Want more cash? Rather than simply sending old
patient balances to collection agencies in knee-jerk
fashion, sophisticated business offices are scrutinizing
their days in accounts receivable, determining
what types of accounts and dollar balances to outsource
for collection and when to outsource them.
In this installment of Straight Talk, we look at the outsourcing
strategies in the business offices of three healthcare systems:
266-bed Tuomey Healthcare System, Sumter, S.C.; 3-hospital,
1,062-bed Montefiore Medical Center, New York; and 14,200- bed,
30-hospital New York Presbyterian Health System, New York.
Modern Healthcare and PricewaterhouseCoopers present
Straight talk. The session on outsourcing of business office
functions was held on September 23, 2004 at Modern Healthcare's
Chicago headquarters. Charles S. Lauer, publisher of Modern
Healthcare, was the moderator.
Lauer: Why outsource? What are the drivers that led you to
outsource?
Kurz: When we evaluate outsourcing possibilities, we consider two
primary criteria: core competency and efficiency. We strive to
answer the questions: Can we perform the function in question
best? And if not, can another entity do it better and less
expensively? For example, we outsource self-pay accounts to our
own collection agency because it has the ability to handle large
volumes of accounts and specializes in collecting bills from
patients. We felt that it would be beneficial to give this
population of accounts to people whose core competency is
collecting self-pay accounts. They can do it faster and they are
trained to talk to people and get their cooperation.
Johnson: We turned to outsourcing in 2004 as a result of HIPAA
(Health Insurance Portability and Accountability Act of 1996). We
saw our accounts receivable go from 45 days to slightly more than
60 days. We were submitting claims and getting confirmations from
our clearinghouse, but we weren't receiving payment. When we
contacted payers, they said they didn't have a record of the
claim. That's when we talked to PricewaterhouseCoopers' (PwC)
Virtual Business Office about working some of our older, third
party accounts. We couldn't hire and train enough people quickly
enough to work the volume of accounts that we had. We turned over
a variety of accounts to PwC: Medicare,Medicaid, commercial
insurance and Blue Cross.
Lauer: When you outsource, does it bother you that you have to do
that? Do you feel that it shows a weakness in your organization?
Swiss: We are not going to allow the receivable to get out of
control. We have a saying, "Care takes cash". If we see a spike
in the receivable, which we monitor very closely, we act quickly.
Outsourcing collections is expedient because it ensures that we
are going to get the cash quickly.
Johnson: My primary job is to make sure the hospital generates
enough cash to pay all the bills and do everything else we need
to do. I want to use any tool that is available to me to get the
job done.
Harris: If you can do it right the first time, your reliance on
outsourcing will go down. That is the notion. If we can improve
the front end of the revenue cycle -- making fewer errors that
produce denials -- then Steve, Paul and Drew will not have to
outsource their accounts at 90 days because those accounts will
be paid in 30 days. The key is to fix it on the front end.
Lauer: What types of accounts do you outsource for collection? Do
you see new trends?
Lutfy: I've seen two changes. It used to be that clients would
outsource all receivables at certain date ranges and certain
balance levels. For instance, they'd outsource all receivables
greater than 90 days and all balances under $10,000. Clients now
tell me, "I will give you Medicare at 60 days, Blue Cross at 42,
and commercial at 68. I want this balance range to be under $500
and this one to be over $2,000". Clients also ask us to fill in
for hospital employees on maternity or family medical leave.
Since we are connected electronically to our clients and do our
work directly on their systems, this is easy to do. At the
Virtual Business Office, we focus on collecting money from
third-party payers. We don't collect selfpay balances.
Johnson: We've made changes recently in our outsourcing
strategy. We want our folks -- our patient account reps -- to
focus on the large dollar value accounts. We are now developing a
strategy to place accounts greater than 46 days from bill date,
with balances under $15,000, with PwC. We think we can churn more
cash by taking that kind of approach to it. We expect PwC to be
successful with these smaller accounts while we concentrate on
the larger accounts.
Kurz: During a recent revenue-cycle initiative, we learned that
our billing representatives generally collect from insurance
companies better than most of the outside vendors that we had
employed. Two years ago, we went back to our agencies and said,
"Give us back any accounts that are over $2,000". As our people
became more efficient -- by using web sites for follow up instead
of telephone contacts, for example -- we were able to drop that
level to $1,500. On our Cornell University campus, the level is
now down to $650 for some payers. That leaves the self-pay
population, which we outsource to our own agency, and balances
under the $650 threshold on non-self pay accounts, which we
outsource to outside agencies.
Lauer: What risks are involved in outsourcing? How do you
mitigate those risks?
Swiss: We worked with a local collection agency that took its eye
off the ball. As a result, we lost $1.5 million. That's why we
contract for collections based on performance. You make millions
on performance, but you save pennies by trying to get the lowest
fee. I look for the best track record.
Johnson: You take a risk any time you hire an outside company.
You never know how they are going to perform. We have outsourced
to vendors in the past who have not done as good a job as we
would have liked for them to do. Even if you check references,
the vendor may not do as good a job for you as it has done for
somebody else.
