One system fits all: centralizing business office operations results in a 50 percent reduction in denials and A/R days. (What Works: Financial Applications).
Presbyterian Healthcare Services (PHS) based in Albuquerque, NM, is the state's only locally owned, not-for-profit healthcare system, providing care to more than 400,000 New Mexicans through a range of services. We are New Mexico's largest healthcare delivery system with 12 hospitals, family healthcare centers, a home healthcare agency, outpatient centers, air and ground ambulance services, a physician network and a statewide managed care plan.
Some of our acute care facilities were added through acquisitions and continued to operate their own patient accounting systems and business offices. This created a decentralized business office with different patient financial systems across the facilities, and varied billing practices within our health system. A lack of skilled resources and high turnover in our billing staff resulted in a high volume of claims rejections because of improper coding and editing. In combination, these factors led to increasingly high A/R days, and ineffective cash collections. The system was so inefficient that, in many areas, our costs exceeded reimbursements.
At that time our A/R days were above 90, our days of cash on hand were 145, our denials were hovering at $1 million and our co-pay collection rate was $381,000. In addition, we faced the impact of the Balanced Budget Act and the year 2000, as well as the impact of federally mandated initiatives such as the prospective payment system.
As we prepared for Y2K, we also decided to move to a centralized business office (CBO) environment to manage the billing and revenue cycle for our seven acute care hospitals and our high volume outpatient center. We moved to centralize the operations on one system and platform, not only to improve financial results but also to simplify the demands on our IT department. Instead of managing disparate systems at the regional hospitals, the department would only need to support one centralized patient accounting system.
Because of the varied processes that were in place, we were not getting the most value from our health information system, an older version of McKesson's HealthQuest[R]. It was only deployed in limited use at our two hospitals in Albuquerque, while our five regional hospitals were using other systems and business practices.
At first, we decided to migrate to another vendor's patient accounting system. Contracts were signed and we were well into the implementation, but just 30 days before go-live, we pulled the plug on the installation project because the new system could not get bills to drop in the test environment.
We quickly shifted gears back to HealthQuest 2000--which we knew already worked in two of our facilities--and purchased the Y2K-compliant release for our five regional hospitals. Because McKesson's mainframe health information system is built to handle large transaction volumes, we were confident it would take PHS to the level of standardization we needed for a centralized revenue management model. We also wanted to use the pre-defined revenue cycle rules within the application suite to standardize patient financial processes, such as billing and collection.
Planning for a major upgrade at our two largest facilities and a concurrent go-live at our five regional facilities took less time because of our familiarity with the product. It took 12 months to install the upgrades, test the codes and interfaces, and train the users. Then, the actual switch of bringing the data into production on the new release occurred over a single weekend.
Our business office, clinical departments and information systems teams worked together to define a standardized process for admissions, scheduling and business office operations. At the same time, we redesigned a number of our prior authorization, co-pay/deductible/coinsurance collections, and insurance verification practices. We established clear objectives and put specific parameters in place to measure our progress.
Training played a significant role in our positive results. To realize the benefits of the system, we had to make sure employees were trained adequately. To update staff on the new solutions, we added full-time trainers who not only instruct new staff but also perform training audits to ensure that senior staff members continue to use the system properly.
Our accounting department put benchmarks in place to measure financial progress, starting with claims denials and extending to other operational areas. To track denials, we created denial-specific general ledger codes.
Whenever we were notified of a denial, we started tracking it by code. This helped us address why certain charges were being denied so we could avoid similar denials in the future. The result was that we reduced our denials by 50 percent, slicing the volume from approximately $8,300 in claims rejected each month to $4,150 each month.
The formation of the CBO and standard procedures for billing and collection, coupled with the new information technology solution, produced positive results in other operational areas almost immediately. In the first year of use we reduced our A/R days by 50 percent, going from 90 days to 45 days.
We improved days of cash on hand--measure of how many days an organization can operate if they were not to take in any revenue--from 145 days to 171 days. Meanwhile, co-pay collections jumped from $380,000 to $3.1 million after we instituted several new policies and procedures.
First, we started collecting co-pays at admission rather than billing patients for co-pay amounts, which historically had resulted in a high rate of collections and write-offs. Effective use of the new HealthQuest 2000 system and the CBO resulted in further improvements in tracking and billing of co-insurance. We established standard registration practices for member eligibility, benefits and co-pay rates, and we established a call center for scheduled OR procedures and certain outpatient visits, facilitating insurance verification and co-pay collection prior to the patient visit.
We continued measuring each of our initial goals, reducing A/R days, improving cash on hand, reducing denials and increasing co-pay collections, in the days and weeks following the implementation. We then monitored our monthly progress through a revenue cycle scorecard where we saw our financial improvements continuing. We surpassed our objectives in nearly every targeted area within patient financial services, in a 12-month period from start to finish. It was then we knew we were on the right track toward becoming a profitable healthcare organization.
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SOURCE Bob Skinner CIO Presbyterian Healthcare Services Albuquerque, NM firstname.lastname@example.org PRODUCT/COMPANY HealthQuest2000 McKesson www.mckesson.com