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Chapter 9 Applications: Management and Financial Systems

Health Administration Press

Learning Objectives

Describe the components typically included in an enterprise resources planning system.

Provide examples of transaction processing applications and discuss how they support financial management.

List components of the revenue cycle, describing how various components contribute to cash flow and revenue optimization.

Discuss desirable features of an automated enterprise scheduling system.

Distinguish between clinical decision support software and executive information systems.

Understand the use of computer applications as tools for research and medical education.

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Early HIT Development

Healthcare lagged behind other industries in development of administrative information systems.

Problems included undercapitalization, and management failure to oversee the development process.

Early systems deployed supported administrative operations, beginning with finance and accounting systems.

Most were stand-alone systems

Maximized functionality

Acceptable costs

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HIT System Development Drivers

Heightened competition

Increased regulation

Changing payment systems

Value-based care

Consumerism

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Legacy Systems

Early stand-alone systems that survived because functionality was important were tagged as “legacy systems.”

Integrating these legacy systems into new and evolved interconnected systems was challenging and grows ever more so.

Starting over would be “easier” but would be cost prohibitive and would be too disruptive to service.

The current goal is to purchase systems with capability to transition to integration with next-generation products.

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Enterprise Resource Planning

Bundled applications that integrate operation information derived from financial, project management, materials management, and other function-based areas into a robust database used to achieve business management objectives

Connects inventory and facilities management, resource scheduling, accounting and financial management, and other business events in a real-time environment

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Administrative Applications Incorporated in an ERP

Financial information systems

Human resources information systems

Resource utilization and scheduling systems

Supply chain management systems

Facilities and project management systems

Office automation systems

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Financial Information Systems

Timely and accurate financial information that enables managers to monitor and guide operational performance are essential.

Managing competing demands for accountability and cost containment while providing high-quality services requires sound financial management based on accurate and timely information.

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Support for Operational Activities

Financial information systems support operational activities such as:

General accounting

Patient accounting

Payroll

Contract management

Investment management

Financial systems provide information to management for directing and evaluating organizational performance.

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Financial Information System Data Sources

Transaction-processing systems for operational activities

General accounting, patient accounting, payroll, inventory control

External sources

Government statistics, inflation rates, market information

Strategic organizational plans

Contract management, investment management

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Financial Information System

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Integrated Financial Systems

Payroll preparation and accounting, linked to a human resources information system

Processing of accounts payable, linked to purchasing and inventory control systems

Patient accounting, patient and third-party billing, and accounts receivable processing

Cost accounting and cost allocation of non-revenue-generating activities and general overhead expense

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Integrated Financial Systems (cont.)

General ledger accounting

Budgeting and budget control

Internal auditing

Financial forecasting

Investment monitoring and analysis

Financial statement preparation

Financial reporting

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Revenue Cycle

All business processes and clinical activities associated with generating and receiving revenue through patient care, from preregistration or scheduling through processing payments for services rendered and follow-up on uncollectible accounts.

The revenue cycle is automated, and data capture, transaction processing, data transmission, and archiving are integrated with the enterprise information system.

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Exhibit 9.2 Revenue Cycle Components

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Revenue Cycle Management

RCM is a critical process that drives cash flow as well as overall income.

RCM goal is to make the time between service provision and payment for services as short as possible.

Efficiency of all business processes associated with generating, submitting, and processing a claim for services provided is paramount.

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How HCOs Get Paid—It Depends

A charge for the product or service based on the actual cost of resources is determined.

Chargemaster: Database that houses the descriptions of billable units and associated codes used to generate a patient bill

Negotiated prices are charged to third-party payers.

Medicare value-based payment

Rate for high volume

Preferred provider designations

Reimbursement, or the amount paid, may differ from the amount billed after application of discounts, penalties, incentives, or uncollectible accounts.

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Coding for Dollars

Charges or prices that make up a patient bill are generated from diagnostic and procedure codes that convert large amounts of text-based information to numeric codes derived from one or more approved classification systems.

International Classification of Diseases

Current Procedural Terminology

Systematized Nomenclature of Pathology

Because of the variability in medical language, and the importance of precision and accuracy, coding software is not so much automated as it is assistive to human medical coders.

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RCM Systems

RCM is a dynamic process subject to frequent and profound change as payment regulations and payer contracts evolve.

The information systems that support these processes must be dynamic as well.

Planned system updates to accommodate changes in the regulations or payer processes must be timely and comprehensive.

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Human Resources Information Systems

Personnel salaries and benefits typically >50% of the operating budget.

