COVER STORY
Margie Souza
Brent McCarty
from bottom to top
how one provider retooled
its collections
How should a hospital
go about increasing its
upfront collections
from self-pay patients?
California's Sutter Health
has found an effective way
to accomplish this goal.
We all know the mantra, "no margin, no mission."
One increasingly important strategy for optimizing margins in this time of high-deductible health
plans and higher copayments is to collect more
cash from patients. Including self-pay patients.
information and the appropriate skills—and the
confidence to use them. These needs apply
especially to registration staff because the best
time to collect payment for services is before
those services are provided.
Registration staff, however, typically are unaccustomed to asking for money. It is therefore important that the transfer of this responsibility from
the back end—the central business office and
collectors—to these front-end staff be managed
thoughtfully and in a well-organized manner that
takes into account the needs of all PFS staff.
AT A GLANCE
In its effort to increase
point-of-service collections and improve the
overall revenue cycle,
Sutter Health took steps
to:
> Measure performance
using a handful of
specific, primary
The Sutier Health Approach
Much has been made of the fact that nearly
4,7 million Americans are uninsured, but it's an
erroneous assumption that none of these people
can afford to pay for their health care. More than
80 percent of uninsured people come from working families, and many may have the resources to
pay for some or all of their health care—if only
someone would ask them to.
Sutter Health, one of Northern California's
largest providers, is committed to giving its PFS
staff on both the front and back ends the tools
they need to improve patient collections and thus
the system's bottom line. Having started in 2006
with the patient account representatives, collectors, and other members ofthe central business
office of its Sacramento/Sierra region, the health
system is working its way forward to the registration staff, ultimately aiming to transfer many of
the back-end functions to the front end and make
point-of-service collection the norm.
Thai "someone" is the patient financial services
(PFS) staff member. To frame the question in a
way that will elicit the most positive response,
PFS staff need complete, accurate, and timely
In the first three months ofthe project, Sutter
reduced accounts receivable (A/R days) for the
nine hospitals in the region from 65 to 59. Given
that each one of those days equals $i3 million,
benchmarks
> Empower PFS siafi to
assume responsibility
for every individual
account they handle
> Ensure each registration is analyzed using a
rules engine to identify
problems before
patients leave the
registration desk
> Ensure PFS staff
receive appropriate
comprehensive training
to excel under the new
system
M m SEPTEMBER 2007
67
COVER STORY
that means the health system collected an additional $78 million.
Setting Benchmarks
.
!
In analyzing its revenue management cycle prior
to implementing the new program. Sutter identified several problems.
This aged trial balance
First, PFS staff could not access real-time information on key financial and operational indicators such as A/R days and cash collections. As a
result, managers and staff often had to wait until
the end of the month to set henchmarks, track
progress, or make important business decisions.
analysis, which shows
aging and status of a
patient representative's
personal assigned stewardship, is intended to
assist the representative
in his or her performance-improvement
efforts.
Second, the hospitals' accounting system did not
allow managers to isolate and analyze select data
or generate reports on demand to the level of
detail required. Instead, the region relied on a
specially trained programmer to develop these
reports, often leading to costly delays in identifying and correcting problems.
Third, the central business office (CBO) stalf also
suffered from the lack of real-time information,
^lth access to only a list of the outstanding accounts
assigned to them, account representatives could not
prioritize effectively or monitor their progress.
In turning this situation around. Sutter decided
to focus on a handful of primary benchmarks:
> Gross A/R days (less capitation and credit bal ance accounts)
> Cash collections
>UnhiUed A/R days
> Billed A/R days
> Percentage of A/R over 90.180. and 36o days
> Majorpayer A/R days
Empowering PFS Staff
Sutter s strategy for increasing collections and
reducing A/R days focused on empowering individual PFS staff members to assume responsibility for each account they deal with. In effect, each
person in the CBO owns his or her own business,
SAMPLE AGED TRIAL BALANCE ANALYSIS
ATB Analysis ($ in millions)
Inhouse
Not Disch OP
DNFBNoDiag
DNFB Other
0-30
31-60
61-90
91-120
121-150
151-180
181-210
211-240
241-270
271-300
301-330
331-365
366
CRBAL
Above is a graphical representation of your current receivables stewardship. We would hope to see the following trend in the bars: The
longest bar would be the 0-30 day bar. From there we would hope to see a steep Mount Everest drop-off to nothing as quickly as possible.
