Running Head: HEALTHCARE FINANCIAL MANAGEMENT
Healthcare Financial Management
Name
Institutional Affiliation
Date
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HEALTHCARE FINANCIAL MANAGEMENT
HealthCare and Financial Management
Introduction
Sutter Health is a non-profit community health network based in Northern California. It
serves people in over 100 Northern California towns and cities. Hospitals and other health care
service providers join their resources and expertise to improve the quality of health care in the
region (Souza & McCarty, 2007). They also intend to make sure that the facilities are accessible
all over the area. The first Sutter hospital was created in 1918 after an influenza epidemic. The
network introduced a new system in order to enhance revenue collection from its facilities. The
traditional payment method was noticed to have many limitations that did not make the process
effective. The limitations were associated with the limited access to information from the
account representatives and the ineffective performance measures. In this paper, I will discuss
the new system that was developed by Sutter Health.
Key problems and issues
The health care system in the United States is highly characterized by the collection of
revenues from patients. Through this way, the healthcare facilities are able to acquire equipment
as well as pay their employees. Healthcare insurance system has brought up and supported this
situation very much. It contains highly deductible health pay plans. The situation is highly
affected by the large population that has no healthcare cover. It has led to the system to collect
revenue upfront so that institutions can be able to sustain themselves (Souza & McCarty, 2007).
Traditional revenue collection systems do not meet the required revenue collection target. There
are many problems that are associated with the system. It was the main reason that Sutter Health
opted to create a new revenue collection system so that they could collect enough revenue.
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In Sutter Health, a patient was required to pay the full amount before they could receive
the services. There were appointed hospital staffs that evaluated and estimated the cost and the
cashiers that received the cash. The patient services staff has to first complete accurate
information on the client. This was a major problem to the Sutter Health as the traditional
payment system supported customer processing on the back end (Souza & McCarty, 2007). The
staff had to ask money from the patients and wait at the back end so that they could process the
information that the patient gave out. It was tedious as the staff and patients had to deal with long
lines before they could offer their services. It had taken many hours before a patient was able to
see the doctor and receive treatment. The system resulted in low-quality services as well as low
revenue collections. The revenue collections were inadequate to support the growing network
and there needed to a better system.
The other issue was the information that was given to the patients. The hospital staff was
not able to get hold of real-time information especially in financial indicators (Souza & McCarty,
2007). The hospital had to wait until the end of each month so that they could be able to identify
the benchmarks. The staff was not also able to generate needed data and detailed reports on time.
It cost the hospital more money as they relied on outside sources so that they could generate their
own reports. It also took time as they had to be assigned a particular date so that they could
compile the reports.
In the data collection area also known as the front desk, lack of real-time access to data meant
that a lot of consultations had to be taken from records. The front desk had to conduct back-end
information so that they could retrieve reports on a single individual. The revenue collecting staff
was not also empowered to be held accountable for a patient's account. It reduced accountability
within the staff. These were amongst some of the major issues that Sutter had to address. They
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had to find a better system that could handle these issues appropriately. Loss of money and the
time taken was affecting the hospital in many negative ways. The revenue collected was not
enough for the chain of hospitals to continue conducting business for a long period of time.
Solution employed by Sutter Health
Sutter came to a decision to make changes to the traditional system in order to suit their
needs. The first solution was to transfer most of the back-end tasks to the front desk. By allowing
the front desk to take care of payment process was to increase the efficiency in the process. The
front desk could access the records of any patient within a short period of time. A patient could
be served from the front desk entirely and directly see the doctor from then on. It took only a few
minutes to complete this, and the hospital could get rid of the long lines that had been adamant in
the previous system. Some benchmarks were also set to allow easy access to data. They
included; Unbilled A/R days, Major payer A/R days, Cash collection and percentage of A/R days
(Souza & McCarty, 2007). The benchmark shorter periods through which the staff could
evaluated. The change was significant as things could now be done in a matter of hours. The
previous method prompted that things be done in days or even months.
The other solution was the empowerment of PFS members. They were given full
responsibility for accounts that they were dealing with (Souza & McCarty, 2007). It was meant
to increase mainly the sense of responsibility and accountability as every individual was to be
handed responsibility for their own account. The PFS members were also given more autonomy
as they saw fit. It was meant to speed up the process and improve the efficiency of the staff
members. Account representatives were issued with individual dashboards to help track the
progress that they had made. It helped in making sure the benchmarks were being followed.
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The Sutter Health program embarked on a training program to support existing PFS
members and the registration staff. It gave the staff the needed competence in dealing with tools
that this system provided. It also eliminated the need to hire formally educated staff to operate.
The hired staff demanded more than $20 an hour (Souza & McCarty, 2007). The already existing
PFS staff could now handle the work without having to introduce anyone else into the system.
The network looked to save more money and also use less time in providing their services in the
hospital. They were also set to be motivators for the employees in order to bring out their
effectiveness. The staff allowed working independently and owning the system. It is a critical
element which enables the worker to work unsupervised to the best of their ability.
The system is less tiresome, and the staff is allowed to work under their own will that
acts as a motivator. They understand that they are responsible for all the decisions that they
make. Working under this condition will help in motivating them and making them independent.
It was one of the efficiency methods that were used by the hospital in setting up the system.
