Jason L. Adams
J. Cathy Smith
Brett Strand

MultiCare Health System shows how, with the right planning and monitored execution, a hospital can maintain its cash flow while installing a patient accounting system and achieve even higher cash levels upon completing the installation.

At a Glance

MultiCare Health System's plan for ensuring that its patient accounting system implementation would bring rapid financial benefits comprised eight basic steps:

  • Set baselines and establish goals.
  • Identify key leadership stakeholders across departmental lines.
  • Identify team resources.
  • Establish roles and responsibilities.
  • Identify and prepare for potential risks.
  • Develop guiding principles.
  • Develop key reporting and monitoring tools.
  • Conduct daily monitoring.

Large new patient accounting system implementations can be a source of anxiety for hospital financial leaders. These projects are not only complex and challenging-with many stakeholders and interdependencies-but also a source of great risk to a hospital's financial stability, particularly because the system is expected to handle all of the data used to generate the facility's income from patient care.

The central difficulty is that as late as 12 to 18 months after installing a large patient accounting system, a hospital can still be struggling with residual processing issues. And these issues translate into delayed cash or, in some instances, lost cash that is never realized. This lost income only adds to the organization's cost for the new system, with the true cost amounting to the price paid for the system plus the reduced income after its installation.

Multicare's Vision

When MultiCare Health System, a not-for-profit integrated health system headquartered in Tacoma, Wash., embarked on a patient accounting system installation in 2007, its executive leaders were determined that an extended period of lost income after the installation would be unacceptable. They believed they should expect, and even demand, to see cash stability through the install period and immediate improvement in financial performance following the new system implementation. With this idea in mind, MultiCare's leaders, along with their selected partners for the project, began to build the framework and tools to ensure that the installation would advance, rather than impede, the organization's efforts to achieve its year-end financial goals.

Great success begins with a vision that gives a strategic direction. For MultiCare's leaders, this vision was not just an abstract idea. It also included the understanding that metrics would be required to monitor the organization's performance, and that-depending on how MultiCare performed against those metrics throughout the install period-specific action would be taken to keep the organization on track to meet its goals.

MultiCare's leaders identified four key financial metrics:

  • Gross accounts receivable (A/R) days
  • Net A/R days
  • Bad debt
  • A/R aging

The organization was to have seven months after system go-live to achieve levels for these metrics that were, at the very least, the same as those seen before the installation. Reaching these targets would mean that cash would be strong and accounts held in receivable would be low. It would also reflect very strong year-end financials for the health system.

MultiCare's leaders also understood that achieving this goal would require a systemwide effort. They recognized that the revenue cycle has changed from what it was 20 years ago. Then, it was considered to consist principally of just two areas: admitting/registration and patient accounting. Today, almost every area of a healthcare system has its own impact on the revenue cycle. Although patient access and patient accounting still have a considerable bearing on the cash ultimately received, so, too, do many other factors, including clinical documentation, coding, payer contracts and payment requirements, and clinical appeals.

For this reason, MultiCare's leaders understood that success in achieving year-end goals would depend on cooperation and co-ownership between the finance and clinical leadership, and among all of the affected departments. To create the most effective revenue cycle process possible, all of these areas needed to function smoothly and in sync.

The Plan

A plan consisting of eight broad steps was developed to realize this vision and achieve the four success metrics.

Set baselines and establish goals. To lay the foundation for the initiative, baselines for the four primary success metrics were set for the project using historical data. These baselines became the targets that MultiCare would need to beat to achieve its goal of improving upon metrics reflecting MultiCare's performance prior to the system implementation. A dashboard was established that would allow the project team to track these metrics both weekly and monthly. Use of this dashboard would be critical to ensure all parties involved knew where the race began and where it was expected to end.

Identify key leadership stakeholders across departmental lines. Because success with this initiative had to be seen as a systemwide goal, not just a "patient accounting goal," the initiative required the commitment and support of finance, IT, and clinical leadership. MultiCare's CFO and CIO assumed joint sponsorship of the project, thereby establishing strong visible support and leadership for the project. Clinical leaders also were willing to come on board because they understood that each day increase in A/R days, each percentage increase in A/R aging, and each percentage increase in bad debt would directly and immediately affect the organization's cash flow and overall financial picture for the year-end.

Identify team resources. Internal resources that were enlisted for the project included representatives from IT, patient accounting, access, and various clinical departments. The project team also drew on outside resources, seeking a partner to help lead project management and ensure fiscal year-end metrics would be achieved. They also decided to outsource a portion of the old legacy A/R to allow the patient accounting staff to focus on the new system.

