The California Sutter Health - Case Study Example

The California Sutter Health (CSH) basically is a point of service collection scheme, in which uninsured patients pay for their services up-front, before the services are rendered. The duty to collect the money for these services falls upon the registration staff, thus front-ending the payment process, instead of the traditional back-end process where the patient is billed for services rendered, and then pays. This system also enabled the collection end of CSH to take control of their own individual accounts receivables, empowering them to do what is necessary to collect. This scheme allowed CSH to reduced its account receivables by $78 million in just three months. Before they were able to enact this new system, a few problems needed to be worked out. Among these problems is the fact that the patient financial services (PFS) staff member was not able to access real-time financial information; management was not able to generate reports with enough detail; and the central business office (CBO) also could not access real-time financials. This led CSH to focus on a few key benchmarks, including gross accounts receivable (A/R) days (less capitation and credit balance accounts); cash collections; unbilled A/R days; billed A/R days; percentage of A/R over 90, 180 and 360 days; and major payer A/R days. The overall strategy employed by CSH was to empower each PFS staff member to assume responsibility over the individual accounts that they were dealing with. As far as the front-end collections, CSH identified that were several potential problems that could be resolved if these problems were tackled before the patient received services, not after. For instance, the patient might be relying upon workers compensation, and this claim might not be paid by the insurer because accident information is missing, or the occurrence code was filed incorrectly. Or maybe there are other errors, such as the patient has two medical record numbers, or is incorrectly classified as a widow. These are examples of errors that might cause the claim to be denied, and the PFS were trained to spot these errors and correct them so that the claims could be properly processed. Before enacting the new system, CSH had to train their staff in using the new system. Registration employees, who, before, were not accustomed to asking for money were trained on the proper way to do this and interact with incoming patients. Employees of the CBO also were trained on strategies regarding taking control of their own accounts, and how to properly steward these accounts to a successful conclusion. In return, CBO members expressed a gratitude for their new autonomy, and were enthusiastic about the change. As for the patients, this new system was either not a big change for them, as they are already accustomed to paying co-pays and deductibles up-front, or they are enthusiastic about it, as it gives them a concrete financial figure up-front. This sort of transparency proved reassuring for patients. At the same time, the system presented new challenges that CSH had to face, including the fact that cost-shifting would no longer be acceptable, as the charges must be reasonable; that certain individuals would not be able to pay their bills, and these individuals would be in need of discounts, flexible payment options and in-depth financial counseling; and patients needed to be educated about billing practices. CSH found that, when all the tools were in place, indigent patients were given options, and the patients were educated about the billing practices, these patients were grateful for the change, as opposed to resentful. Alternative Solutions While CSH found success with this new system, other hospitals and medical providers have implemented similar procedures and have met with similar success. One such medical provider is Kristen Dillon, M.D. Dillon is an OB/Gyn doctor who noticed that there were many outstanding patient balances. Part of the reason why there were so many large balances is because paperwork deficiencies caused infants to be turned down for insurance coverage, and, when this happened, the staff simply rolled these bills onto the patient, instead of taking this up with the insurance provider (Dillon, 2006, p. 5). These infants were properly enrolled, but there was a lag between the enrollment and the time when they showed up as eligible by the provider. Therefore, this issue should have been pressed with the insurance company, not the patient. This problem was resolved by holding billing until the infant was two weeks old, which gave sufficient time for the infant to show up in the insurance providers system, and enabled proper billing that was not rejected (Dillon, 2006, p. 50). Other innovations tried by Dillon were, as with CSH, collecting fees up-front, before services rendered; making a simple change in their billing to show that the total amount was due, as opposed to a partial payment; and payment agreements were revised to show that the patient was required to pay 10% of their total bill in installments, instead of asking for a $25 minimum, which is what Dillon was doing previously. These changes resulted in Dillon to cut her A/R by almost $20,000 in a seven-month period and to cut her A/R that are six months old or older by 50% (Dillon, 2006, p. 52). Another study showed that merely adopting technology, as opposed to paper-based billing, resulted in decreased A/R, and a decrease in claim rejections. This study, conducted with 17 anesthesiologists, implemented a system of entering charges on a hand-held personal digital assistant (PDA). This one change resulted in a downward trend of A/Rs, a decrease in charge lag, a decrease in timely denials, and a net collection increase (Fahy, 2009, p. 583). Another article describes different ways that different hospitals are dealing with the problems of collecting patient balances (Hammer, 2006, p. i). One of the ways is by providing transparent billing information to the patient before the patient receives services. This is similar to CSH, and it enables patients to “comparison shop,” while encouraging hospitals and health-care providers to keep their costs low and quality high. Another way that hospitals are cutting down their patient balances is by providing information to them about their accounts on-line, where patients can pay their bills and communicate with the provider via e-mail. This cuts down on patient balances by providing them a convenient way to pay their bills on-line with a credit card (Hammer, 2006, p. iii). Some hospitals have taken this one-step further, allowing the patients to see all the bills - from