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Improving Cash Flow


By Howard J. Anderson, Executive Editor 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.”

Lazarus, president and founder of Boundary Information Group, Denver, Colo., believes this situation is far too common. Many health care organizations don’t attempt to collect payments from patients before they are treated or immediately after, he says. “In many hospitals, you can’t even pay if you want to while you’re there,” he notes. “There is no cashier conveniently located. And they don’t know what you owe even when you’re discharged.”

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.

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