5 Silent Areas of Leakage (and How They Could be Costing your Organization Millions)

James Muir
By: James Muir
Date: August 07, 2017

In part one of this two-part series we’ll look at the five silent areas of revenue leakage and why they occur. In next week’s post we’ll share insight on what to do about them.

Have you ever discovered after you got somewhere that you forgot your keys?  Or your phone? Or an important document?  I have. In fact, I’ve managed to get to the airport several times without my identification, requiring some deft maneuvering to make my flight.  It’s easy not to discover these things until it’s a crisis.  Let me share a more dramatic example.

My mother who is in her 70s has experienced years of fatigue and lightheadedness.  One visit to her physician they decided to run some tests. The results revealed something shocking. “You’ve had a heart attack,” her doctor said. “And you didn’t even realize it, but that’s the cause of your fatigue and lightheadedness and you’ll need a pacemaker to address it.”

How could you have a heart attack and not even know it?  How could my mother have suffered from years of fatigue and lightheadedness without knowing that was the cause?  While our family still marvels at it, we’re mostly glad her doctor discovered it and did something about it.

So what’s this got to do with ERP and EHR integration?

Here’s the point – when the cause isn’t obvious it’s easy to miss when something may be going wrong.

There are many things that sneak up on us in business and in health without us even realizing – because we’re not connecting the symptoms. Through my recent work in the area of ERP and EHR integration I’m about to share one of those and that is that the lack of supply chain integration between ERP and EHR is a source of revenue loss for healthcare providers.

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Five Silent Areas of Leakage

The five big leakage areas between ERP and EHR include:

  1. Materials Management Between ERP and EHR
  2. Documentation Optimization
  3. Inventory Depletion/Reconciliation
  4. Charge Generation
  5. Decision Support / Analytics / Business Intelligence

Material Management Between ERP and EHR

The most common leakage area is Materials Management between ERP and EHR. When the ERP system doesn’t feed the EHR both systems are required to be updated manually.  This often causes a situation where a clinician cannot find a supply. That forces them to use a “one-time” item create to complete documentation for a procedure. There’s basically no way a complete supply item record can be created at this time so it will have to go into a queue for others to fix before it can be charged to the account. Both steps increase HR costs which increases costs in general.

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Because “one-time” creation was used, we end up down another path where we see the effects of incomplete and inaccurate data. Depending on whether we’ve have incomplete or inaccurate data in our supply, we end up with a documentation quality issue. This can result in inaccurate, delayed or completely lost charges. Of course, the selection of the right supply affects inventory reconciliation, and the net of all this is increased costs and often lost revenue.

When ERP is not the source of truth for the EHR, it requires that both systems be updated separately (a scenario that creates many of its own issues). The big challenge is that depending on the procedure and the inventory item, the item may be chargeable or not. When this is not set properly in the ERP, charges for supplies are completely lost. In the case of a Midwest academic center, just two inventory categories – sutures and implants – accounted for more than $10 Million in lost charges.

Documentation Optimization

The short version: it’s important that we get the documentation correct in the EHR right from the beginning or we get increased costs. It’s critical to make it easy for users to document the right thing.

Inventory Depletion/Reconciliation

If we don’t have integration or if we don’t document the correct supplies, then that creates inventory depletion issues and that increases costs during reconciliation. Documentation in EHR needs to send depletion messages to ERP.

Charge Generation

Generating the correct charge is a fairly complex process involving three different engines:

  1. Get the right supply to begin with,
  2. Mark the price up using a rules-based system instead of a static-based system (which can result in literally millions of records that are logistically challenging to maintain), and
  3. Assemble and submit the charge with all the appropriate linkages to other tables in the system.

When we don’t do this correctly the net effect is we don’t charge the right amounts (most likely under-charging) or even worse we don’t charge at all and that means lost revenue.

Decision Support / Analytics / Business Intelligence

When ERP and EHR are not connected neither one can be used to make strategic decisions because neither one contains the whole picture. This limits our insight and creates lost opportunities and revenue.

The Root Cause

The root cause of all of this is lack of integration between the ERP system and the EHR.

During EHR implementation tight deadlines and limited resources require extreme prioritization and supply chain integration is a low priority during this time – and rightly so.  Of course, there’s always the intent to go back and do this work but it never happens because of shifting priorities.  And in this way ERP and EHR integration quietly becomes an area of lost revenue.

Next week we’ll look at the value of ERP and EHR integration and how it can pay off for your organization.

James Muir is vice president of Business Development at Avaap, specializing in helping healthcare organizations using Epic create measurable improvements in financial and clinical performance. Using best practices developed by Avaap’s team of deeply experienced revenue-cycle and clinical Epic practitioners, James helps clients discover and execute the strategies that best improve their business outcomes.

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