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Accounting Concepts for the Health Care indsutry: A case study on Sutter Health

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California Sutter Health Approach

ACC 281 Accounting Concepts for Health Care Professionals

August 18, 2014

Sutter Health

In 2006, Sutter Health Care facility located in Sacramento California faced someserious problems. Because they are a non-profit organization it became increasingly difficult to collect payments and with an increase in cost it had caused this health care facility the need to reevaluate the way collections were handled. This paper will discuss how things were reevaluated, how things could have been different, the steps taken, and the successful result that ended with making Sutter Health Care one of the most effective operating health facilities in America.

Sutter health is committed to giving its P.F.S. (patient financial services) staff the appropriate tools toward improving patient collections. Unfortunately in America today there are over 47 million uninsured people while 80% of them are working families. Sutter Health was facing several problems the main one was “within our Sutter Health Family, 48,000 physicians, employees and volunteer care for patients in more than 100 Northern California cities and towns” (The Sutter Health Story, 20). The article “From bottom to top: how one provider retooled its collections” written by Souza and McCarty explains how Sutter Health went from wondering how they would continue to pay everyone and stay operating to becoming one of the largest reputable Health Care provider in Northern California. Souza and McCarty go on to say that Sutter Health was successful in creating a new program that would help them in their aid for collections owed.

In collecting payment from new patients, services provided, comes from the need to implement new strategies on how and when to collect the payments. The program was a success and has aided the accounts receivable (A/R) department in finding solutions to their problems as well as allowing them to see that while the program is effective there is a big need to continuously look for updates. (Souza, McCarty, 2007). “One of the key problems that Sutter Health was experiencing was that each facility acted as an independent” island” of information. Due to the numerous operating and accounting systems it was impossible to obtain data and reports in the same format from every location. There were no common formats between the organizations” (Hummel J, 2004).

In 2006 Sutter health committed itself to improving patient collections. Their tasks began with the “island” of information that came through. This meant starting with patient account representatives, collectors and other members of their central business operation. In the first three months of moving forward with the registration staff Sutter Health was able to reduce the number of accounts receivable from nine hospitals in the region from 65 to 59. Each of these A/R days equals thirteen million meaning Sutter health collected 78 million dollars towards collections. (Souza, McCarty, 2007).

Souza and McCarty stated in their article prior to implementing the new system Sutter Health first identified several areas the project needed to focus on.

1.)“PFS staff could not access real time information on key financial and operational indicators such as A/IT days and cash collections. As a result managers and staff often had to wait until the end of the month to set benchmarks, track progress, or make important business decisions.

2.)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.

3.)The CBO or central business office was also suffering from the lack of real-time information. With access to only a list of the outstanding accounts assigned to them, accounting representatives could not prioritize effectively or monitor their progress.”(Souza, McCarty, 2007).

Sutter decided to focus on benchmarks to turn this situation around such as: Major payer A/R days, percentage of A/R over 90, 180, 360 days, Billed A/R days, Unbilled A/R days, Cash Collections, and gross A/R days. By reducing their accounts receivable and increasing collections Sutter Health was able to focus on empowering their PFS staff to assume responsibility for the accounts they personally dealt with, thereby allowing managers to have their own tools andreceivables dashboard that helps them track progress on individual and team goals. These tools help “prioritize and automate account work lists, sort accounts in various ways by dollar, oldest date worked or who the payer is, it also allows managers to see at a glance their ranking within their work, group, and office wide.These tools are vital because they not only tell staff members where they need improvement but also in which accounts, if they were successful in any areas, and the impact they will have on A/R and cash collection goals.

Even managers were given their own dashboards to keep on track. Their tools allowed 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 30 day period.
  • Assess their performance for the month to date, and estimate likely results at the end of the month
  • View all receivables or select any segment for quick analysis
  • Generate timely reports on demand, including aging analysis, A/R stratification, discharge not final billed (DNFB) analysis, credit balance analysis, and analysis of problem payers” (Souza, McCarty, 2007).

In the late summer Sutter Health implemented its new system to the front-end staff with the opportunity to have claim denials reduced. At the end of the year when registration staff went online the new system was complete and allowed all employees to have access to the data they needed to produce clean claims. The new process allowed individual registration to be evaluated by a rules engine, identifying possible problems before the patient would leave the registration desk. Some of the problems or errors that occur at this stage are:

·“Workers compensation or liability class lacks accident information.

·Workers compensation is filed with an occurrence code other than 04.

·The patient’s guarantor is under 18 years of age.

·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 services.

·The patient is age 65 or older, but the Medicare plan insurance is missing.

·The patient had Medicare in any plan code, but the Medicare secondary payer questionnaire is missing.

·The health insurance claim number or policy ID number is missing.

·The patients address includes errors in format, punctuation, and/or abbreviations.

·The patient has duplicate medical record numbers” (Souza, McCarty, 2007).

This helps PFS staff quickly identify problems where more training or a different action might be needed. Sutter Health will be trying out a new tool to help to keep up with the amount of cash each staff member collects up front. While registering a patient the computer will send the user a message suggesting an action he/she should take toward the patient to help insure payment. Examples of these suggestions are “Patient has other accounts with returned mail; please verify address, or Patient has other accounts in bad debt; please request payment” (Souza, McCarty, 2007).

Souza and McCarty further stated that a simple prompt to the registrar to collect the amount preregistration has established with the patient can make all the difference. Sutter facilities started testing a new tool that would track money each staff member collected up front, with hopes to link that tool estimating and contract management systems so that registrars can be evaluated as well on percentages of contracted rates and established targets collected. While the Sutter system does require that staff receive comprehensive training, it does not require the need to hire a more formally educated staff without the need to raise wages above the current averages.