Document roles and responsibilities. To manage expectations and ensure the project's success, project roles, in addition to the CFO's and CIO's sponsorship, had to be clearly identified and documented. Four steps were taken to this end:

  • IT took responsibility for a system command center, which would be used to manage the overall system implementation.
  • Action teams composed of departmental leaders-both finance and clinical-were created ad hoc to address issues and concerns that were reported back to the command center.
  • Department representatives were assigned to lead the tactical steps that were identified to address various issues, such as specific areas of unbilled or missing charges.
  • Project leads were assigned to create/review reports, interpret data, make recommendations, help mitigate risks and guide implementation

In addition, patient accounting and access staff were given specific individual work queues, which were designed to drive performance toward the A/R, cash, and bad debt goals. These work queues were continually redefined throughout the project to reprioritize focus as needed. The legacy A/R accounts given to the outsourcer were also monitored closely, and strategy and focus planning meetings were conducted jointly with the outsourcer routinely throughout the project. Again, the system implementation and achievement of A/R metrics by fiscal year-end was a systemwide effort that crossed departmental lines.

Identify and prepare for potential risks. Risks are inherent within any system implementation, and when stringent metrics are tied to the implementation, it is important to anticipate as many risks as possible. Among the risk-related questions that MultiCare considered were the following:

  • Could, or should, staff vacations be delayed?
  • How accurate was the initial estimate of the time and effort needed to manage all work queues, including charge entry and reduction of unbilled accounts?
  • How many internal staff would realistically be needed to devote the necessary amount of time to the project to ensure a high-quality outcome? Was the originally projected number sufficient?
  • Will the change management effort undertaken to communicate the project to staff and prepare them for new roles and processes be effective?

To help mitigate the risks that were identified and managed through the project, MultiCare had to make some difficult decisions. For example, some vacations had to be delayed, and additional resources had to be added for certain departments to help them identify lost charges where charge volume variances were initially greater than expected.

Preparing for the people side of change is critical because tasks, roles, and workflows can change dramatically after a system install. For example, newer systems support pushing work queues to the front end and, in some cases, to the clinical areas. These areas may never have been responsible for these work queues and may not have sufficient staffing to handle the additional workload.

It is also important to identify "black holes," such as dollars and accounts that are not noted on the new system reports. Information can be missing for a wide of reasons-for example, the algorithm used to distribute the accounts may not have distributed all of the possible account categories. One good way to find out if A/R information is missing from the distribution across the new work queues is to download A/R to compare it with system reports and work queues.

Develop guiding principles for the initiative. Com-munication is essential for any team, especially when the team members are spread across the organization. By agreeing to the following guidelines, project team leaders could ensure continuity and common understanding:

  • Communicate often, even daily in some cases.
  • Use data, rather than subjective opinions, to report the project's status and to guide recommendations and next steps.
  • Hold themselves and their teams accountable.
  • Respond quickly to issues identified in their areas.
  • Support each other. System implementations can lead to unforeseen glitches and challenges that can result in late nights. The project's success depends on the willingness of every project team member to do what's necessary to help each other make the project successful.
  • Always keep the end goal in sight, despite any obstacles along the way.
  • Elevate issues that represent a high risk for the organization to the major project sponsors (CFO and CIO) for input, direction, and assistance.

Develop key reporting and monitoring tools. The project team defined detail metrics, in addition to the four key high-level metrics, to be monitored and managed daily. The main detail metrics reviewed were:

  • Revenue (charges) by cost center
  • Unbilled dollars and days (includes discharged not billed [DNB] and claims held in edits)
  • Claims transmitted (quantity and dollars)
  • Cash and adjustments posted (daily and weekly averages)

The project team also reviewed the following on a weekly and monthly basis:

  • Claims denied (quantity and dollars by payer)
  • Bad debt write-offs
  • Administrative adjustments

Team members monitored revenue (charges) by cost center daily until they determined that the new system was capturing all charges. They used a tool developed for tracking revenue by department/service line to facilitate comparison of charges before and after go-live. This Revenue Tracking by Cost Center report, which also identified accountable owners, was e-mailed to all department heads and reviewed daily at multiple levels in the organization, including IT, clinical, and various revenue cycle areas.

The unbilled dollars and days were monitored daily through the two metrics DNB and claims held in edits. These two metrics were so critical to the end results that the team made 30-minute calls daily to address each metric. The DNB call required, at a minimum, representatives from billing, HIM, patient access, and case management. The claim edit call required representatives from billing, HIM, IT technical support, and patient access. These calls have been so effective for communicating and holding departments accountable that MultiCare has decided to continue this approach into the foreseeable future.

Control limits were set for each unbilled responsible area to identify whether their number of unbilled accounts was acceptable, on the border, or too high.

Claims transmitted were tracked daily to ensure the volumes of claims released were growing and reaching the levels prior to go-live.

Cash and adjustments were tracked daily, weekly, and monthly to identify trends and project future month-end numbers.

Conduct daily monitoring. Daily monitoring of key metrics at the tactical level was deemed essential because cash can be directly affected by even slight changes in the metrics being measured. Just one day with missed focus can allow slippage, and a week of inattention can allow risks to escalate and negative impacts to be significant.

In particular, during the two daily calls to address unbilled backlogs, each group received the metric dashboards for DNB and claims held in edits, respectively. It was mutually agreed that stakeholders who had met their goals for the metrics would not need to attend the call. Stakeholders who had not made their goals, however, would be required to attend the daily calls and work to correct deficiencies.

