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Improving Cash Flow
Health Data Management Magazine, June 1, 2008
Lamenting the current state of collections in health care, I.T. consultant Steven Lazarus recalls his personal experience. “I just went through outpatient surgery, and I was never asked for a dime during the whole process.”
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So any discussion of how to use information technology to improve collections has to be preceded by the acknowledgement that, first and foremost, hospitals and clinics must make sure they have efficient revenue cycle management processes in place.
Collecting money from patients is becoming increasingly important as deductibles, co-payments and co-insurance amounts continue to rise. Providers could see their bad debt levels skyrocket as more of their patients face higher out-of-pocket expenses because they are enrolling in consumer-driven health plans and other new managed care offerings, Lazarus says.
As a result, some organizations are placing particular emphasis on estimating bills in advance of service and asking for payment upfront–a concept that’s common in other business sectors but somewhat revolutionary in health care. And they’re relying on I.T. to help them make accurate estimates.
In addition, they’re using technology to make it easier for patients to make payments over the phone or establish payment plans. They’re also using improved collections software to prioritize accounts for collectors.
Back To Square One
Some provider organizations are going back to the drawing board to re-engineer all their revenue cycle processes before selecting new technologies to help improve cash flow. But this effort can be extremely time-consuming.
For example, Christus Health, a 40-hospital Catholic system based in Dallas, has spent the last 3.5 years reinventing revenue cycle management at just one of its hospitals as a prelude to a system-wide rollout.
“This project involves taking a look at the revenue cycle from beginning to end and redesigning it to take out the waste and inefficiencies,” says Jay Herron, senior vice president and CFO. “We’re trying to design the processes first, and then bring in the technologies as an enhancement, not as a driver.”
Steps taken so far include rebuilding the revenue cycle organizational structure to more closely integrate patient financial services with pre-admission and health information management; create metrics for measuring improvements in cash flow; and rolling out new processes for every step of the collections effort.
Working with Marjorie Green, president of the Overland Park, Kan.-based consulting firm Healthcare Excellence Institute, Christus Health concluded that no commercially available collections software would meet its needs. The software lacked the robust algorithms needed to carefully prioritize accounts for collectors, Green contends.
“You don’t want to give collectors flexibility,” the consultant says. The software she helped Christus develop shows collectors precisely which account to work on next, based on a long list of factors.
Green is helping Christus apply quality improvement principles, such as those used by automotive giant Toyota, in improving revenue cycle management. Too often, health care organizations fail to attempt to collect from patients at the time of care, fail to prioritize accounts for follow-up and fail to resolve issues with payers in a timely way, she laments.
“What I’m seeing here are the kinds of things we saw in the manufacturing sector a couple of decades ago,” the consultant says.
Rather than taking a c isis management approach to improving cash flow, hospitals need to “do a careful analysis in excruciating detail to figure out their problems,” she contends.
“Our challenge is that anyone who’s worked in the health care revenue cycle before has preconceived ideas about how things should be done,” says Herron, Christus’ CFO. “When we bring them into a new process, they want to make it familiar like it was.”
As a result, he stresses, changing the culture of the business office requires a great deal of patience.
Capitalizing On I.T.
Another multi-hospital organization determined that adopting a few new technologies could make a world of difference in its cash flow. The five-hospital Health Alliance of Greater Cincinnati hired Doug Gardner to head the effort. He previously spent eight years in the banking industry working on retail collections.
“When I got here, I found that the health care industry was far behind in both technology and processes,” says Gardner, director of patient financial services. “It made the transition very simple for me, because I was able to bring strategies and processes from the retail side to the health care side.”
For example, Gardner implemented software from Ontario Systems LLC, Muncie, Ind., to help revamp the collections process. The hospitals in the integrated delivery system create a guarantor number for each person responsible for payment, and then create separate account numbers for each visit. Before implementing the new software, collectors would make calls account by account, rather than working multiple accounts pending for each guarantor. Discussing multiple accounts on one phone call with all necessary information easily accessible “was revolutionary for us,” Gardner says.
The software includes an auto-dialer system that screens out busy signals and leaves messages when answering machines pick up. “So we were able to accelerate the amount of calls we could make in a week from 3,000 to 13,000 guarantors,” the patient financial services manager says.
The hospitals also had spent $500,000 a year to outsource the creation of payment arrangements for self-pay accounts. “We now use the Ontario software to build logic to manage our own payment arrangements in-house,” Gardner says.
The organization also formerly outsourced collections of all bills of less than $1,000 because of a lack of staff. By improving staff efficiency, it eliminated the need for this outsourcing, saving $1.5 million a year.
Health Alliance’s self-pay collections have grown from $19 million in 2003 to $34 million in 2007. Nevertheless, winning the support of senior executives for investing in the Ontario software was a tough task, Gardner notes.
“The challenge in most health care systems is that CFOs can’t get past that initial cost to identify the potential return,” he argues. “The challenge is that money typically goes to attracting new patients or to clinical technology. The back-office systems aren’t recognized as a good investment. But when you embrace this technology, you can make a lot of money and save a lot of money.”