Every bar after that should be no greater than hall the size of the one above it. You have five aging categories that do not follow the ideal
pattern: 121-150,271-300,301-330,331-365, and 366+.
68
SEPTEMBER 2007 healthcare financial management
(omplete with a customized dasliboard to track
progress in meeting individual and team targets.
To help PFS staff manage their businesses effectively. Sutter has provided them with a set of tools
that allows them to:
> Prioritize and automate account work lists
> Sort accounts in various ways, such as by dollar
amounts, oldest previous work date, and payer
* See at a glance their ranking within their work
group and officewide, based on their performance as a percentage of the target achieved
The tools tell staff members not only how they are
doing, but also where and how they could
improve, pointing out which accounts, if worked
successfully, will have the greatest impact on
iheir A/R days and cash collection goals.
Managers have their own receivables dashboard
and tools, enabling them to:
^ Query all aspects of receivables for trending
purposes and identify problem areas
> Drill down to the patient account level
> Monitor revenue, payments, adjustments,
receivables, and days for periods from the previous day and week to the previous 18 months
> Calculate average daily revenue by day and
3o-day period
^ Assess their performance for the month to date,
and estimate likely results at the month end
> View all receivables or select any segment for
quick analysis
> Generate timely reports on demand, including
aging analysis. A/R stratification, discharged
not final billed (DNFB) analysis, credit balance
analysis, and analysis of problem payers
A denials management component was implemented in late summer. When registration staff
go online at the end of the year, the cycle will be
complete, with all parts having access to all the
ilata they need to produce clean claims.
Front-End Collecting
Half of the required billing elements on a UB92/04 originate at the point of access. As a result,
this point in the revenue cycle presents tbe greatest opportunity to reduce claims denials. To help
ensure optimum performance at this crucial
juncture. Sutter's new process requires that each
registration be analyzed by a rules engine before
the patient leaves the registration desk to identify
potential problems.
Examples of problems or errors that can be identified at this stage include the following:
> Workers" compensation or liahility financial
class lacks accident information.
> Workers' compensation is filed with an occurrence code otber than 04.
> The patient's guarantor is under 18 years old.
> The patient's marital status is widowed, but the
relative is listed as husband, wife, or spouse.
> The patient type is not valid for hospital service,
> Tbe patient is age 65 or older, but the Medicare
insurance plan is missing.
> The patient had Medicare in any plan code, but
the Medicare secondary payer questionnaire is
missing.
>Tbe health insurance claimnumber or policy ID
number is missing.
> The patient address includes errors in format,
punctuation, and/or abbreviations.
> Tbe patient bas duplicate medical record
numbers.
ABOUT SUTTER
HEALTH
Sutter Health is a leading
not-for-profit network of
community-based
healthcare providers that
deliver care in more than
100 Northern California
communities. The network consists of more
than two dozen acute
care hospitals, as well as
physician organizations,
medical research facilities, home health services, hospice and
occupational health networks, and long-term
care centers.
This front - end claims editing enables PFS staff to
quickly identify problem areas where corrective
action and/or further training is needed.
In the same way. computer interfaces allow the
system to flag accounts tbat require special handling. The admitting clerk receives an alert that
may include a description of specific action he or
she should take. Examples of such alerts include
"Patient has other accounts with returned mail;
M m SEPTEMBER 2007
69
OVER STORY
please check for valid address." and "Patient
has other accounts in bad debt: please request
payment.'*
registrars can be evaluated as well on percentages
of contracted rates and established targets
collected.
Experience has shown tbat a simple prompt to tbe
registrar to collect the amount preregistration
has established with the patient can make all tbe
difference. Sutter will be testing a tool to track
how much money each staff person collects up
front, hoping eventually to link that tool to estimating and contract management systems so that
Comprehensive Training
Sutter's system is designed to support the existing PFS and registration staff without the need to
hire a more formally educated staff or to increase
wages beyond the current average of $10 to $20 an
hour. The system does, however, require that
staff receive comprehensive training.