Data derived from multiple sources:

Individual employee data

Wage and salary records

Job classification structure

Benefit packages

Employment contracts

Source data may be owned by multiple departments.

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Human Resources Information Systems (cont.)

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HRIS Functions

Maintaining, updating, and retrieving information from a database of employee personnel records

Providing automatic position control that is linked to the budget

Producing labor analysis reports for each operating unit or cost center

Producing reports used for assessing personnel problems, such as turnover and absenteeism

Maintaining an inventory of special skills and required certifications of employees

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HRIS Functions (cont.)

Producing labor cost allocations with linkage to the payroll system

Providing information on employee productivity and quality control, assuming that appropriate labor standards have been developed

Managing employee sick leave, vacation, and other earned time off

Comparing the organization’s compensation and benefit packages with industry norms

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HRIS Reports Aid Management Monitoring

Turnover rates

Unfilled positions

Labor costs

Employee productivity

Benefits utilization

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Security Is Essential

Robust security systems and policies for accessing and updating electronic files containing personnel data and information

HRIS data is a prime target for identity theft and fraudulent access to financial information

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Credentials Verification and Evaluation

Frequently outsourced to credentials verification organization (CVO)

Careful vetting is essential.

Accreditation is preferred.

CVO verifies physicians’ and other licensed professionals’ credentials.

HCO defines practice privileges in the organization based on CVO report.

Reports from HCO clinical and administrative systems support ongoing evaluation of clinical performance.

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Resource Utilization and Scheduling Systems

Internal and external drivers for optimal resource utilization

Fixed-price and capitation payment systems compel cost containment and efficient resource utilization.

Utilization review is mandated by regulatory agencies and insurance companies.

Managers must ensure that services are available when needed and that personnel and technology are efficiently allocated and scheduled.

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Monitoring Resource Utilization

Occupancy and census rates

Clinic and emergency department activity

Operating suite utilization

Diagnostic service utilization

Advance booking / preadmission / event scheduling

Precertification

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Resource Utilization and Scheduling

Fiscal objectives:

Balanced schedules, optimal staffing, and management of resources

Capture patient insurance and billing information during the registration process, which can be matched against stored contract data to produce appropriate charge records

Link with materials management system for supply availability and re-ordering

Patient objectives:

Schedule multiple diagnostic procedures in a single day

Automated appointment reminders

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Supply Chain Management Systems

Assist healthcare organizations in more effective management of supplies and materials

Include online purchasing, electronic data interchange with suppliers, inventory control, use of barcode devices for encoding supplies and materials, and computerized menu planning and food service management

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Supply Chain Management System Functions

Requisitions for supplies and materials are electronically generated and matched against budgetary authorization.

System generates purchase orders, which can be transmitted electronically to suppliers via established data-exchange protocols.

When received, bar-coded products can be scanned and matched against an open order file.

Direct linkage to an integrated accounts payable system.

Automatic reordering of items as inventory is depleted.

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Supply Chain Management System

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Facilities and Project Management Systems

Plan, manage, and maintain physical facilities

Preventive maintenance systems, energy management systems, and project scheduling and control systems (particularly useful in new construction and remodeling projects)

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Preventive Maintenance Systems

Help extend the life of equipment and facilities and reduce costly failures. Cost savings and benefits include:

Preventing nonproductive downtime

Improving the safety of the workplace

Decreasing the risk of patient or employee injury as a result of equipment malfunction

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Energy Conservation

Important cost-saving strategy

Applications assist in monitoring routine and peak energy use, providing guiding tactics for reducing consumption

Applications can automatically lower or raise room temperatures, or turn off lights, in areas that are unused at night or on the weekend.

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Project Management

Project scheduling and control systems typically employ a combination of integrated tools to manage personnel and activity scheduling, labor and materials costs, required resources, and periodic progress reporting.

These tools are used to document:

All activities required to complete the project

Relationships of these activities to one another, including those that can be carried out simultaneously and those that must follow a time sequence

Time estimates for completing each activity

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Critical Path Tools

Data are used to create a diagram of activities that shows the critical path (longest time required) for project completion and any opportunities for concurrent or fast-tracked activities.

As activities are completed, actual completion times are entered into the calculation, and more accurate schedules can be prepared for the remaining work.

These systems are excellent tools for dynamic scheduling and control of major projects.

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Office Automation

Coordinate and manage people and workflow, link organizational units and projects, and coordinate work in the organization across levels and functions.

A variety of computing tools are used to carry out general office functions, such as word processing, email, project management, meeting schedules, and personnel calendars for work-related activities.

