Consortium improves MCO, outpatient billing
February 1, 1997
Consortium improves MCO, outpatient billing
Redesign costs little, boosts collection ratio
[Editors’ note: The University Health System Consortium (UHC) in Oak Brook, IL, is a group of 70 university and teaching hospitals across the country, which sponsors one of the best benchmarking programs in the health care industry. Following are two stories that look at the UHC’s efforts in accounts receivables and imaging reporting. While the detailed results of each benchmarking program are available only to consortium members, the UHC has shared some techniques and hallmarks for best practices with the readers of Healthcare Benchmarks.]
In 1993, members of the University Health System Consortium (UHC) in Oak Brook, IL, a 70-member network of teaching hospitals, were faced with an accounting nightmare. Although outpatient visits accounted for only 22% of total revenue dollars, their attendant claims represented 95% of all processed claims.
Outstanding revenue days in accounts receivable were 20% longer, on average, for outpatient accounts than for inpatient accounts, while write-off percentages for outpatient accounts were more than double those for inpatients. Managed care contract requirements that resulted in manual billing and collection processes also added to outstanding revenue days and account write-offs.
UHC launched a research project within its ongoing benchmarking in patient accounting operations. The project sought to identify best practices among its members to maximize account collections overall. Two phases were designed: Phase I concentrated on inpatient claims processing, while Phase II focused on outpatient claims and managed care processing.
With an advisory council of 27 chief financial officers from its member institutions, UHC zeroed-in on key indicators to rank its overall performance, and concentrated the year-long study on six hospitals that had demonstrable best practices. "We highlighted three areas," says Danielle Carrier, UHC assistant director of operations improvement. "They were total revenue days in accounts receivable, the cost-to-collect ratio, and bad debt write-off percentage."
Above all, the better performers made patient satisfaction a priority and had a healthy respect for cash flow potential, says Carrier. Most surpassed the industry standards for the chief categories the CFO council listed. For instance, in the revenue days in accounts receivable, the six facilities averaged 50 days, compared to 54 days by the health care industry overall. Their cost-to- collect ratio was slightly better than the market standard, 1.1% to 2%, respectively. Finally, the bad debt write-off percentage was an astounding 0.5% for the UHC "best in the class" compared to the market leader’s 2%.
Carrier said these best performers had four "key success factors" inherent in their approach to processing outpatient and managed care claims. They valued communication, were able to prioritize, closely managed high-volume accounts, and automated their claims processing. Overall, the benchmarking study identified 15 initiatives that were developed into a generic action plan for UHC members.
The findings were published in a 12-page manual, which rated performances and listed improvement strategies as well as ways to maintain high performance. It was distributed to all UHC members during an annual meeting.
The key elements in the best practices of the outpatient accounts receivable were:
• adopted a multidisciplinary approach;
• valued the customer’s involvement;
• sought accurate and complete patient information at registration;
• motivated staff to achieve performance goals and levels.
Similar professionalism was evident in the processing of managed care claims. Again, communication and professionalism were integral here but on a different order. "Handling the managed care income was more complex," said Carrier. "A few of the members were able to develop a relationship with the managed care providers."
Within this setting, the better performers were able to:
• reconfigure front-end practices to meet managed care requirements;
• build relationships with major companies;
• utilize prompt follow-up methods;
• involve case managers and utilization management.
Other important practices encouraged the collection of account balances at the time of service. Secondary payers should be billed in a timely fashion, while the follow-up activity with major payers should be based on their payment experience.
Automation was another key component. In fact, one UHC member computerized its accounting operation during the benchmarking study. Hospitals also were urged to maintain collections in-house rather than outsource this operation.
Potential for $11 million annual savings
The benchmarking showed that if all UHC participants in the study performed as well as the study’s best performers, the average savings per member from improved cash flow would approach $12 million from a one-time reduction in accounts receivable. Thereafter, each hospital would save an additional $11 million each year from improved collections. This translates into a $31,000 average expense reduction per day per member.
While the benchmarking group continues to network and share ideas, many individual members have been slow to adopt the recommendations of the study. Carrier attributes this to academic inertia and the fact that several of the hospitals are conducting their own in-house studies. This is the climate of the teaching hospitals, whose culture naturally leans toward research and investigation, she says.
Carrier added that the protocol the UHC benchmarking staff adopted in its accounting study could be replicated in other areas, like technical assessments, clinically based benchmarking, host research programs and standardized purchasing for UHC members. For more information on the benchmarking group’s findings or protocols, contact Danielle Carrier, (630) 954-3794.
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