Consolidation is the way, says health system VP
Politics called No. 1 obstacle
Establishing a consolidated business office (CBO) for Baptist Health System (BHS) in Birmingham, AL, has resulted in cost-savings, quality improvement, and dramatic reductions in bad debt and accounts receivable (AR) days for the 10-hospital system, says Mitzi Winters, CHAM, CHFT, vice president of patient business services.
Since 1994, when the two largest hospitals — Montclair and Princeton — merged their business offices, the system has reduced bad debt from 3% to 1.9%, and gross AR days from "the low 60s" to 50, Winters says. The last of the 10 hospitals was added to the CBO fold in April 1999.
Winters, then director of one of the business offices, was asked to write a proposal for the Montclair-Princeton consolidation in January 1994, and "we were fully merged by May," she notes. With long-range plans in place to install computer systems from Malvern, PA-based SMS at the other eight hospitals, the decision was made to merge each hospital’s business operation into the CBO as the computer conversions were done.
Without the computer installations, she estimates, it would have taken about three months to add each hospital to the CBO.
When the first two hospitals merged business operations, there was an immediate reduction in staff of 8.5 full-time equivalent (FTE) positions, several of them management-level, Winters says. There also were savings in terms of space from moving the remaining 26 employees at Princeton to the Montclair campus, she adds.
The FTE reductions continued as the consolidations progressed, Winters says, but not one of the affected employees has left the system. They either have been offered jobs at the CBO or have found positions elsewhere in the system, she adds. "We work with human resources at the individual hospitals and get them preferential treatment for jobs that are open. We’ve really worked hard at that."
While it was putting the CBO in place, Winters says, BHS made a commitment to strengthen the admitting function, with a concerted effort to improve data accuracy and increase upfront collections. Under the reorganization, each hospital has its own admitting director, who interfaces with the CBO and reports to a corporate director of admitting for the entire system, she adds.
There is at least one financial counselor at each hospital to take care of charity applications and payment arrangements for walk-in patients, she explains. Otherwise, all business operations are handled at the CBO.
"All of the training for admitting is done at central — how to ask for a deductible, how to fill out forms," Winters says. "[New employees] don’t touch a computer until they come to the CBO in Birmingham for four days of training, so we really put a lot of emphasis on that training."
That emphasis has paid off with a big improvement in quality, she notes. When BHS began audits of admissions in 1994, along with a quarterly incentive plan, the systemwide average was a 72% correct admission, she says. It is now 98.5%.
Like many admitting departments, those at BHS find themselves losing the admitting representatives they’ve trained to better-paying jobs with regular hours after a year or so, she notes. The good news is that instead of going to insurance companies or physician offices, the BHS reps tend to move to the CBO. "At least we keep them in the system."
With nine colleagues to call on, in addition to the corporate director, each hospital’s admitting director has a built-in network for ideas and problem-solving, she points out. "Instead of calling a competing hospital for help, they’ve got nine people within the system to call at the drop of a hat. There is a lot of shared experience."
When a new admitting director is hired, Winters says, an experienced director from another BHS hospital is sent to work with that person.
The biggest obstacle to a successful CBO implementation was the politics involved in removing the business function from the individual hospitals, she says, and it was a challenge that was not taken lightly.
"Even though there was a corporate directive to [make the change], there was a lot of effort spent with each hospital administrator to make them understand the advantages," Winters says. "I spent a lot of time with the administrators explaining how we would be handling patient accounts."
Among the benefits of a CBO, she points out, is the availability of technology small hospitals couldn’t afford. "We’ve improved statement formats, put in better telephone systems that are automated, and our remits are done electronically. We’ve got a [predictive] dialer that cost several hundred thousand dollars — there’s no way a 100-bed hospital can afford that."
To help prevent customers from thinking of its CBO as "that office up in Birmingham," BHS set up local telephone numbers at individual hospitals, she says. Customers with account inquiries make a local call, which is rolled over to the central office, Winters says.
Having an admitting director in place at each facility is a key element to the CBO’s success, she notes. "They understand what we’re doing at the corporate level and support it. A few [directors] had to go because they were not able to make that switch. It can be very much of a public relations nightmare if you don’t have the support of people at the local level."
The compliance factor
Increasing government scrutiny of billing practices gives even more reason for health care organizations to establish CBOs today than when BHS did so five years ago, Winters points out. "In 1994, billing was still an easy function. But with today’s fraud alerts and audits, it’s very important that whoever is responsible for putting bills out is up to date. If you have just 12 employees [in the business office], there’s no way you can be as up on things as someone over a 500-bed hospital."
The CBO’s increased buying power, she adds, enabled the purchase of software — such as Omega, a program from Atlanta-based NDC — that performs medical necessity audits.
Similarly, Winters has been able to hire a director of compliance who "does nothing but read the literature on medical necessity and work with the different hospitals" and a nurse who tracks medical necessity issues and addresses problems that arise. "[Compliance] is a big deal. Most hospitals don’t even know how much money they’re losing because of this."
In January 1999, BHS started tracking the procedures it was unable to bill for because of failure to document medical necessity properly, Winters says. As of July, the money lost each month has been reduced from $700,000 to $450,000, she adds, and the goal for the upcoming year is $350,000. "That’s probably the No. 1 thing we’re working on," she says. "If we didn’t have a CBO, who would be doing that?"
(Editor’s note: Look for a full report on Baptist Health System’s medical necessity program in the next issue of Hospital Access Management.)
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