These functions require desktop workstations; laptop computers; or a variety of handheld devices, including tablets or smartphones.

Systems for integrated word and graphic processing, scheduling, electronic filing of documents, and message or document transmission can dramatically improve administrative efficiency and reduce the costs of office operations.

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Groupware

Collaborative software that enables sharing of information via an interactive network (e.g., a virtual workspace).

Facilitates real-time interaction among members of the group to improve problem solving and project management and supports independent work tasks.

Audio- and videoconferencing allow real-time interaction among team members.

Group members may work asynchronously on project activities while maintaining the integrity of a shared work product.

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Groupware (cont.)

Email and discussion forums

Teleconferencing

Interactive videoconferencing

Relational databases

Document editing and management, including archiving and version tracking

Group calendars and scheduling

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Information Systems for Nonhospital HCOs

Organization types that fall under the nonhospital category include ambulatory clinics; long-term care (LTC) facilities; home health agencies; physician practices; and many others, including retail clinics.

Software applications used in these settings typically include multiple modules for clinical documentation, operations management, and financial management, and an ability to share information with hospitals, health systems, payers, and regulatory agencies.

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Ambulatory Care Information Systems

Availability of powerful and inexpensive microcomputers and practice management software packages has brought this technology within the reach of even small medical groups and solo practitioners.

Meaningful use legislation and incentives to adopt electronic health record (EHR) technology have contributed to the current state, in which more than 70 percent of physicians have adopted certified EHRs.

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Practice Management System

Operations management (e.g., scheduling, reminders, billing, authorizations)

Services (email, groupware)

Claims processing

Document processing, spreadsheets, and databases

Transcription

Personnel management

Inventory management

Waste management

Energy management

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Ambulatory Care Information Systems

Clinical applications in medical practices and freestanding clinics include electronic health records (EHRs), prescription management, and disease management resources.

Patient applications—an emerging software market—include electronic communication, monitoring, educational resources, and telehealth applications.

Various vendor products offer full-service suites or selected modules based on the practice’s needs.

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Long Term Care Information Systems

The LTC sector was a late adopter in implementing computer systems, in part because software vendors were slow to develop products tailored to the needs of nursing homes and continuing care communities.

This situation changed as the scope and volume of healthcare delivered in subacute care and post-acute care facilities increased.

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LTC System Requirements

Census management

Initial and periodic resident assessments

Documentation of care services provided

Documentation of physician orders

Nutritional assessments and menu planning

Pharmacy applications

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Remote Access to LTC System

Physician usually is not physically present on a daily basis.

Remote access to clinical documentation facilitates timely intervention in an acute episode and contributes to better health outcomes.

Remote access can be achieved using various computing devices or telephone systems.

System security and controlled system access are extremely important.

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Home Health Care Information Systems

Home health care services have expanded rapidly in recent years as an alternative to more costly institutional care.

As service volume has increased and the scope of services expanded, information systems have been developed specifically to meet the needs of home care provider organizations.

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Many Providers, One Repository

Many home health agencies use laptop computers and other remote access devices for on-site documentation of patient care and for access to treatment plans and records of previous encounters.

Home health nurses and other caregivers enter information at the treatment sites and upload it to the centralized data repository.

Relevant data can be accessed during a service visit by any provider.

Goal is to reduce the amount of administrative work needed to document care, allowing nurses and home health aides to spend more time providing care and services.

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Clinical Decision Support Systems

Assist physicians and other providers in diagnosis and treatment planning.

Passive CDS systems collect, organize, and communicate clinical data for interpretation and analysis by the physician; an make clinical information, including medical history, physical examinations, and diagnostic tests, more readily available and usable.

Active CDS systems provide direct assistance to the physician in diagnosis and treatment planning; combine patient-specific data with generalized medical knowledge; may use a branching logic or rule-based structure, or a statistical probability algorithm, to suggest an appropriate diagnostic or treatment response to a clinical condition; incorporate validated clinical guidelines and treatment protocols.

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CDSS Types—Expert Systems

Expert systems contain three major components—knowledge base, patient-specific information, and inference engine. The knowledge base is matched against patient-specific information retrieved from the healthcare organization’s clinical database. A rule-based inference engine generates conclusions for consideration by the physician.

The system is dependent on the quality of the expert knowledge base and the “reasoning power” of the rules used by the inference engine.

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CDSS Types—Probabilistic Algorithms

Probabilistic algorithms employ statistical probabilities, which include a calculated element of randomness, rather than relying solely on knowledge collected from expert human beings.

