts to review potential underpayments by LPCH’s top 15 payers. Sunrise Decision Support’s sophisticated variance reporting capabilities allow the team to accurately compare actual versus expected revenues, even in cases with complex stop-loss provisions and case rates.

“We identify whether it’s a case-rate underpayment or a stop-loss issue, and we can filter it by account type,” said Barakzai. “It’s very flexible.” Sunrise Decision Support also processes the adjudication letters to send out to the payers, clearly delineating the issues to help expedite resolution and payment. In addition to boosting collections, Sunrise Decision Support helps the team head off future underpayments by amending the contracts based on payment trends.

The Benefits
Between August 2002 and April 2006, LPCH identified $49 million in underpayments, collected $27 million of that amount, and saved $6.5 million in outsourcing costs. Sunrise Decision Support is greatly improving the organization’s cash flow, said Jane Sasur, administrative director, Financial Planning & DSS. “The risk of not receiving payments is that you’ll need to dig into your reserves, so it makes it much riskier if you don’t collect,” said Sasur. “Because we now have greater confidence in our future collections, we don’t need to maintain such a high level of reserves.”

Sasur and McIntyre continue to expand the use of Sunrise Decision Support throughout LPCH. “Decision Support is really quite central to the organization,” said McIntyre. “We run over 200 indicators which are used pervasively, and our flex-budgeting numbers are published in the general ledger each month.” The system, which is remote-hosted by Eclipsys, is also used for LPCH’s state regulatory and external submissions and analysis of clinical-population profitability, and it will soon be the center of a new IT audit-tracking application.

“The most impressive thing is that Sunrise Decision Support provides access to information from across the enterprise and integrates it in a comprehensive manner,” said McIntyre. “It really ties it all together for us.”