Accounting Problems in Health Organizations: Sutter Health - Research Paper Example

?CASE ANALYSIS: Sutter Health A brief about Sutter Health Sutter Health being a not-for-profit organization serves several communities of people in Northern California through their health services. More than twenty hospitals, facilities for medical research, health services at home, and other health networks are part of this large health organization. The Sutter Health organizations along with other not-for-profit health networks attempt to serve people through sharing of their resources with intentions of improving the quality of service (Anon., June 2011). As per facts available, “nearly 47 million Americans are uninsured”; however from this it cannot be said that all these people would be unable to pay for health care services. Most of the people, even if uninsured, are working and therefore, can be expected to have resources to spend on healthcare (Souza, & McCarty, 2007, p.1). Sarah Krevans, the President of Sutter Health Sacramento Sierra Region, has won the title "2011 Woman of the Year" by Women Health Care Executives, and she continues to perform through her guidance on delivery of health care to the needs and demands of the patients. The health care, under her guidance, has made much advancement, which is appreciable to a great extent (Anon., June 2011). The affiliated medical groups under Sutter Health got listed among the top health organizations. Also, hospitals under the Sutter Health received certificates of excellence from California Hospital Assessment and Reporting Task Force (CHART) in 2010 Not only this, the Sutter medical centre, is undergoing plans for expansion. Thus the level of achievement and advancement can be well understood. (Anon., June 2011) Considering the achievement of profit margins as one of the most important strategies for any organization (and when the organization is a health centre, issues of health plans and collection of payments are of major importance), my research report deals with the problems faced by such health organizations in increasing their margins, and the probable solutions to such problems. Sutter Health has found certain planned measures to improve the conditions of payments collections, thereby solving many of the accounting problems within the organization. Through this report, I would discuss the measures outlined by Sutter Health and thus their pros and cons. This report is mainly based on an analysis of the Sutter Health’s approach and how the approach proved beneficial to the health organization system. Also, by comparing with the measures other organizations are following, the report has certain recommendations for Sutter Health that may benefit the organization further with its accounting problems. With a view to solve the accounting problems in health organizations, Sutter Health devised certain measures by which the collection of payments can increase and the accounts receivable can decrease within the organization. The following section would throw some light on the details of the case: The Case in Details: One of the main objectives of any organization would be to try to maximize the profit margins. And in case of any health organization, one of the ways to do this would be to receive the payments on time, which can be done by collection of payments for the services before the services are provided. However problems arise when/if the registration staff is not comfortable to ask for money. Thus, for this purpose there is a need for someone who would play the role of asking for the payments. Such a role is played by the “Patient Financial Services (PFS) staff member”. Owing to the problems faced in payments collection, there arises a need for a shift from the back end office staff to these staff members who, through the use of complete, accurate, and timely information, arrange for the collection of payments on time. (Souza, & McCarty, 2007, p.1) As per the Sutter Health approach to the accounting problems, proper requirements and information are provided to the PFS staff members, so that they can work on the improvement of payments collection. Sutter Health through its approach has tried to find out means to help the PFS in all way possible to improve the accounting situation in the health organization. The next section identifies the problems related to the health organisation. Identifying the problems: To identify the problems that were being faced by the health organization, some of the issues that were considered important for improving the accounting conditions in the health organizations are discussed below. It can be seen that the accounts receivables is a major part to be taken care of, that is, the amount of payments that is yet to be received by the organization. Capitation is the technique of compensating health care service providers. Therefore, whether the capitation is less, or what is the amount in the credit balance of the organization, and accordingly the accounts receivables, are necessary to be measured. This would give an idea on the receivable status of the organization. The cash collection methods of an organization are also important, particularly to identify whether they are efficient to bring payments. For example, in case of health organizations, if the registration staff is supposed to ask for money, and if they cannot do it, that would only unnecessarily delay the payments; instead if PFS can work, they should be allowed to take the steps. Again there can be unbilled or billed accounts receivables. Billed receivables are referred to those where the invoices or the billing information have already been sent to the customer. On the other hand, unbilled receivables are those where the billing invoices have not yet been sent. So depending on billing or not billing, the amount of accounts receivables may increase (the unbilled amounts, without notice would accumulate further). Measurement of the percentages of accounts receivables is also important to see how many times the number of days for payments cross 90, 180 or 360 days. The more the number of days would be, the more it would be less beneficial for the organization. Also, another important point to be noted by the organization is the list of payers who are most prominent. The major payers can be accordingly be contacted for early payments, if necessary. Thus these reflect the basic issues confronting a health organization if it has to increase its margins. It can well be