Daily attention also was given to reviewing charge entry and to helping ensure all charges were being captured into the new system. This daily focus was essential and effective, in that changes could be effected immediately upon identifying problems, which were often complex and distinctly different from department to department. The daily calls and the monitoring tools provided the means to hone in on the root cause of each issue and resolve it quickly.

Issues Identified

It was in large part through this quick resolution of issues that MultiCare was able to ultimately meet its financial goals following the project. Examples of issues that were identified and addressed after go-live through daily monitoring included the following:

  • A review of detail charges by cost center/department disclosed that some charges on a daily basis had declined in some departments after the installation as compared with prior levels.
  • A review of the reports on unbilled charges disclosed that, in some instances, these unbilled accounts were not being resolved as quickly as they should be-a problem that would negatively impact cash if allowed to go unchecked.
  • A review of claims transmitted daily after go-live disclosed that the volume of certain types of claims was lower than expected, having declined relative to the period before installation.
  • A review of potential adjustments on accounts both in-house and outsourced helped identify other actions that could be taken, such as additional steps to collect or more detailed, separate tracking to disclose the reason for an adjustment.

Daily monitoring also allowed repeated issues to be identified. For example, missing charges was a relatively common problem, occurring in more than one area. The daily monitoring and the shared commitment across departmental lines allowed for lessons learned to be applied across the organization, thereby helping to push each metric toward improved levels.

The Results

The results were tangible and easy to measure. Seven months after system go-live, as a result of the focused efforts of the entire team and the departmental subteams, MultiCare reported improvements in all four cornerstone metrics, as shown in the exhibit.

Exhibit 1


MultiCare also achieved other notable outcomes through this process. The organization improved its existing internal revenue cycle processes and reduced redundancies and inefficiencies. Meanwhile, patient accounting staff gained greater accountability and knowledge regarding the metrics that drive revenue cycle success. The more an organization's staff members understand the impact of the changes in these metrics, the better positioned the organization will be to respond to future variances.

MultiCare's leaders and staff also came away with a greater understanding of the tools available for monitoring, and they decided to keep some tools in place after the project to allow monitoring to continue.

Key Success Factors

Looking back over the seven-month project period, MultiCare's success could be attributed to 10 key factors:

  • Executive leadership support, knowledge, and awareness of processes and issues
  • Identification of the roles of each person and group early in the project
  • Predefined, clear, and measurable success metrics
  • Development of an overall strategy and tactical work plan
  • A set, and immutable, timeline for completion
  • Departmental accountability
  • Identification of appropriate resources
  • Frequent, and often daily, review of detail metrics
  • Open identification of risks and immediate development of risk mitigation action steps
  • Ongoing interdepartmental communication

These factors helped promote constructive, action-oriented communication toward a common goal with shared accountability. Everyone won together-or failed together. The result was a strong team effort and a collective determination not to accept failure.

Measuring the Impact

Many hospitals have put off upgrading or converting revenue cycle systems due to financial constraints, particularly given the current economic climate affecting U.S. hospitals. Typically, hospitals are concerned not only about the cost of the system, but also about the potential for cash lost during the transitional period after system installation, which can be 12 to18 months or longer. But as MultiCare Health System's experience demonstrates, with the right plan in place, strong leadership and project management, and key metrics and tools, a hospital system can substantially reduce the transitional period and, within as little as seven months, end up better off financially than it was before the implementation. In fact, following its patient accounting system implementation, MultiCare enjoyed its best financial year to date in 2007, with approximately $25 million in additional cash at year-end made possible by the new system and the processes established to get it up and running within a short time frame.

Several months later, MultiCare's metrics still shine. In 2008, MultiCare had the lowest unbilled accounts of all reporting users of its patient accounting system-just two A/R days. Moreover, any hospital can achieve similar results, regardless of the specific patient accounting system being implemented or the geographic region. What is required is only the commitment to create a plan like the one described here and to insist on success by diligently adhering to every step of that plan throughout the entire implementation process and beyond.

Web Extra: View reports used by MultiCare Health System to monitor revenue cycle performance following implementation of the organization's new patient accounting system.

Jason L. Adams is vice president, revenue cycle, MultiCare Health System, Tacoma, Wash., and a member of HFMA's Washington-Alaska Chapter (jason.adams@multicare.org).

J. Cathy Smith, FHFMA, CIA, CISA, is managing director, Wellspring Partners, a Huron Consulting Group Practice, Bellevue, Wash., and a member of HFMA's Washington-Alaska Chapter (jcsmith@huronconsultinggroup.com).

Brett Strand is project manager, Hospital Billing Implementation Services, Epic, Verona, Wis. (bstrand@epicsystems.com).

About MultiCare Health System

MultiCare, based in Tacoma, Wash., is a not-for-profit integrated health system comprising four hospitals and numerous primary care and urgent care clinics, multispecialty centers, hospice and home health services, and other services. MultiCare's history begins in 1882, with the founding of Tacoma's first hospital, the Fannie C. Paddock Memorial Hospital, which was renamed Tacoma General Hospital in 1915. MultiCare has since grown to become the area's largest healthcare service provider, serving patients at 93 locations in the four surrounding counties. (www.multicare.org)

Publication Date: Tuesday, September 01, 2009

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