Health Alliance paid for its software and hardware investment, which totaled less than $1 million, within six months with improved collections from patients, Gardner notes.
To make it easier for patients to make payments, the organization uses SpeedPay software from Western Union, Greenwood Village, Colo. Using the software, collectors can take payments from checking accounts or credit cards over the phone for full payment or as part of an extended payment plan. “If a patient is willing to give you checking or credit card information, those extended payment plans won’t go bad,” Gardner contends. “If a patient says, ‘I’ll mail you $50 tomorrow,’ 50% of the time they don’t.” The hospitals also use the technology on a Web portal."
Making Payments
Accepting payments by phone in advance of treatment a so helped a seven-hospital delivery system in Memphis boost collections from patients.
“When you process as many registrations as we do, on average 44,000 a month, your intention has to be to pre-register every patient possible,” says Jessica Murphy, administrative corporate director for patient access services at Methodist LeBonheur Health Care. “You cannot have that many people showing up at the front door and waiting to be registered. Handling a majority of our registration work by phone, we also wanted to be able to take care of collections at that time.”
Patients generally are more willing to pay their share of health care bills before they arrive than they are weeks after treatment, Murphy contends. “They perceive that it’s best to get payment behind them.”
In 2007, the organization collected $6.7 million from patients at registration. One key factor in this success, Murphy stresses, was to provide patients with an accurate estimate of the amount they owe.
The seven-hospital system gets much of its business under two large managed care contracts. So it can estimate with some certainty the maximum amount these payers will cover, Murphy says. Then it uses the two payers’ Web sites to verify benefits, determine deductible amounts remaining and estimate co-payments.
Methodist still uses a 24-year-old self-developed patient accounting system plus a contract management system from Thomson Healthcare, Stamford, Conn., and a claims scrubber from Xactimed, a unit of MedAssets, Atlanta. “We rely on every source of electronic data we can find” to provide patients with good estimates of the amount they owe, Murphy says.
When arranging for payments from patients treated in its emergency department, Columbus (Ind.) Regional Hospital uses a service from TransUnion LLC, Chicago, to access their health care credit scores. Using the vendor’s health care revenue cycle platform, the hospital verifies the accuracy of the patient’s address and Social Security number and then accesses a credit score that indicates the likelihood of payment for health care bills, says Susan Rust, director of revenue cycle for the 225-bed hospital.
If patients have a high score, the hospital proposes a short-term payment plan for their self-pay balances. Those with mid-range scores are offered a longer-term payment plan, while those with lower scores are referred to government programs such as Medicaid or the hospital’s charity care program.
Missing Link
Some hospitals seeking to improve cash flow are finding that they’re missing an important link in the revenue cycle chain: specialized software to support the work of collectors.
For example, two-hospital Methodist Health System in Omaha, Neb., is using three applications from Accuro Healthcare Solutions Inc., Dallas, accessing them through the application service provider computing model.
One Accuro application prioritizes accounts for collectors. “It empowers managers to focus on target areas of their choosing so we can get cash in the door,” says Barbara Copeland, manager of charge services and systems support.
Another application analyzes payment history to identify underpayments based on contract terms, giving collectors the information they need to seek additional reimbursement.
The third application helps collectors estimate patient self-pay amounts in advance. Since implementing the application at one hospital late last year, collectors have been generating $35,000 a week in additional cash flow upfront. “So we are hiring some patient financial counselors to increase our volume of contact with patients ahead of time,” says Bob Wagner, Methodist Health System’s director of revenue cycle.
The 700-bed Halifax Medical Center in Daytona Beach, Fla., is using an application from Boston Software Systems Inc., Sherborn, Mass., to speed up the gathering of data to support collections for physician billing, which it formerly outsourced.
The software automatically applies a aged care contract terms and sends information to appropriate collectors so they can more accurately estimate what a patient owes, says Kim Scaccia, a systems administrator.
The Cleveland Clinic uses a specialized application from Tableau Software, Seattle, to analyze payment denials to detect patterns, displaying the results in easy-to-read charts using what’s known as data visualization technology, says Josh Berman, senior manager of electronic claims and denials.
For example, the software determined the five most common reasons for denials from Medicare HMOs, pinpointing the billing issues that the organization needed to resolved.
Although technology can play a critical role in improving cash flow, too many organizations mistakenly conclude that it can solve all their problems, argues Courtney Hoagland, partner in the health care practice at the Chicago office of Deloitte LLP.
“I see it time and time again. A hospital buys technology but does not redesign the processes, does not match technology to their business needs, does not provide adequate training and does not add accountability for measuring performance,” she says. “These are all management basics.”
This is the second in an in-depth, three-part series on revenue cycle management. Part three, on business analytics, will appear in the November issue. Health Data Management is also running three other series this year on CIO issues (see page 44), point-of-care technologies and EMRs, EHRs and PHRs. These series represent our effort to provide insightful, concise and timely information to our readers on the technology and business issues that shape their strategic initiatives.