Extrapolations outside an expert’s existing knowledge contribute to experiential learning.

While a consensus viewpoint among experts incorporates nonquantifiable variability, a statistical probability allows the decision maker to control the degree of uncertainty tolerated in the system’s output.

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CDSS Types—Clinical Reminders and Alerts

Clinical reminders and alerts suggest potential medical conditions or other problems that should be given attention in setting treatment plans.

Examples include pharmacy information systems that alert the physician to potentially negative interactions between two drugs prescribed for the same patient or systems that suggest certain drugs or treatments should not be employed when specific lab results contraindicate their use.

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Executive Information Systems

The business corollary to CDS systems is the executive information system (EIS).

Sometimes referred to collectively as business intelligence, EISs include systems designed to access and merge internal and external data into meaningful information reports.

Information needed from an EIS for decision support generally is not provided by standard reports. Users must be able to select the variables and data sources needed to answer specific questions, so ad hoc reporting capability is essential.

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Evidence-Based Medicine and Disease Management Systems

Evidence-based clinical practice guidelines, also referred to as evidence-based medicine (EBM), are intended to assist clinicians and healthcare organizations in standardizing decisions about the care of individual patients to achieve cost and quality benefits.

Accumulated evidence from clinical research is used to formulate statements of the “right” things to do for patients with a given diagnosis or condition.

Guidelines ensure that patients receive appropriate diagnostic tests and treatments in an efficient and cost-effective manner, and are assumed to lower treatment costs by avoiding unnecessary tests.

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Disease Management Systems

Designed to assist healthcare organizations in designing processes to provide quality care at the most reasonable cost possible.

Most are disease specific and focus on high-volume, high-cost chronic conditions such as asthma, diabetes, and congestive heart failure.

The typical approach is to involve patients in self-management of their condition and to create monitoring and feedback processes that encourage compliance with treatment plans.

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Computer-Assisted Medical Instrumentation

Virtually every piece of medical equipment used for diagnostic testing and treatment now contains a microprocessor.

The processors are used for instrument control, image enhancement, or processing medical data and interpreting the results of the testing or treatment process.

Data from monitoring equipment are stored and made available for periodic display or display on demand, enhanced through structured analysis of clinical data in accordance with programmed decision rules.

Trend data are followed to monitor changes in patient vital signs over time.

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Telemedicine and Telehealth

Telemedicine—now sometimes referred to as telehealth or e-health systems— is the application of computer and communications technologies to support healthcare provided to patients at locations remote from the provider.

Mobile computing enabled the deployment of mHealth—health-focused applications accessible to the general public. These user-friendly and low-cost applications allow patients to monitor and report health indicators such as blood pressure or blood glucose easily and conveniently.

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Telehealth Usage

A 2016 congressional report estimated that “61 percent of healthcare institutions currently use some form of telehealth,” including 40–50 percent of hospitals.

The most prevalent uses are remote patient monitoring, communication with patients, and providing counseling for patients with conditions related to cardiovascular disease, diabetes, behavioral health complications, rehabilitation, and respiratory disease.

For traditional telemedicine applications such as specialist consultation or remote diagnostic procedures, many challenges related to reimbursement for remote services, patient privacy protection, and government regulations have been impediments.

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Medical Research and Education

Information systems and medical databases are used extensively to support biomedical education and research.

Computers are an integral component of most medical research projects. Effective project design requires close collaboration among clinicians, biostatisticians, and information systems specialists. Some research projects would not be possible without the high-speed computational capabilities and data storage capacity of large computer systems.

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Medical Research and Education (cont.)

Computer-based education for physicians and other health professionals engages the students actively in the learning process and builds foundational skills in preparation for clinical training.

Computerized mannequins are used to teach clinical skills in a lab environment before health professions students are assigned to healthcare organizations for clinical practice. These mannequins also can be used in continuing medical education as a tool for testing new technologies or exploring procedure innovations.

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Takeaways from Chapter

HCOs use computers and information systems to support all administrative operations, including financial activity, human resources management, resource utilization and scheduling, supply chain management, facilities and project management, and office automation.

Information systems that support the needs of nonhospital delivery sites are pivotal to achieving data sharing required for seamless patient care.

Computers are integral components of medical equipment for instrument control, image enhancement, and medical data processing.

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Takeaways from Chapter (cont.)

No aspect of healthcare delivery or health services management is untouched by computers and information systems. The computer, in its various forms, has become a ubiquitous tool used by clinicians and managers alike.

Technological evolution has produced powerful machines whose functions are optimized through the judicious selection of software to meet business and care delivery needs.

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