– 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.

– 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.