Healthcare Financial Management - Literature review Example

Case Study, Finance, and Accounting Case Study, Finance, and Accounting Souza & McCarty (2007) state that Sutter Health is one of Northern California largest health care providers that has the commitment to provide its esteemed clients the Patient Financial Service (PFS). The PFS has both front and back ends tools to improve patient collections and the system bottom line. The new system became operational in 2006 and involved different stakeholders such as collectors, members of the Sierra region, patient account representatives, and the entire health system that works in collaboration of the registration staff. . The aim of the bottom to top HealthCare Financial Management is to transfer most of the back-end functions to the front end to make point-of-service collection the norm. During the first three months of the project, Sutter reduces accounts receivable days for nine hospitals in the region from 65 to 59. The health system collects 91 million from the nine hospitals. Sutter strategy of increasing collections and reducing account receivable focuses on empowering individual PFS staff members to assume responsibility for every account they deal with. Many hospitals face challenges in their attempt to increase upfront collections from self-pay patients. Recently, California’s Sutter Health finds an effective way to achieve this goal. One of the best strategies to optimize margins in the time of high deductible health plans and high copayments is to collect a lot of money from the patients that include self-pay patients. Souza & McCarty (2007) confirm of a common misconception that close to 47 million American with no health insurance policy and are unable to pay for their health care. In reality, most of the uninsured entail working families that have resources to meet their health care obligations once someone makes that request. PFS can assist someone to pay for healthcare. The PFS staff requires up to date, accurate, confidence, timely information, apt skills, and confidence to use them. The needs apply during registration of staff because the best time to collect payment and services before providing the services. The registration staff has a habit of asking for money and it is crucial to transfer the responsibility from the back end central business office to front-end staff. PFS staff requires well-organized staff and structure for efficient services. Sutter Health Approach According to Souza & McCarty (2007), Sutter Health is one of Northern California largest health providers that have commitment to give its PFS staff on the front and back ends tools in a bid to improve the patient collections as the system bottom line. The patient account representatives, members of the central business, and collectors in Sacramento work their way to register the staff to transfer most of the back-end functions. Setting Benchmarks Sutter identifies several problems in the course of analyzing its revenue management cycle prior to implementing a new program. For instance, (1) the PFS staff cannot obtain real time information on the key financial and operational indicators such as cash collections and account receivable days. As a result, the management and the staff have to wait until end of the month to evaluate and track progress, set benchmarks, or make crucial business decisions. (2) The hospital accounting system does not permit managers to analyze and select specific data or to generate reports that require detailed information. Sacramento region relies on a specialist programmer to develop the reports that frequently lead to expensive delays and correcting problems. (3) The central business office (CBO) faces the challenge of lack of real-time information. The staff can only access limited outstanding accounts assigned to them. The account representatives fail to prioritize effectively or monitor their progress. Sutter decides to focus on handful primary benchmarks to address the situation such as gross account receivable days, unbilled account receivable days, gash collections, percentage of account receivable, and major payer account receivable days. Sutter provides PFS staff with different tools to help them prioritize automation, sort accounts, and evaluate the target. Tools inform the staff on ways to improve that will have the greatest impact on the cash collection goals. The mangers have own tools to assist them in monitoring revenue payments, calculating average daily revenue, and assessing performance in every month. Front – End Collecting Half of the required billing elements originate at the point of access. The revenue cycle presents a great opportunity to reduce claims denials. To help ensure optimum performance at the crucial juncture, Sutter new process require analysis of each registration by a rules engine before a patient leaves the registration desk to identify potential problems. Some of the errors identified at the stage of front-end collecting include workers’ compensation due to lack of information, a minor guarantor, an invalid patient for hospital service, An adult above 65 years old with no Medicare insurance, a patient with two medical record numbers, and lack of a health insurance claim number. Comprehensive training Sutter system has the design to support existing PFS registration and staff without the need of hiring formal educated staff. The system does not require staff to have comprehensive training. Sutter staff encounter technological alternative to practice test system mode. The highly intuitive system permits them to work independently with little assistance. The health system uses tangible rewards and formal recognition as form of motivation. The effort to increase point of service collections will improve the overall revenue cycle as Sutter Health takes steps to measure performance using specific primary benchmarks, empower PFS staff to assume responsibility for every account handled, analyze the registration using an engine to identify when patients leave the registration desk. The aged trial balance analysis shows aging and status of the patient representative with the intention of assisting the representative his performance –improvement efforts. The size of hospitals remains a cause of disagreement in United States healthcare industry. Questions consistently focus on cost management or efficiency in the large versus small hospitals. A persistent question among the researchers is whether efficiencies associate with larger facilities through economies of scale or whether they alter scenarios to play a noteworthy part in the cost of hospitals and efficiency. Prior research study uses a wide variety of performance measures to compare the hospital performance by the size of the organization. A prior study examined performance differences between the system and independent hospitals using two cost measures that include payroll per patient day and cost per case. Some of the efficiency measures include full-time equivalents and admission per bed. The study also examines cash flow, asset turnover, cost per case, change in occupancy, complications, occupancy, and the length of inpatient stay. A technical advisory group created a financial indicator report to specifically access hospitals. The report is in use by the Chief financial officers to measure revenue, utilization, liquidity, cost, and measure profitability. Hospitals in five-year period depict signs of improvement with most indicating volatility on the modest improvement. The