Issues of disparity

Maricopa Medical Center operates the second largest burn center in the country, which requires unique supplies such as custom gowns and synthetic skin. Much like blood, the price of synthetic skin fluctuates based on supply and demand, making it difficult to ensure the item is appropriately charged. Inconsistent acquisition costs such as this were just a fraction of the problem resulting from Maricopa’s disparate chargemaster and supply item file information systems. Compounding the discrepancies between charges and costs were a large number of non-item file purchases and special ordering by the clinical staff, which circumvented normal purchasing processes and prevented proper tracking of costs. Often, special orders were priced at the department level bypassing the materials management and revenue cycle management departments all together.

Without a linkage of the supply item file and the chargemaster, updating the two systems was an overwhelming task for the materials management and revenue cycle management departments. The two departments would meet to compare spreadsheets in hopes of synching the information. Unfortunately, this limited communication between departments was not an effective means of resolving the issues. When costs for supplies increased or decreased, the charge often remained the same. Additionally, policies and procedures created to address the disparities were not followed, and an attempt to manually link the supply item file and the chargemaster proved to be too time- and labor-intensive. The result of this lack of communication was an item master containing more than 10,000 line items with no links to the chargemaster; and a chargemaster filled with incorrect charges and compliance exposures resulting from items priced well above or below the set markup.

Maricopa also faced uncertainty in its pricing strategy. While committed to moving toward acquisition-based pricing, there was hesitation in changing the markup formula because there was no way to determine the net revenue impact of a change. These issues were brought to the forefront when internal auditors visited Maricopa. The staff often heard the pricing for supplies was not right, yet they had no way to maintain defensible pricing of supplies.

Linking costs to charges

Maricopa is a healthcare safety net for citizens of Maricopa County. Many of the patients face major challenges, such as lack of health insurance, complex medical problems, and difficult socioeconomic situations. Because Maricopa provides care for all who enter its doors, it has limited cash flow and needed a solution with a strong return on investment to improve financial operations.

After conducting product research, Maricopa implemented MedAssets Net Revenue Systems’ CrossWalk product. CrossWalk automatically and continuously links the hospital item file with the chargemaster to ensure charges are based on a reasonable relationship to costs with a defensible markup. CrossWalk’s Markup Simulator offers the ability to fully evaluate multiple supply pricing strategies and model the bottom line impact.

Steve Ellis, director materials management and procurement for Maricopa, served as co-project lead with Siobhan Mee, director of revenue cycle management. The common goal was to eliminate non-file item ordering and maximize charge capture.

Ellis focused on cleaning up the item file and optimizing item descriptions using the UNSPC product classification system. Once this process was completed, MedAssets worked to map the information between the two systems.

"CrossWalk pointed out incredible deficiencies on the purchasing and revenue cycle sides of our business," said Mee. "The materials management and the revenue cycle departments were both trying to determine manually what was wrong with the data."

Continual updates and
best practices

The mapping process was able to link the majority of Maricopa’s gross revenue and exposed a significant number of non-item file purchases. Discovering non-item file purchases allowed Maricopa to integrate these supplies into the item file and become part of the normal purchasing process. To ensure procurement processes are observed moving forward, Maricopa refined its vendor access policy requiring vendors to have an appointment and a badge before they are permitted access throughout the facility. A product evaluation team was also reorganized to include senior management in the decision-making process.

Additionally, graphs on the CrossWalk dashboard, which show items that are charged below and above costs, permitted Maricopa to drill down for the details on the specific items in question. And now when prices change or a charge comes through without an item file link, the updates are made that day. This information and new data transparency provided a roadmap for improvement in business processes at the facility.

"CrossWalk has helped materials management and the revenue cycle work cooperatively," said Ellis. "We now have a common goal and are dependent on one another. There is better respect and communication because of this aligned interest."

Since implementing CrossWalk in February 2006, Maricopa has realized gross revenue impact of $2.1 million and a net revenue impact of $320,218.

"CrossWalk helped us implement best practices to efficiently resolve compliance issues and improve revenue," Ellis said. "Best practices can’t be achieved without utilizing CrossWalk or a product that works in a similar way." HPN