Sutter Health - Essay Sample

Introduction

Sutter Health is one of the earliest and biggest non-profit health provider in California. It is an organization of community based health practices which compose of various hospitals, physician practices and others. The practitioners aim is to give health care that is of high quality. The project has significantly been of great help and value to many communities (McCarty & Souza, 2007). However, in efforts to sustaining this initiative, the organization encounters many problems particularly in collecting revenue from self-pay sick individuals. This is mainly because of majority of these patients are either underinsured or have no insurance at all. This paper will discuss Brent McCarty and M. Souza's 2007 journal with the title "From Bottom to Top: How One Provider Retooled its Collections". The article gives details on how Sutter Health identifies the main challenges it was facing, relevant facts, solutions it derives and the outcome of the solutions. The essay will also explore different accounting resolutions taken up by the organization and also present a comparison with other approaches that apply to other health care facilities to solve the same problems based on discussions in other articles.

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Case study - Main Challenges and Issues at Sutter Health

By 2006, many organizations providing healthcare including Sutter Health were experiencing an alarming spike in outstanding A/R days and a significant reduction in collection of amounts owed by patients. This contributed to huge bad debts every year. The cause of this was an increase in unemployment rates as a result of an economic recession and also employers providing higher deductible medical care. In 2006, Sutter Health decided to investigate and establish the gaps in the policies and procedures. The objective after this was then to come up with corrective actions that did not result in injection of additional capital to purchase a new accounting system or restructure the functions tasked with collecting revenues.

Before implementing a new program, two problems were identified and they required immediate action without disrupting work. The first challenge was that employees responsible for revenue collection did not receive real-time information relating to the financial and operational metrics such as cash collections (McCarty & Souza, 2007). Management were forced to wait until end month to monitor progress or make key decisions. Isolation and analysis of specific information or generation of instant reports upon demand was not possible when using the accounting system. It was established that a request to obtain key management report had to be issued to a specialized programmer who develop the report using a complex code. This was time consuming and by the time there was complete generation of a full report, the information was sometimes no longer relevant. Secondly, there was lack of training for the staff handling patients' financial services (McCarty & Souza, 2007). The employees specifically had no proper knowledge on how best to collect money owed by patients by directly requesting for upfront pay before they are attended to.

Solution

The organization's strategy is to boost revenue collections and decrease the A/R days. As a way of resolving the problems, Sutter Health makes a decision to center attention on metrics such as the raw, unbilled, and billed days , cash collections, A/R days as a percentage of 90, 180, and 360 days, and A/R days for major payers (McCarty & Souza, 2007). The first step was empowering all employees handling patients' financial services (PFS) to own up the responsibility of each account they handle. By doing so, each staff embraces his or her own business and has a dashboard to monitor and follow up on progress to meet set individual and team goals. The staff have tools to help them achieve specific objectives. The tools assists in prioritizing and automating the accounts list of tasks, sorting the accounts using different fields such as payer, amounts and work dates, and also viewing their performance ranks amongst peers.

Apart from communicating performance, these tools disclose the improvement actions by pinpointing the accounts that lead to significant improvement in cash collection and decrease in A/R days. The management also have their own dashboards and tools. They allow them to establish any problem areas, track receivables and payments, explore all aspects of each patient account, evaluate their performances, and develop instant reports. The reports may have information relating to the analysis on aging, A/R structures, balance of credit, and problem payers (McCarty & Souza, 2007).

During the registration process, the patients' information is analyzed and any identification of any problem is detected. The challenges can either be the patient has no health insurance claim policy number, patient is over 65 years but with no Medicare insurance plan, incorrect individual's address, the person already has a bad debt accounts among others (McCarty & Souza, 2007). The new system flags this immediately by giving alerts prompting real time action. The system overwrites the cost of having to employ a specialized employee or increasing the current hourly wage rate.

Also, Sutter Health focuses on ensuring that staff acquire the necessary skills and knowledge to operate the system, enhance communication skills, and understand all aspects of information collected so as to submit accurate insurance claims to the patients' insurers. The organization invests in providing comprehensive training. Different staff have different training needs depending on their job areas. For instance, employees at the registration desk get training on how to refine their communication skills by role playing or rehearsing scripts. On the other hand, central business office employees' learn how best to utilize tools and deliver on tasks at hand. The training is a group training and runs for three hours. The module covered during the first hour is on efficient management of receivables which encompass problem identification process and how best to resolve the challenges promptly, and trends identification and utilization with aim of improving performance. The training boosts the staff's competency capacity without incurring any extra unnecessary costs.