Kurz: Another risk is that you now have to manage the outsourced
company -- at least indirectly -- as well as your own
organization. The breadth of management tasks goes out over a
larger area.
Lutfy: We've found that each client's process for handling
accounts receivable is unique. We put together what we call a
playbook -- a document that outlines each client's procedures.
The whole trick is to be virtual and invisible -- just like you
are an extension of the business office, operating as a collector
on their patient accounting system.
Harris: I think it is important that providers train their
outsourcers on their policies and procedures. Because if there is
a problem downstream, patients will not focus on the outsourcer
-- they are going to focus on the hospital.
Lauer: Do you also outsource the collection of self-pay accounts?
Swiss: Sure. It is like the triage process in healthcare in which
doctors and nurses treat the sickest patients first. We identify
quickly which patients need to be outsourced. What we try to do
is triage the patients, based on the age of the account and their
ability to pay us. If it is not collected within 90 days, we get
the account out to an agency. We are constantly screening the
patient to get whatever coverage we can get. Medicaid or any
other type of coverage.
Lauer: When you outsource self-pay accounts, what controls do you
put in place to make sure the outsourcer won't do something to
embarrass your hospital?
Harris: What sometimes happens is that a hospital places aged,
selfpay accounts with a local agency and never recalls them.
Several years later, a national collection company buys the local
agency and reworks all of their paper. So three years after you
turned over an account to the local agency, a new collections
representative says, "Let's send dunning (collection) notices and
perform asset verification on these accounts". And low and
behold, there is a problem. The hospital administration says, "We
wrote those accounts off, and we don't want you to attempt to
collect them". There is a communication that needs to exist
between the provider and the agency that says, "We want to take
that account back after x number of days".
Kurz: This issue has become particularly sensitive in the past
year as a result of hearings conducted by the House Energy and
Commerce Committee's Subcommittee on Oversight and
Investigations, which has scrutinized hospitals' charges for
self-pay patients. This is not an issue the hospital industry is
going to win in the press -- even if our collection processes are
perfect. As a result, our partnership with our outsourcing
companies has become much tighter. We want greater control over
their processes. We want to know what is happening with our
cases. We want to make sure that before a patient gets a bill
from the outsourcer, every avenue has been taken to ensure that
the patient is not entitled to insurance coverage, government
entitlement, or financial aid from the hospital.
Swiss: I think patient cooperation is important. That's where our
new financial aid policy has helped us. First, we determine if
the patients qualify for coverage. Medicaid, a grant or other
government program. If they aren't eligible for outside help, we
determine if they qualify for our financial aid. We use a scale
based on the federal poverty level. But if patients want the aid,
they need to cooperate and provide us with financial
information. We make sure our outside collection agencies have
our policies. We direct them not to put liens on houses. We also
make sure the agencies understand what our financial aid policies
are so they also can screen patients, offering aid from us based
on our guidelines.
Lauer: Let's switch gears a bit and talk about compliance. How do
you ensure that your outsourcing arrangements or business office
extensions are in compliance with the various regulatory bodies
that you have to deal with every day?
Harris: The amended False Claim Act of 1986 has produced over
$3.0 billion in damages. It was enacted by President Lincoln in
1863 to protect the U.S. government from fraud and abuse in the
defense industry. Over the last couple decades, healthcare has
been added to the watch list of industries, starting with durable
medical equipment suppliers and moving on to healthcare
providers. The revenue cycle is prone to fraud and abuse because
that is where the billing and collections takes place. The
72-hour rule, advance beneficiary notification, and Medicare
bad-debt audits are examples of programs CMS has put in place to
protect Medicare from reimbursing providers incorrectly.
Providers must be careful when they involve outside companies in
the revenue cycle -- no matter if it's in patient access, medical
records or the business office.
Swiss: When we formed our billing compliance program it initially
reported to me, which, was a very good thing because this way I
have both my revenue cycle and compliance antennas up at all
times. Now, it reports to a legal counsel and I have a dotted
line relationship with billing compliance. I always ask the
question: Are we compliant? We not only set up processes but we
audit those processes as well.
Johnson: We encourage our employees to report anything they see
that is not right. Report it to a supervisor, vice president or
the compliance officer. Let someone take a look at it and see
whether it meets the legal test. We make sure our employees know
that they won't suffer retribution for reporting something.
Lutfy: From an outside agency's perspective, we also make sure we
are compliant. In addition to documenting clients' policies and
procedures in our playbook, we send bills to insurance companies
through the client's financial information systems, using the
client's clean claim edits and maintaining the patient accounting
system as the system- of-truth in case the provider is audited.
Kurz: That's important. When Medicare comes and audits you and
they are holding a bill, your home system had better show what is
on that bill. I think more and more people are concerned about
making sure invoices that go out from an outsourcer are identical
to what is produced on in-house systems.