prior hospital performance research is inconclusive concerning the hospital size and requires extensive research. Researchers examine the possibility that hospitals gain economies of scale as the size increases. Some of the factors associated with hospital efficiency and facility size include percentage of Medicare and hospital ownership. Those factors remain consistent with efficiency due to economies of scale. The efficiency indicators are frequently in use as measures of hospital performance. It is important to note that the percentage of occupancy base on the available beds and not the licensed beds. Five cost indicators in the study frequently used as measures of hospital performance. Three of the five cost indicators adjust to isolate discharges, admissions, and the patient days that associate with acute care activity to exclude skilled nursing facility (SNF). Some of the hospitals under the study are CAHs. The hospitals are non-profit making or state-owned and are cost-based reimbursed based on the percent of patients that are Medicare. It is possible to adjust small hospitals report cost per adjusted on the large hospitals. Most of CAHs report a high cost structure in all manners due to the cost-based reimbursement. Overall, CAH account for 84 percent of small-sized hospital category, 60 percent of revenue on the small hospitals. Efficiency results of non-profit hospitals appear to achieve higher performance levels as measured by the current asset turnover that operate efficiently than in the industry. Small and large non-profit hospitals appear to achieve higher efficiency levels measure occupancy levels that except larger hospitals of both ownership types using this measure. From the national and state perspectives, it is not clear amount spent by the hospitals and health care system in general in respect to the capital outlays. It is a known fact that hospitals utilize largely outdated medication equipment. Hospitals should invest in different projects including routine maintenance, technology, medical equipment, remodeling, and expansion. Capital outlays to expand and modernize plant and equipment are some of the critical components to improve overall hospital financial performance. The hospitals that invest in the latest medical equipment as well as remodel tend to replace the aging facilities. Additionally, they should recruit and train physicians to enable them compete with other equal health care providers. Hospitals that miss the opportunity to reinvest in plant and equipment tend to deteriorate in cash flow. Nonprofit hospitals have deteriorating cash flows that can reduce their liquidity position to inhibit an access to affordable tax-exempt financing eventually. The capital outlays to renovate and modernize plant and equipment are critical drivers to improve the overall hospital performance. Within California State, there are several descriptive and anecdotal reports concerning the types of hospital capital expenditures. Researchers investigating hospitals in the state find that Californian hospitals spend on capital expansions that relate to replacement hospitals, development of specialty services, and the conversion of private rooms. Vast proportion of new construction relate to replacing aged hospitals, expansion, adding capacity, and the development of specific service lines. In contrast to anecdotal and survey studies, the Healthcare Financial Management Association classifies four different types of capital expenditures. California acute care hospitals increase their capital expenditures by a margin of 23 percent. The assessment of the number and average of capital purchases depict a primary growth that occur in medical equipment and maintenance and renovation projects. The capital outlays total close to $4.51 billion in 2012 in comparison to $3.26 billion in 2003. The capture of a greater share market and treating higher working class families appear to relate to a type of capital project. Some of the medication equipment acquired includes surgical systems, robotic surgical systems, PACs, and CT scanners. The expansion projects that relate to increasing hospital beds include replacing hospitals and adding bed towers. The purchase of new medical equipment is at the request of the senior physicians that order ultra modern medical equipment that will capture new patients for the hospitals. The revenue enhancing that relate to the capital decisions compete with the hospitals, specialty providers, and physician practices. The purchase of new equipment can contribute to the rise of expansion and renovation projects since hospitals need new space to accommodate new technology. The large bed size facilities require greater capital needs. For every incremental increase in the number of bed size, it will result in greater number of capital purchases for the four categories. The private nonprofit making hospitals account for the highest number of hospitals in the state as well as the largest bed size facilities. District hospitals total more than the investor-owned hospitals with investment in the expansionary projects being larger than state and the investor-owned hospitals. The strategic capital plans for district hospitals allocated for the purpose of expansion to replace existing facilities instead of making capital decisions that relate to renovation on the existing plant and equipment. Over 75 percent allocated to the district hospitals is for the intention of purchasing CT scanners, new equipment, MRIs, and other equipments. The expansionary projects include replacement of hospitals, the expansion of operating rooms, new hospital wings, and emergency rooms. The district hospitals are proactive to develop capital budgeting strategy to attract and retain clinicians. The capturing of a greater share of the market and treatment of high paying commercial payers relate to medical equipment purchases and expansionary projects. The purchase of new medical equipment by the hospitals will influence meeting physician’s needs for the ultra modern medical equipment as well as capturing new patients for hospitals. Getting Patients on board In summary, It is easy for the health systems to view the benefits of POS collection Most healthcare leaders raise their fees the same way completion heightens. Consumerism in Health Care suggest that combination with other patient policies such as simplified charge structures, POS collection, and quality information will lead to collaboration among the health care providers. Patients with insurance coverage use copayments and deductibles prior to receiving services. The POS collection eliminates the obsolete sticker shock patients. The simple fact is that consumers are aware of their financial commitment since hospitals provide charge estimates to help patients prepare when they arrive at the hospital. A hospital should do three things to accomplish other than implementing technology these include: a) Offer on the spot, skilled, and flexible payment options to the self-pay patients that are unable to settle their bills. b) Educate patients meticulously in more than one time concerning billing practices. c) Able to justify charges for the ordinary people to accept as reasonable at the end of cost shifting. With effective programs in place in addition to technological tools to help PFS it will deliver quality customer service. References Souza, M., & McCarty, B. (2007). From bottom to top: How one provider retooled its collections. Healthcare Financial Management, 61(9), 67-73. Read More