the hospital, and the physicians – on-line, and in one place. Other hospitals are taking advantage of their web-site to explain, in detail, why insurance claims may be denied, as well as putting these reasons into their billing statements (Hammer, 2006, p. v). This educates the patients and allows them to better understand why a certain claim was denied, which also cuts down on an A/R that would have resulted if the patient did not understand these processes. Still other hospitals are increasing their collection rates by simply consolidating all the bills from all the providers at the hospital, as well as the hospital bills themselves, into one mailing. This is opposed to the traditional way of doing this, in which the patient receives separate bills for each encounter and each provider. This resulted in patients being better informed, with a better understanding of their bills (Hammer, 2006, p. vi). This process alone allowed one hospital, Stanford, to reduce its A/R by $1 million per month (Hammer, 2006, p. vi). All of the above procedures really falls into one category, that of transparency. These changes enable patients to better understand the billing processes, and, at the same time, make payment more convenient. This transparency and added convenience has enabled health care providers around the country, who have invested the money to revolutionize their billing systems, to reap the rewards. Through examining all of the above research, an alternative solution to CSH can be formulated. This solution would incorporate some of the CSH innovations, such as up-front billing, with other aspects that have been demonstrated to work for other health care providers. The ideal system would be an amalgamation of what has worked for all of these different providers. This system would feature up-front billing, or, at the very least, transparency to the patient, so that the patient can know how much the services will cost before they are rendered. It would also use some of the strategies employed by Dillon, which means that the patients will be encouraged to pay a larger amount of their bill with each billing cycle, as well as encouraging patients to pay their bills in full by stating, on the bill, that the entire amount is due upon receipt. A simple change from paper-based billing to PDA proved successful in one study, so this would also be incorporated in this alternative system. Lastly, the innovations used by other hospitals – including allowing patients to pay all their provider bills on-line, as well as providing a consolidated bill to the patient that includes all charges from the hospital providers in one mailing – would also be an aspect that would be incorporated in this new system. Although these changes may be costly, and a bit of a headache up-front, they have proved to work wonders for hospitals and health care providers around the country, so they should all be implemented into the new system. Assessment of CSHs system CSHs system, like some of the other systems explained above, is brilliant in its common-sense simplicity. One of the problems that health care providers face is that, for uninsured patients, “sticker shock” ensues when that patient gets the bill. This “sticker shock” turns to outrage, which turns to refusal to pay, which increases the A/R for the hospital. However, CSH, like other providers, are cutting down on the “sticker shock” by explaining to the patient, up front, how much the services will cost. While the patient may still complain, at least he or she is warned up front, and, if the procedure is elective, may choose whether or not to go through with the procedure based upon how much the charges will be. Also, collecting the money up-front is a good move, although it might cut into business, as many patients cannot afford to pay for procedures in one lump sum. Therefore, if the procedure is elective, and the patient must pay for this procedure up front, he or she may not be able to, which causes the provider to lose out on this patients business. At the same time, the health provider may not want the patients business if the patient cannot afford to pay. However, maybe the patient can pay, but would just have to make payments. The scheme of up-front paying therefore, while cutting down on A/R, also probably cuts down on business and revenues that could have been realized if the patient was allowed to make payments. Another good move by CSH was in training their intake staff to spot potential problems that might result in a claim denial, and nipping these problems in the bud. This is helpful, as a problem will result if, by some paperwork technicality, a patients claim is denied. This denial will, more often than not, lead to frustration on the part of the patient, as the patient is confused about why the claim was denied, which, in turn, would probably lead to the patient refusing to pay. This is because he or she feels, probably justifiably, that the insurance company needs to pay. Meanwhile, the insurance provider is refusing to pay because of a minor paperwork error that could have been fixed, and fixing the error would result in payment in full. By training the staff to spot these errors, this will naturally lead to many more claims be processed and paid, as opposed to denied. At any rate, the issue of transparency and up-front payments by CSH has proved to be successful by providers around the country who have tried it. Therefore, this seems to be a good change not just for CSH, but for health care providers in general. This not only makes good business sense but may, over time, revolutionize the way that health care is delivered in this country. This is because greater up-front transparency will encourage comparison shopping. Suddenly, hospitals will be competing with one another by offering lower prices than their competition. This competition was not possible in the old days, when patients had no idea how much their health care would cost until they get the bill months later. This healthy competition will lead hospitals to examine how to cut costs while offering quality service, which will reduce bloat and cut the rising costs of health care across the board. This solution just may go a long ways towards solving the health care crisis in the United States. Sources Used Dillon, K. (2006). Patient balances: Getting to the root of the problem. Family Practice Management, 48-52. Fahy, B. (2009). Acute pain management efficiency improves with point-of-care billing system. International Anesthesia Research Society, 108(2), 583-587. Hammer, D.C. (2006). Adapting customer service to consumer-directed health care. Health Care Financial Management, i-v. Read More