understood that if the accounts receivables decrease or the number of days for such payments decrease, it would automatically help the organization in earning more and early, thereby, increase profit gains as well. The following section refers to the steps taken towards solution of the identified problems. Solutions by Sutter Health to the Identified Problems: Sutter Health, in order to help the PFS staff members, for the purpose of increasing payments and decreasing accounts receivables, searched for some measures which help the PFS with their work by providing accurate and timely information, as per their requirements. According to the Sutter approach to accounting problems, the PFS are expected to assume individual responsibility for the purpose of increasing payments and decreasing the accounts receivables. For helping the PFS with their required information, the Sutter Health provides them with certain tools which are discussed as follows: The accounts works are sorted and listed in a manner which helps to give the PFS the idea as to how the exact work is going and also point out situations where there are chances of improving. Managers also have their own receivables tools which they can use to find the data of all receivables, work on the patients’ accounts, study the revenue generation, payments and other necessary adjustments, calculate and judge the daily financial performance, and also prepare timely reports as per requirements. A denials management team was formed which also proved helpful. All parts of the organization would be able to access all information which is necessary for dealing with claims. Another important phase includes the front-end collection of money. Most of the payments can be received at the point of service only, thus this opportunity should be utilized. Hence, accordingly, Sutter has found rules by which the patients would not be able to leave before the entire process of registration completes. Some of the problems that may arise in such moments include: Invalid patient type; patient's guarantor is under 18 years old; Medicare insurance plan is missing; Patient’s address includes errors; and other such problems. (Souza & McCarty, 2007, p.1) The front end collections enable the PFS to understand situations better, the problems thereon, and accordingly take measures immediately. Another way by which Sutter helps the system is through comprehensive training. The training is mainly provided so that outside hiring of manpower does not become necessary, which may also increase the expenditures by increase in wages. The training does vary according to the different divisions and according to the job. The registration staffs, who are supposed to collect payments, are given training particularly on that field. The training helps the staff to learn about the effective way to increase payments and decrease accounts receivables, also as to how to present themselves to the patients, how to ask for payments, thus in short to help them learn how to achieve and maximize profits. Also, instead of believing in rewards, Sutter provided the staff with independence, responsibility, and effectiveness, which gave the power to the staff to work and take the responsibility on their own (Souza, & McCarty, 2007, pp.1-2). Thus, in order to improve performance, and increase point-of-service collections, the Sutter Health took measures to study and judge the accounts receivables, so that the PFS get the idea properly, give them individual responsibility so that they can work independently, and ensure training as per the requirements. Sutter Health also joined more than twelve health organizations that are nationally recognized in the High Value Healthcare Collaborative (HVHC) - a project that will share comparative data to make new ways to improve clinical means while reducing health care costs across the U.S. Members of HVHC include: “Baylor Health Care System, Beaumont Hospitals, Cleveland Clinic, Dartmouth-Hitchcock, Denver Health, Intermountain Healthcare, Maine Health, Mayo Clinic, Providence Health and Services, Scott & White Health Care, Sutter Health, The Dartmouth Institute, UCLA Health System, University of Iowa Health Care, and Virginia Mason Medical Center”. The HVHC is expected to focus on prevalent areas that vary in rates, costs, and outcomes like total knee replacement, diabetes, asthma, heart failure, depression, spine surgery and weight loss surgery. (Anon., May 2011) Results of Sutter Health Approach: Now I would discuss in brief whether Sutter approach proved to be successful or not. Point-of-service (POS) collections, and thus, the Sutter approach, have proved to be beneficial in many ways. People having insurance covers get used to paying before receiving the services. POS collections help the people by ensuring that they do not receive a huge bill at the end of several months. The financial obligations can be judged at the beginning only and thereby served accordingly. The Sutter approach also proved helpful as it provides accurate, responsible and timely information needed for the purpose of acting on the financial performance of the organization. With the help of technology and following systematic procedures, the Sutter approach found means to help the health organizations increase payments and decrease accounts receivables and hence increase the overall margins (Souza, & McCarty, 2008, p.2; Gomez, 2011). Alternative Solutions: I have, till now, discussed about Sutter Health’s approach. Now I will discuss some other alternatives that may be used for the benefit of the organization. A very important way that nowadays many health organizations are following is the Outsourcing of one or more services. Outsourcing may be affected owing to several factors like cost savings or customer satisfaction. For example, health organizations in Greece are found to outsource a variety of activities. Through this method, a contract is made with an outside provider who on behalf of the organization performs one or more activities. Such companies are becoming very popular as many health organizations are satisfied with their performances which is helping them reduce their costs and also solve problems related to cash collections or decreasing accounts receivables (Moschuris & Kondylis, 2007). As per surveys, nowadays, hospitals are also outsourcing clinical services. This is also more happening owing to the expertise that these outside providers provide to the health organizations (Waller Lansden