Working independently is important, and the employee will always know that they are their own
boss and should bring the best out of them. Motivating employees was one important thing that
the chain of hospitals had to do. For the system to be effective, all the employees had to put in
their efforts. It was a new system, and if the efforts did not meet the expected requirements, the
whole project would have been a fail. The employees needed to be motivated and the best
method the hospital found was making them their own boss. Through this method, the hospital
could reach its potential in motivating employees positively.
The last solution that the hospital put forward was the inclusion of the patients into the
system. It was not only beneficial to the patients but also to the customers. Providing a customer
friendly billing was important to make the system complete (Souza & McCarty, 2007).
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Transparency is what all customers need. They need to understand how much they are being
charged and why. The new system was set to address this problem. The new system billed the
customer after they had been treated and left the hospital. It was in contrary to the traditional
method where customers were billed before they received treatment. The patient, however, knew
the services that they were going to receive and what the services would cost them in the long
run. In the old system, clients received the billing after treatment and most were shocked by the
amount that they were being charged. The new system did not also need the use of many records
to settle their bills. This had been evident in many areas where the client had produced many
documents. The provision of fewer documents to acquire services was better and less tiresome
which is what the clients needed. Clients need an efficient, transparent and less tiresome process
to settle their bills. It was one area that Sutter Health target at ensuring that it was efficient.
Identification and solving the problem
The practice that Sutter used to identify and solve the problem was accountability and
transparency. There was discontented on the amount that was being collected. More revenue was
needed and to solve this problem, there needed to be a system that could ensure that money was
collected appropriately. The management of the hospital knew that the hospital had the capability
of collecting the required funds. The funds collected could manage their expenses. The system
was too faulty and needed to be upgraded to a more secure system that will safeguard the money.
In the identification process, cost reduction was used. There are two major ways as
outlined in accounting principles. It’s either increasing the profits or reducing the costs. The
identification led to the unification of the whole system. One of the ways was the training of the
existing staff rather than hiring trained professionals (Souza & McCarty, 2007). It was one
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method of saving costs as possible. The hired staff demanded hefty sums that the hospital was
unable to meet. The last practice used was efficiency. It mainly means the use of available
resources to get great results. The available resources were not being utilized adequately in the
traditional system. The problem identified by Sutter was that performance evaluation and record
management were not being used appropriately. They were not being executed fully, and this
mainly led to the poor results by the hospital.
Alternative Solution
One of the alternatives that Sutter could have used was to reduce the time that the clients
settled their bills. The new system set benchmarks that could see payments made faster but did
not focus on the time they took to be paid (Solomon, 2011). The clients could delay the money,
and the hospital will be left out without enough just like in the traditional method. The clients
should have been given the adequate short period of time to settle their bills completely.
A standardized billing could also be set. The patients were allowed to pay after they had
received the service in the hospital (Rauscher & Wheeler, 2010). It could still incur a lot of
losses for the hospital. Standardizing the billing system to a certain amount per procedure would
have been better. The total cost of all the procedures the patient went through will then be
calculated and then billed. It will allow the hospital to collect enough capital as well as allow the
clients to choose their procedures.
Records could also be used for the billing as well as the ability of the client to pay. Clients who
are in a position to pay or have had a good record could be given certain exemptions in the
billing. They could be offered an extended time to settle their bills (Trans Union, 2010). The
period should also be limited to avoid bad debt. Some clients would not pay for the services that
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the hospitals are not able to trace. Therefore, giving trusted clients more time will help build a
concrete relationship with the management. The relationship is very important for the business.
Informed Opinion
The approach that Sutter Health used was effective. It addressed many limitations that the
old traditional system was having. The low amounts of revenue were the worrying factor in the
Sutter Health case. After the implementation of the new system, the hospital was able to raise an
additional $78 million. The system also had other several benefits. There was improved quality
care to patients in the hospitals. The new system made the hospitals customer friendly and
attracted many patients to be treated in the hospital. The needs of the customers were addressed,
and transparency was another issue that brought them to the hospital. All these combined led the
hospital in a positive direction. Both clients and staff were satisfied with the methods that had
been implemented in the hospital.
Conclusion
Sutter health is a non-profit chain of hospitals in Northern California. The case discusses
how Sutter was able to change into a system that collected the network more revenue. It was
losing a lot of money from the previous traditional system, and if a change was not done, the
hospital would have run out of funds. Identifying the problems was the key strategy for the
network. They were able to solve all problems in this way. The system was successful and
helped collect a lot of revenue for the hospital in a short period of time.
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Conclusion
Rauscher S. & Wheeler J. (2010). Effective Hospital Revenue Cycle Management. Journal of
Healthcare Management
Solomon P. (2011). The State of Health Care Revenue Cycle. July 28, 2011. Retrieved on 16th
August 2015 from http://philcsolomon.com/2011/04/the-state-of-healthcare-revenuecycle-an-insiders-perspective-part-2/
Souza, M. & McCarty, B. (2007). From bottom to top: How one provider retooled its collections
[Electronic version]. Healthcare Financial Management, 61(9), 67-73.
Trans Union (2010). Healthcare Collections: How Full Cycle Improvements Reduce Bad Debt.
July 28, 2011. Retrieved on 16th August 2015 from
http://www.transunion.com/docs/healthcare/businessneeds/healthcareCollectionsWP.pdf
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