Harris: This is a great point. The audit ability now of CMS is so
powerful because there are common systems throughout the
intermediaries. CMS has the ability to look at a physician's
claims and say, "For this procedure, this is what we should see
on the hospital bill". For the very same visit, they can compare
the UB92 from the hospital to the HCFA 1500 for the physician. If
something is not in sync, they will select a couple more
accounts, and if they see a trend, they will do an audit. I am
sure most providers have received a letter from Medicare, saying
CMS wants to review some claims for potential fraud and abuse --
arising from either lack of knowledge or intent to defraud the
government.
Kurz: Through our audit and compliance group, we've developed
mandatory training for all of our employees. We do online
training specifically focused on Medicare compliance. When the
HIPAA regulations came out, we did the same thing with online
programs. We have set up our own internal audit group within the
patient accounting division. We now have written contracts with
our outsourcing companies, specifying the level of service we
want.
Lutfy: In fact, HIPAA requires that hospitals sign business
associate agreements with all vendors who have access to
confidential patient information.
Lauer: Let's talk some more about HIPAA. What impact has HIPAA's
rules for transaction code sets had on the collection process?
Johnson: With HIPAA pushing standardized processes, I hope most
claims will be paid automatically. The human intervention part of
accounts receivable management is going to greatly decrease. The
result will be less outsourcing because the need to outsource
this work will decrease, thanks to technology.
Swiss: We're not there yet. Right now HIPAA is failing the
original objective -- making processes more efficient -- I think
the payers have not standardized. They each have their own
companion guides that detail how to bill them. There was a
significant issue where certain payers were compressing the
rejection codes and making them less understandable, going from
more to less specific and requiring more manual intervention.
Harris: The issue is disparate technology. With providers, we
have a choice of maybe four or five vendors of patient accounting
systems. Payers have ten or more different claim adjudication
systems that support their various insurance products. Each one
of these systems has its own rejection and reason codes for
reimbursement. I would say we are still in our infancy with
respect to HIPAA. It may take a few more years, but we'll
eventually get there. HIPAA's standardized transaction code sets
are designed to give us a common transaction environment. That's
why I think you will see more banks involved in healthcare down
the road -- acting as an intermediary between the patient, payer
and provider.
Lauer: We've talked primarily about outsourcing the collection
process. Are there other functions that could be outsourced?
Johnson: Clinical coding is an area that is being experimented
with right now. India provides dictation services for many
U.S. companies. Now they are looking at other high volume
services such as outpatient coding. I don't think the inpatient
coding will be outsourced soon.
Swiss: We are in the midst of implementing an imaging product in
medical records so we won't have a barrier to outsourcing our
coding. If you have an image, you can code anywhere. We've had a
chronic problem with turnover in coders. I think contract coders
code 30% of our medical records and the quality is not as good as
our employed coders.
Kurz: Collection agencies address the back end of the revenue
cycle. We are beginning to see the entry of an increasing number
of companies that provide solutions for the front end of the
cycle.
Harris: Patient access is a good example. Steve and I
checked into the airport yesterday without any manual
intervention. We swiped our credit cards, received our boarding
passes and went directly to the gate. The banking community
figured it out long ago with ATM machines and then the airline
industry joined the bandwagon. The technology exists to do it in
healthcare, we just haven't figured out how to string the various
systems together in a cohesive network. But I can really see it
in our future. You will go to the hospital for an outpatient
procedure and walk up to a kiosk, swipe your healthcare card --
or even your VISA -- to identify yourself because the visit was
pre-registered. After you swipe your card, the kiosk produces a
checkin slip along with a color-coded map directing you to the
department. If we do this right, we'll also collect deductibles
when patients swipe the credit card or Health Saving Account
(HSA) card - eliminating the need for a patient statement.
I like to say that the revenue cycle is comprised of three
things: People, process and technology. In the future, there will
be more reliance on technology, replacing people and
process. Technology is going to continue to grow. The result:
Instead of outsourcing to a person, you'll outsource to a
machine.
How to outsource successfully:
- Evaluate your core competencies to decide if someone else
can do the job better;
- Evaluate outsourcers based on performance -- not just
price;
- Determine the best mix of accounts to outsource to maximize
cash flow;
- Develop procedures to monitor the quality of the
outsourcer's work;
- Monitor outsourcers for compliance with governmental
regulations.
Want to learn more about outsourcing business office functions?
Contact: David Harris, National Revenue Cycle Partner, at (646) 471-1241, or click here to send him an email or visit PricewaterhouseCoopers on the web at pwc.com/healthcare.
Participants:
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Dave Harris
National Revenue Cycle Partner
PricewaterhouseCoopers
New York, NY
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Paul Johnson
CFO
Tuomey Healthcare System
Sumter, SC
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Steven Kurz
Vice President Patient Financial Services
New York-Presbyterian Hospital
New York, NY
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Steve Lutfy
Director Virtual Business Office
PricewaterhouseCoopers
Columbia, SC
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Drew Swiss
Vice President Finance
Montefiore Medical Center
New York, NY
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Charles S. Lauer
Publisher
Modern Healthcare
Chicago, IL |
The views expressed by Straight Talk participants are not
necessarily the views of Modern Healthcare, Crain
Communications Inc. or PricewaterhouseCoopers.
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