January 28, 2004
In 2001, West Suburban Hospital Medical Center, of Oak Park, Illinois, began a significant financial turnaround by taking a hard look at its self-pay accounts receivables and implementing a new collection strategy. HFMA members Jack Holton, the hospital's senior director of finance and Carol Prine, manager of patient financial services, shared their experiences in this month's issue of HFMA's newest newsletter, Revenue-Cycle Strategist.
The hospital provides inpatient acute, nonacute, and outpatient services to residents of several upscale suburban communities as well as the west side of Chicago, one of the poorest areas of the city. An important part of the financial turnaround has been managing accounts receivable for this challenging payer mix.
Self-Pay's Impact on Bottom Line
The hospital's bad debt/charity as a percentage of gross revenue was 6.7 percent in 2001, and the goal was to reduce it to 5.5 percent of gross revenue based on current industry benchmarks. In total, based on gross revenue, the hospital's payer mix is 4.5 percent self-pay, compared with 2 percent for the city of Chicago. About 85 percent of the hospital's bad debt/charity care is related to patients served in the emergency department.
Turnaround Initiatives
The hospital determined that it did not have the staffing or telecommunications resources to adequately address the high volume of self-pay accounts. In addition, poor registration information gathered in the emergency department was a major factor in the inability to collect from self-pay patients.
The following initiatives were begun:
- Point-of-service collection procedures were begun for patient balances, co-pays, and deductibles.
- A financial clearance policy was established that required payments from all nonemergency self-pay patients before services are rendered. This policy needed to be integrated into the hospitalwide scheduling practices.
- An outsource vendor and an automated system were selected to process self-pay accounts through the collection cycle.
The approach was cross-disciplinary and included resource team members from key areas such as radiology, information systems, ambulatory care, patient access, accounting, and patient financial services.
Outsourcing Self-Pay Accounts
The hospital decided that pure self-pay accounts would be outsourced at day seven and that insured patients' liabilities would be outsourced after the insurance payment was received. The hospital uses the period prior to outsourcing to check for any possible financial alternatives, such as Medicaid eligibility, crime-victim remuneration, or any form of insurance that may have been missed at registration.
A scripting tool with the billing and collection systems is used to automate the process of assigning the self-pay accounts to the outsource vendor. The scripting tool automatically transfers the self-pay account to the outsourcing vendor.
The self-pay collection cycle is 75 days and includes a series of statements or letters and direct telephone contact. If the collection effort is unsuccessful, an automatic 10-day letter is generated, notifying the patient that the account will be sent to a collection agency if not resolved within 10 days. If the account is not resolved, the transfer to bad debts is automatic.
The process was established to ensure that self-pay accounts flow through a systematic process before going to the bad-debts account. The process eliminates any potential build-up of older self-pay accounts receivable.
Achievements
For the most current fiscal year, the percentage of bad-debt/charity accounts was 4.7 percent, down from the historical benchmark of 6.7 percent. The 2 percent improvement represented a favorable bottom-line effect of $9.2 million, compared with the targeted improvement of $5.5 million.
SOURCE:
"Self-Pay Outsourcing Strategy Contributes to Hospital Turnaround," by Jack W. Holton and Carol A. Prine, Revenue-Cycle Strategist, January 2004.
Additional Resources
- P&P Board Position Statement on Charity Service and Bad Debt
- Top 10 Self-Pay Best Practices (Online access available to HFMA members only. Nonmembers, see information on how to retrieve HFMA articles .)
- Five Self -Pay Control Points (Online access available to HFMA members only. Nonmembers, see information on how to retrieve HFMA articles .)
- The PATIENT FRIENDLY BILLING® project
- More HFMA resources on charging and billing uninsured and charity patients
- More HFMA resources on revenue cycle issues.
If you have questions or comments about HFMA Wants You to Know, contact editor Laura Noble at lnoble@hfma.org.
HFMA Wants You to Know ISSN: 1540-0697. Volume III, Issue 2. Copyright 2004, Healthcare Financial Management Association. All rights reserved.