“The time to the registrar to attempt to collect the amount due at preregistration can make a huge difference for the collections department” (Souza, McCarty, 2007). When Sutter Health retooled their collection department they were able to give many more valuable tools to their staff. As with any business, training differs for each department. Proper training will ensure that payroll costs are contained by not needing staff to work longer hours. That those that are not accustomed to asking for money receive training to aid them in patient communication such as role play or script rehearsal. In order to keep the program cost down the new system is in place to give each staff member the training and information they need.

Facing problems such as how to take ownership of a problem and make autonomous decisions about how to solve them, how to identify trend and use it to boost performance, and how to use performance based feed-back results; Sutter Health chose Med Assets Receivable Manager, and My Mentor TM to resolve these issues. This not only gave staff real time reports but also the information they needed to make a smarter more informed decision. Receivable manger allows the nine facilities managers to have the information they need at their fingertips. The applications dashboard allows managers to identify and analyze potential issues and trend daily. “Using a simple drop down box “receivable manager” allows its users to isolate and analyzes data for each payor or staff member enabling faster problem resolutions” (Souza, McCarty, 2007). Souza and McCarty’s results showed that Med assists program was doing what it was needed for. The software helped the region’s central billing department catch a mistake in a payor’s contracted rate; a mistake that could have cost thousand had it gone unchecked. Luckily the error was caught within days instead of weeks like had been previously.

My Mentor has also been extremely helpful at helping office staff increase efficiencies and reaching goals in a timelier manner. This application provides each user with their own dashboard that tracks their individual goal/progress, and then allows them to compare theirs with others in the company. Margie Souza said “MyMentor is the most effective piece of software I have seen in my 32 year career” she also states “by giving the employees all the tools they need to run a business we’ve seen a renowned sense of ownership and competitive spirit in the department”. Souza also noted that her region is still implementing the applications medassist denial manager. “Once this process is complete, we believe we will see similar successes in denials management and patient registration areas” (Case studies,N.D.)

There are many different approaches that Sutter Health could have used to retool their collections departments, such as those stated in the article: “Selling Written-Off A/R”. This article explains that selling off a hospital’s A/R can be a benefit to the organization itself. Hospitals have the opportunity to unlock a dormant asset by selling their written off debt, one that will have a positive impact on their bottom lines. These debts do not include Medicaid or medicare. The debt is evaluated for purchase based on: the age of the debt, zip code of the debtor, size of the debt, or age of the debtor. “Hospitals that wish to sell their accounts receivable should first make sure their objectives and the debt buyer’s objectives parallel one another” (Czerwinski & Friend, 2008). While selling A/R is a quick and easy solution to delinquent account it does not solve problems within the account receivable department.The article labeled “Best practices for self-paid collections gives the following examples of the best practices that have been validated by leading healthcare groups: Success starts at registration, chart your self-pay population, assess expected collection rates and use predictive modeling. Eller states the most successful hospitals focus first on using technology to screen their accounts at registration, and then use established policies and procedures to guide their self-pay patient interactions.

While Sutter Health’s approach will and did take time to ensure each phase of the solution is implemented successfully they have been doing great at finding and fixing problems as they arise. There are quicker ways they could have approached the problem but by slowly integrating the system into the company they will continue to be successful. In the article “The Joint Commision names seven Sutter health Hospitals top performers for quality health care” the author states “This is such a high award as winners must meet two 95% performance thresholds in the accountability measures for which they report data” (PRN, 2012).

While there have been other hospitals that have faced the same problems Sutter Health was the first to find a working solution to the problem. They realized “the way in which health care organizations need to implement a new strategy into their A/R departments comes from the realization that time of registration is the best time to ask the patient for payment (Souza, McCarty, 2007). Sutter health may once have been on the brink of failing but found an effective way to turn things around for all non-profit organizations.

References:

Case Studies. (href="http://www.justanswer.com/homework/5hu1j-written-8-10-page-case-study-analysis-sutter-health.html1). Retrieved from

http://www.medassets.com/CaseStudies/Pages/Sutter-Health-Sacramento.aspx

Hummel, J., (2004). Sutter Health. Retrieved from www.healthdatamanagement.com/issues

The Sutter Health Story. (href="http://www.justanswer.com/homework/5hu1j-written-8-10-page-case-study-analysis-sutter-health.html0). Retrieved from

http://www.sutterhealth.org/about/index.html

http://www.allbusiness.com/health-care/health-care-facilities-hospitals/5504429-1.html

Czerwinski, R., and Friend, P..(2008, September).Selling Written-Off A/R. Healthcare Financial Management, 62(9), 128-30, 132.

Eller, T. (2008, June). Best Practices for Self-Pay Collections. Healthcare Financial Management, 62(6), 50-3.

Souza, M. & McCarty, B. (2007). From bottom to top: How one provider retooled its collections [electronic version]. Healthcare Financial Management.61(9). 67-73. Retrieved from ProQuest.

PR, N. (2012, September 19). The Joint Commission Names Seven Sutter Health Hospitals Top Performers for Quality Health Care. PR Newswire US.

Orion Health I. Sutter Health Implements Health Information Exchange Allowing Unaffiliated Providers to Share Critical Patient Information. Business Wire (English) [serial online]. 6:Available from: Regional Business News, Ipswich, MA. Accessed August 11, 2014.

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