-Greg Gillespie, Publisher
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Experts Offer Revenue Cycle Tips
One key step to improving cash flow, many experts say, is to provide patients with an accurate estimate of their out-of-pocket expenses at registration–and then ask for payment.
“Providers need to educate patients upfront about payment expectations,” says Steven Lazarus, president and founder of Boundary Information Group, a Denver, Colo.-based consulting firm. “They need to alert patients that they’ll owe money, spell out the payment options they’ll accept and explain all this to them early.”
Providing financial counseling before patients arrive is becoming increasingly critical because patient self-pay portions of medical bills are skyrocketing, Lazarus and other experts say.
Many technologies can play an important role in this process, including verifying insurance eligibility and benefits through payer Web sites, multi-payer portals or other options (see story, page 66). Plus, more providers are using specific applications, such as contract management systems and collections software, to provide patients with far more accurate estimates of patients’ share of their bills.
“The focus of providers has to shift to the front end of the process, ensuring to the greatest extent possible that patients understand their financial responsibilities and then setting up a payment mechanism for them,” says Jim Moynihan, a long-time revenue cycle consultant who’s now senior vice president at U.S. Bank Healthcare Payments, Agoura Hills, Calif.
Registration staff members at hospitals and clinics need better access to the terms of managed care contracts to provide accurate self-pay estimates, he stresses.
And providers be able to accept payments at all points of patient contact any time in the revenue cycle, he adds.
One of the biggest challenges in estimating bills is precisely determining co-payment amounts, says Courtney Hoagland, partner in the health care practice at the Chicago office of Deloitte LLP. Sometimes payer Web sites lack such details as whether a plan covers 100%, 90% or 80% of a bill after the deductible is met, she notes.
And too many hospitals, she contends, fail to prioritize accounts for collectors. “The highest return cases should be worked on first,” she notes.
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Group Practices Face Their Own Challenges
For group practices, a big challenge in the collections arena is making sure their thousands of claims contain all the right information to ensure payment.
Many clinics rely on technology partners to scrub claims, using software that pinpoints whether any data is missing, incorrect or listed in the wrong place.
Family Doctors, a nine-physician practice in Swampscott, Mass., relies on athenahealth Inc., Watertown, Mass., to handle most of its collections tasks. Athenahealth applies scrubbing software that it updates daily with the latest information from payers, says Peter Barker, M.D., the practice’s medical director. “If we send athenahealth a claim with a diagnosis code that’s inappropriate, they flag it and send it back to a hold bucket with an explanation that it will be rejected by the payer,” he explains.
In the two years since it implemented the athenahealth collection service using the application service provider computing model, the practice has seen its days in A/R decline from more than 40 days to less than 30 days, the physician says.
Similarly, Charleston (S.C.) Cancer Center relies heavily on claims scrubbers from its vendor, Misys Healthcare Systems, Raleigh, N.C. (Misys is merging with Allscripts LLC and moving its headquarters to Chicago.) When the three-physician practice sends claims to the Misys Payerpath claims clearinghouse unit via the Internet, they’re immediately scrubbed to make sure they’re complete and accurate. “Clinics have to use every technology available to them to get claims paid appropriately and quickly,” says David Handy, CEO.
Another clinic is using in-depth reports from its billing outsourcer to analyze its business processes and make corrections.
Opthalmology Associates, a 13-physician practice in Fort Worth, Texas, relies on MedSynergies Inc., Irving, Texas, for its collections via the ASP model. The vendor’s claims intelligence system provides the clinic with reports on claims denials from insurers, rejection reports from clearinghouses and other information, says Johanna Jones, practice administrator. Reports also identify, claim by claim, the reasons behind the rejections, such as missing information or wrong identification numbers.
“The reports will tell us who last touched the information here so that we can go to that employee and train them on how to correct their procedures,” Jones says.
Estimating Bills
Like hospitals, many clinics have concluded that they need to provide accurate estimates of self-pay amounts to patients so they can collect more money upfront, especially from those enrolled in consumer-driven health plans.
“Fewer and fewer patients have deductibles of $500 or less; that’s becoming the exception,” notes Twyla Fuertes, business manager at Texas Orthopedic, Sports and Rehabilitation Associates, a 14-physician practice in Austin.
“We now verify benefits for all our patients before they arrive here, and the majority have a $1,000 deductible or more.”
The clinic uses software from MPV Inc., Austin, Texas, to estimate patients’ out-of-pocket expenses in advance of treatment. Its days in A/R have dropped to 28 from more than 40 in the last three years.
“Most patients understand why we want money upfront. Dentists have done it for years,” Fuertes notes. “Only about 5% raise concerns about it. Many appreciate having the information rather than getting a surprisingly big bill after the fact.”
(c) 2008 Health Data Management and SourceMedia, Inc. All Rights Reserved. http://www.healthdatamanagement.com http://www.sourcemedia.com
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