SAMPLE EXECUTIVE ANALYSIS
Regional
General
General
General
Medical
Memorial
Memorial
Memorial
Center
Inpatient
Outpatient
Total
Inpatient
$62,401,511
$35,854,843
$98,256,354
$10,895,907
40.5
53.9
44.6
51.2
Inhouse
$6,882,814
$21,076
$6,903,890
$1,080,159
Discharged not final billed
$14,153,379
$6,331,544
$20,484,923
$1,359,967
$21,036,193
$6,352,619
$27,388,813
$2,440,126
$81,460
$538,796
$620,256
$19,118
$28,059,538
$16,828,778
$44,888,316
$4,685,794
91-180
$6,826,376
$7,335,094
$14,161,470
$51,163,563
181-365
$4,386,455
$2,873,829
$7,260,284
$677,426
366+
$2,789,969
$2,374,808
$5,164,778
$1,969,489
$808,950
$846,676
$1,655,627
$433,435
$42,062,339
$29,412,509
$71,474,848
$8,496,272
-$778,481
-$449,081
-$1,227,562
-$59,610
Total A/R
Total A/R Days
Unbilled
Preadmit
Total Unbilled
Unbilled Recurring
Billed
0-90
366+ BC/Medicare
Total Billed
Credits
70
SEPTEMBER 2007 healthcare financial management
COVER STORY
The focus of the training differs with different
.staff areas. For example, registration staff, who
;ire not accustomed to asking people for money,
receive training that focuses largely on effective
patient communications and includes role-playing and script rehearsal. By contrast, CBO staff
:ire more used to asking people for money, hut
1 hey are not used to taking stewardship of their
:issigned accounts. So in addition to time spent
learningtousethe tools and perform the functions, the first hour of the CBO staffs three-hour
Regional
Medical
group training session focuses on the concepts
and principles of effective receivables management—e.g. . how to take ownership of problems
and make autonomous decisions about how to
solve them, how to identify trends and use that
information to boost performance, and how to
use performance feedback-hased results rather
than just activity.
Following the initial educational sessions.
Sutter's staff use a technological alternative to
Regional
Medical
Center
Center
Total
Total
Grand
Outpatient
Total
Inpatient
Outpatient
Total
$10,614,259
$21,510,165
56.0
53.4
$1,914
$1,082,073
$1,518,673
$73,297,418
$46,469,102
$119,766,520
54.5
45.9
$7,962,973
$22,990
$7,985,983
$2,878,640
$15,513,346
$7,850,216
$23,363,562
$1,520,587
$3,960,713
$23,476,320
$7,873,206
$31,349,526
$29,315
$48,432
$100,578
$568,110
$668,688
$5,677,245
$10,363,039
$32,745,333
$22,506,023
$55,251,356
$1,802,141
$2,965,704
$7,989,939
$9,137,235
$17,127,174
$886,650
$1,564,076
$5,063,882
$3,760,479
$8,824,361
$774,776
$2,744,264
$4,759,458
$3,149,584
$7,909,042
$146,544
$579,979
$1,242,385
$993,221
$2,235,606
This report shows PFS
$9,140,811
$17,637,083
$50,558,611
$38,553,320
$89,111,931
managers the status of
performance based
upon hospital-defined
- $76,454
-$136,064
-$838,091
-$525,536
-$1,363,626
targets.
M m SEPTEMBER 2007
71
COVER STORY
GETTING PATIENTS ON BOARD
It's easy for hospitals and health systems to see the benefits of point-o^service (POS) collection. But what about
the patients? Many healthcare leaders worry about raising their ire just as competition makes patient satisfaction
more important than ever. A recent report of the HFMA-led PATIENT FRIENDLY BILLING® project,
Consumerism in Health Care, suggests that, in combination with other patient-centric policies and practices such
as pricing transparency, simplified charge structures, and quality information, POS collection actually will be
accepted without problem by most consumers as part of an open and businesslike partnership with providers.
For one thing, patients with insurance coverage have become accustomed to paying copayments and
deductibles up front at their physician's and dentist's offices before receiving services. It's no longer a new idea.
For another, POS collection eliminates the infamous sticker shock patients get when they open a hospital bill
four months after discharge—and long after their gratitude for getting better has faded.