To achieve the resolutions to the issues, Sutter Health selects the MedAssets' software which has two applications which are MyMentorTM and Receivables Manager (Souza & McCarthy, 2007). The applications gives both management and the staff timely information and also intelligence required to make well informed decisions. Through utilization of the software, the billing office was able to discover an error that could have led to huge underpayments. The error detection was in days compared to previously where it would have taken weeks. Employees also increase their work efficiency and attain both team and individual goals faster than before.

By the time the first phase of the project was complete which was in three months from initial kick off, there was a huge reduction of A/R days from the previous 65 days down to 59 days. Each day average revenue collections increased to about $13 million which was a spike of $78 million. While it is difficult to ascertain the actual return on investment because knowledge of initial investment amount, the writers are indicate that management at Sutter Health are very satisfied with the results (Souza & McCarthy, 2007).

Alternative Solution

An example of alternative solution to the Sutter Health problem is discussed by S. Koenig in his article named "A Prescription for Turning Self-Pay Accounts into Revenue". It discusses the link between increase in self-pay patients and spike in unemployment rates. Bottom-line, the high rates of unemployment and employers shifting the health costs in terms of copays to their staff are causing an upward scale of the number of patients who self-pay. Similar to Sutter Health, the article also highlights that the biggest challenges are a rise in outstanding A/R days and also a drop in revenue collections from patients. The main causes to this is that CFOs lack the proper metrics to evaluate problems more efficiently and that during solution implementation there is application of globally accepted techniques instead of customizing the solutions to suit the organization(Koenig, 2010). Also, employees do not receive sufficient training on how best to request upfront payments from patients, and also the staff resources are strained or inadequate to handle accounts that of self-pay.

Addressing this issues will significantly improve revenue collections because at least 80% of patients who self-pay can clear their medical bill or a huge percentage of it (Koenig, 2010). It is important to note that many health organizations maintain a charge master. During contracting with third party insurers, the charge master allows the organization to receive about 60% or 70% discounts. However, a patient with no insurance pay the full charge master rates which proves unsustainable for them. For example, if a sick individual is hospitalized for about three days and has a bill of about $27,000 but is insured by Blue Cross/Blue Shield (BC/BS), the insurer will only pay $6,000 and the remaining balance is written off by the hospital. However, for a patient who is uninsured, he or she is required to foot the full $27,000 which leads to him or her to walk away and not repay any amount at all. The solution to this will be to bill the uninsured individual an average rate with low or no interest payments. This will avoid ruining of the patients credit and also reduce the failure to repay the billed amounts (Koenig, 2010).

There has been a development of an initiative known as "MAP" by an association called HealthCare Financial Management (HFMA) in collaboration with leaders in the health industry. The abbreviation stands for Measure which basically means determine performance, Apply practices which are only based on evidence and Perform which mean delivering to highest standards. The program is based on the DMAIC Six Sigma standards (Koenig, 2010). DMAIC means Define the challenge, Measure the current processes' main aspects and gather factual data, Analyze the information collected to establish the problem's root cause, Improve the process factoring in the data analysis results, and Control the state of the process in the future. The control exercise should involve correcting any variations from objective before they result in defects. Also, there should be implementation of visual dashboard reports and consistent tracking of the process as part of control systems (Koenig, 2010).

The MAP program aims towards giving templates to help healthcare facilities enhance their revenue cycles, training to fully execute the program and constant support when you are a member of HFMA. There is an offering of a free membership to college students who are full time and provide free information on healthcare trends.

The 2012 journal by L. Butcher on "Centralizing Registration Boosts Collections, Patient Experience at Crozer-Keystone" is another example of an article that describes a healthcare facility applying metrics and training of employees to reduce outstanding A/R days. The article details the application of the same technique as the one used in Health Sutter but with a different angle. Crozer-Keystone which is a four practice system based in Pennsylvania combines its four distinct practices admissions functions into one offsite subdivision known as the Patient Services Center. Before admission into the hospital, patients have to visit the unit for registration purposes. The center validates the eligibility of the insurance of the patients and collects upfront payme...