Second Pass Reviews, New AI Technology Will Support Hospitals’ Financial Performance During Hard Times | By Michael Gao, Founder & CEO, SmarterDx

Healthcare systems have faced significant challenges in recent years.

The COVID-19 pandemic accelerated the trend of medical care outside of traditional hospital settings, leading to a decrease in patient volumes. Additionally, personnel shortages and structural issues have caused a steep rise in operating expenses. According to a January 2023 report by Kaufman Hall, hospitals on average were only able to achieve one month of profitability throughout the entire year.

Hospitals face significant financial challenges, especially during difficult economic times for everybody. To overcome these challenges and thrive, hospitals need solutions that can generate revenue and profits without requiring a substantial upfront investment in capital or staff.

Chief Financial Officers should be selective when choosing vendors and look for solutions that meet three essential criteria: they should complement existing systems, generate new and verifiable revenue, and come with little to no risk.

By investing in solutions that meet these criteria, hospitals can maximize their revenue potential while minimizing the risk of costly and disruptive changes to their existing infrastructure. Such solutions can help hospitals weather difficult times and ensure their long-term viability.

Hospitals can now achieve major margin improvement by introducing essentially a new software product category: second pass reviews.

Second pass reviews allow hospitals to conduct an additional documentation and coding review at the Prebill stage, after their existing processes have been completed, but before the final bill is sent out. This supplementary review augments existing Clinical Documentation Improvement (CDI) and Coding processes and is essential for ensuring that all potential revenue and quality gains have been fully captured.

Historically, the challenge with second pass reviews has been staffing. Manual re-review can be time consuming and thus low ROI. Some hospitals have addressed this by looking at just a small slice of “high priority” charts through services vendors or internal processes, but this leaves the majority of potential opportunities uncovered resulting in lost revenue.

In response to this, proprietary AI technology has been created to see the entire clinical picture. It can process data from labs, meds, orders, notes, radiology, and other chart sources, and automatically detect specific findings (not just charts, but exact diagnosis opportunities) for staff. This effectively allows CDI and Coding staff to “peek into” every chart to ensure all relevant revenue and quality-impacting opportunities are identified.

Hospital leaders might assume that these findings are marginal, but its impact has been much more substantial than anticipated. Margins represent only a small proportion of a hospital’s revenue, but even a small improvement in documentation and coding accuracy from 99.6% to 99.9% can lead to a significant increase in margin. By leveraging the AI technology to uncover previously missed revenue opportunities, hospitals can achieve a substantial boost in their financial performance.

The increasing trend of payors implementing cost-containment programs prompted the creation of AI technology designed to help hospitals identify missing diagnoses and patterns in clinical care.

These algorithms are intended to assist hospitals in navigating the complex landscape of cost-containment programs and recoup lost revenue. The technology is designed to avoid the practice of “upcoding” to increase revenue and is validated by a team of physicians to ensure that it reflects genuine clinical management.

The new technology has been quickly adopted by a wide array of hospitals, from small community hospitals to large health systems and even elite academic medical centers. This technology has increased the overall margin of each hospital by millions of dollars.

AI technology is an ideal solution for CFOs who are looking to improve margins without taking on additional risk. It comes after existing CDI and Coding processes and software, bringing in new revenue that is fully attributable. Moreover, it is zero risk, offering contractually guaranteed margin improvement. By investing in this technology, hospitals can achieve long-term financial sustainability while improving the quality of care for their patients.

Michael Gao Bio

Michael Gao, MD, is an entrepreneur on a mission to revolutionize healthcare operations through the use of AI, with the goal of eliminating the $1.1 trillion spent annualing on overhead and administration.

Prior to founding SmarterDx, he was the Medical Director for Transformation at NewYork-Presbyterian Hospital, where he led applied AI development, implementation, and strategy for the health system. He holds faculty positions at the Icahn School of Medicine at Mount Sinai and Weill Cornell Medicine, and has advised other health systems, such as Northwell Health, on data engineering strategy.

Dr. Gao completed his internship and residency in Internal Medicine at NewYork-Presbyterian. He received his M.D. from the University of Michigan, where he was honored with one of five Alpha Omega Alpha awards for service leadership nationally. and his B.S. from the University of California Los Angeles, where he developed and published Bayesian statistical models for various genetic disorders.

In addition, Michael Gao has founded several organizations, including the design firm High Concept Designs, and two nonprofits – the Student-Run Free Clinic and Findcare (Zocdoc for patients without health insurance). He served as both CEO and founding engineer for Findcare and scaled it across five states.

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