The simple fact is that consumers want to know from the start what their financial obligation will be—that is, how
much in total they will owe out-of-pocket, including copayments, deductibles, and coinsurances. And the earlier the better; one reason so many hospitals are moving to preservice charge estimating is to help patients be
prepared to pay when they arrive at the hospital.
"My mechanic can tell me in advance how much I'm going to owe-why can't you?" had been a familiar refrain at
Mayo Clinic in Jacksonville, Fla., before it started POS collection, according to Kelly White, section manager,
PFS. "And the patients were right—we should be able to give them at least a ballpark estimate. We've found that
the more details we can provide about their bill, and the sooner we can provide it, the more successful we are in
collecting." Mayo Clinic is lucky. White acknowledges, in that the bulk of its admissions come from its clinic physicians and are scheduled well in advance, so that her staff can talk directly with patients, often more than once,
before they arrive at the hospital.
But the principle is the same regardless of the organization. Accurate, timely information on the front and back
end of the revenue cycle is essential to this process. Yet technology can go only so far in preparing patients and
providers for the new age of consumerism in health care. There are three things hospitals must accomplish
beyond implementing new technology:
> They must be able to justify charges in a way that ordinary people will accept as reasonable, which means, of course,
that the charges themselves must be reasonable. And that means, among other things, the end of cost-shifting.
> They must offer on-the-spot, skilled, and comprehensive financial counseling, discounts, and flexible payment
options to self-pay patients who are unable to pay their bills.
> They must educate patients thoroughly, in more than one way and at more than one time, about provider
billing practices-including who, what, where, when, why, and how.
With effective programs in place and the technological tools and training to help PFS staff deliver top-notch
customer service, healthcare organizations in the vanguard ol POS collection are finding patients to be not
resentful but grateful.
personal tutors to practice in test system mode on
their own for at least 3o minutes a day for a full
week. The highly intuitive system allows them to
work independently with minimal assistance.
Each person must complete and pass the online
competency test before receiving a production
72
SEPTEMBER 2007 healthcare financial management
user ID. Staff also can refer to an online user
manual at any time.
Where other health systems have used tangible
rewards and formal recognition as incentives,
Sutter has so far found that staff regard the boost
COVER STORY
IMPROVING FRONT-END EFFICIENCY REDUCES BACK-END PROBLEMS
Automated Rules
Engine analyzing
Performance
Reporting
Registration
registrations
Rep
for accuracy
Point-of-service
collections improves
cash fiow and
reduces need for
back-end follow-up
N
Hospital Receivables Database
Transaction
Database
> Charges
> Payments
> Adjustments
in autonomy and effectiveness as reward enough
to embrace the system wholeheartedly. In fact,
every respondent in a recent survey of Sutter's
GBO staff commented positively about having
gained a renewed sense of ownership and competitive spirit, and many staff members have sent
unsolicited e-mails expressing their enthusiasm
for the new system. And in 3006, the CBO
received Sutter's Business Processes Excellence
Award for outstanding achievement.
Patient Rep
Performance Reporting
(Collector)
Open Accounts
Database
Denials
(Problem Claims)
Database
Registration-caused denials
(problem claims) are reported back to
the originating department so a strategy
can be developed to stop future
occurrences (root cause analysis).
Hospital
Business Office
> Non-iero
i
> Non-bad debt
> Formal denials
> Underpayments
> Backend identified
I errors
"» Submission errors
> Returned mail
Performance Reporting
Denial reps getting
unresolved denials resolved
whittling away at tbe list. Almost $80 million in
additional collections in three months says they
are on the right track. •
About the authors
Margie Souza
is central business office director,
Sutter Health Sacramento Sierra
Region, Sacramento, Calif.
(souzam1@sutterhealth.org).
Object: No More Denials
There are 600 valid reasons to deny a healthcare
claim. But by integrating all data elements in revenue cycle management, making PFS staff
accountable for their own results, and concentrating on obtaining accurate and complete information, as well as cash upfront, Sutter Health is
Brent McCarty
is president and C O O , Accuro
Healthcare Solutions, Dallas
(bmccarty@accurohealth.com).
Mm SEPTEMBER 2007 73
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