Dortch & Davis, n.d., pp. 1-4). Considering the topic of concern, outsourcing seems to be one of the best solutions to help the organizations with the problems of cash collections. There are several examples of health centers that are making use of outsourcing. For example, NextGen healthcare with an intention to improve its revenue cycle management formed NextGen Practice Solutions created by two companies. This formation would help the clients in earlier cash collections. Also, there is Ontario Systems providing solutions to receivables management by improving front end collections, setting up patient payment expectations, thereby serving its customers like Artiva Healthcare solutions (Waller Lansden Dortch & Davis, n.d., pp. 1-16). Another example is of DCH Health system that reduced its cost factors, and also accounts receivable days all with the help of Caremedic’s electronic financial record. Audrain Medical center in Mexico also required help for a computer conversion project as well as for collections of accounts receivable in time. And they got Dell Services’ Revenue Cycle Solutions as their solution providers. Organizations outsourcing their activities have been found to be benefited through these service providers. ‘Ontario systems’ is known to provide fully integrated solutions to its clients who help in gaining profits. Ingenix has also helped its customers to earn more cash within a less time than before, that is, by decreasing the average number of days of accounts receivables. (Waller Lansden Dortch & Davis, n.d., pp.1-16). Few other health organizations that also outsource their activities include Madrid health authority, Intermountain Healthcare. Madrid health authority has been outsourcing its activities to Accenture whereas Intermountain is outsourcing to Select Health. (Accenture, 2011; Intermountain Healthcare, 2010) The main purpose of discussing the above service providers is to suggest that Sutter Health along with its own approach may also plan to follow this outsourcing method as this would help the organization more to handle the problems of cash collections as the responsibility would be taken by an outside provider. Since these providers are doing well, by providing integrated solutions to accounting problems, and thereby helping the organizations by decreasing accounts receivables and increasing cash collections, so Sutter Health can also approach this policy for its benefits. Some other alternatives that can also be followed include: HARA or Hospitals Accounts Receivable Analysis can be adopted as an alternative measure which can help the organization to improve performance as it is a very important benchmarking tool. Such analysis helps to measure one’s own health center’s performance against other similar health organizations, providing details of performance results, trends, and long term planning. (Robinson-Crowley, 1998, pp. 65-68) Secondly, collection losses would occur more if the chances of repayment by the patients are less. Thus, instead of providing patients with too much of credit facilities, prior judgments are required to be made of the patient so as to understand whether the credit is provided to the right person, for example, a moderate down payment can be asked to be made. Even while providing credit to other customers or service takers of the health centre, prior examinations should be done to understand the right candidate to be given a credit facility. Opportunity costs should be tried to be lessened as these become the costs for which return is not guaranteed. Also, different strategies should be continuously tried, for example decreasing one cost component while increasing another, and so on, to see which strategy can work best. Conclusion: Considering the poor accounting measures in the health organizations, and going through the Sutter Health approach, I would like to conclude that the Sutter Health has tried to come up with measures which are truly helpful in increasing payments and decreasing the accounts receivables in the health organizations. I have discussed, in the report, the problems that can be identified within such organizations, and the probable solutions that Sutter has come up with, and also how such solutions or point-of-service collections have proved beneficial. I have also given certain alternative measures which many other organizations do follow and any organization may follow for the purpose of improvement of financial performance. On a personal note, the Sutter approach seems to be a very well planned procedure to follow to improve accounts receivable situations and thereby increase the ultimate gains or profit margins. Bibliography Anonymous (2011) Sutter Health Leader Sarah Krevans Named Woman of the Year by Women Health Care Executives: Sacramento Sierra Region President Sarah Krevans Honored for Leadership and Innovation, PR Newswire. Retrieved June 6, 2011 from: ProQuest Newsstand. (Document ID: 2363121921) Accenture (2011) Madrid Health Authority: IT Outsourcing, Retrieved on June 16, 2011 from: http://www.accenture.com/us-en/Pages/success-madrid-health-authority-it-outsourcing-summary.aspx Gomez, J. (April 20 2011). Lawsuit claims Sutter Health over billing for services. Oakland Tribune, Retrieved June 6, 2011, from ProQuest Newsstand. (Document ID: 2325347701). Intermountain Healthcare, (2010), For Intermountain Healthcare Trustees, Retrieved on June 16, 2011 from: http://intermountainhealthcare.org/about/overview/trustees/fortrustees/handbook/intro/selecthealth/Pages/home.aspx Moschuris, S. & M. N. Kondylis, (2007) "Outsourcing in private healthcare organisations: a Greek perspective", Journal of Health Organization and Management, Vol. 21, pp.220 – 223 Robinson-Crowley, C. (1998). Understanding Patient Financial Services, Sudbury: Jones & Bartlett Learning Souza, M. & McCarty, B. (2007), From bottom to top: How one provider retooled its collections [electronic version]. Healthcare Financial Management 61(9): 67-73 Sutter Health Joins Health Systems Nationwide to Share and Compare Data on Quality, Outcomes and Cost: One-of-its-Kind Health Care Collaborative Led by The Dartmouth Institute for Health Policy and Clinical Practice. (25 May). PR Newswire, Retrieved June 6, 2011, from ProQuest Newsstand. (Document ID: 2357152001) Waller Lansden Dortch & Davis (n.d.) Hospital outsourcing Trends in Clinical Services, Wallerlaw, Retrieved on June 16, 2011 from: http://www.wallerlaw.com.sitemason.com/files/WallerSurvey.pdf Read More