Cut hospital losses with upfront injection of cash

Front end is the focus

John E. Kivimaki, director of patient accounts at Mary Rutan Hospital in Bellefontaine, OH, was asked by his CFO to identify areas in the revenue cycle where losses could be reduced by focusing on upfront efforts.

His proposal identified several best practice processes and technologies to increase front-end account settlements, improve cash collections, reduce bad debt, and improve quality of care. (See Kivimaki's proposal on page 5.)

"By implementing these process changes and by providing our registrars with current technology, we can increase our current $2 per front-end registration effort to a conservative $10 per registration," says Kivimaki.

A $10 increase would add more than $40,000 in monthly revenue, or more than $500,000 in annual revenue. "This injection of cash would increase our cash on hand, improve our bond rating, and improve our bottom line," says Kivimaki.

First, Kivimaki researched multiple technologies and processes. He used resources such as the Healthcare Financial Management Association, a Westchester, IL-based organization that provides education on maintaining fiscally healthy health care organizations.

The result of this effort pointed to one partner, says Kivimaki, whose clients are averaging $100 per registration in upfront account settlements. "They provide a turnkey solution and best practice processes that fit our goals like a glove," he says.

Kivimaki says that based on this research, he concluded that his patient access department can reach its goal of reducing losses by providing registrars with the following tools:

• identity and address validation/verification

This ensures the name and address provided by the patient is an accurate U.S. postal address, and also that the guarantor is associated with that address. "This step will reduce returned mail and reduce denied claims," says Kivimaki. "It will also reduce fraud, and ensure we are compliant with the FTC Red Flag Rules."

• capacity to pay determination

"Thanks to the Internet, there is loads of non-credit-scoring information available today," says Kivimaki. "By identifying the patient's true capacity to pay at the point of registration, we can design our discounting policies around the guarantor's capacity to pay." Also, registrars can identify those patients who qualify for charity.

• interactive scripts

"Once we have the patient's capacity to pay, it is important to provide our registrars with a script to follow, so they can engage in a conversation with the patient about their financial responsibility," says Kivimaki.

The script integrates the hospital's business rules and discounting policies. It provides the registrar with the exact words to say to every patient, in order to settle his or her account at the point of service.

• charity screening

"By having the guarantor's capacity to pay, we can automatically identify who qualifies for charity," says Kivimaki. "And, we can prompt our registrars to complete necessary charity application forms on the spot."

Those forms can be electronic, with the patient information entered into the system auto-populated. This saves time and ensures the forms get completed and filed.

• price transparency & payment plan negotiation

"In order to settle patient accounts on the front end, we must provide an estimated cost of services," says Kivimaki. "The estimated cost of services provides our registrar and the guarantor an estimated price to start with."

Since registrars know the cost of most common procedures, this information can be provided to the patient upfront. This estimated cost can then be used as a basis to negotiate a settlement with the patient, and set up a down-payment and payment plan.

"The interactive script then provides the registrar with the parameters to settle the account with the guarantor," says Kivimaki.

• simplified insurance verification

In order to verify insurance, registrars need to be able to identify the guarantor's copay and deductible information. "By providing these two data points to the registrar, we can speed up the settlement process and improve collections," says Kivimaki.

Insurance verification also should provide primary and secondary insurance information, and also identify pre-authorization requirements. "This prompts our registrars to contact the insurance provider before we complete a procedure requiring pre-authorization," says Kivimaki.

• payment processing

"We should equip our registrars with a real-time, easy-to-use payment processing tool," says Kivimaki. "This ensures the money we collect from the patient goes directly to our merchant bank."

Ideally, the tool should allow the registrar to set up recurring payments based on a negotiated payment plan. This way, the patient does not have to be billed, and instead, can pay via a credit card or monthly automatic check handling transfer.

• Red Flag compliance

"The FTC has determined that hospitals are required to follow Red Flag rules," says Kivimaki. "If audited, our facility is at great financial risk if we are not in compliance. Our front-end system should identify potential fraud. Registrars should be prompted to take the appropriate steps to ensure the patient is who they say they are."

Address validation is an important first step, and another is the ability to provide reports to the FTC auditor. "Even if the FTC does not enforce Red Flag rules, identifying fraud is simply good business practice," says Kivimaki.

• reporting

"We cannot manage what we cannot measure," says Kivimaki. "It is critical that the management team has real-time insight into each registration and each patient account negation that occurs."

Management needs to know what payment arrangements and settlements registrars are completing, and more importantly, what they should be completing. This way, they can address training issues as they occur.

"We can also budget more effectively by knowing the revenue streams that will be coming into the hospital, based on payment plans that have been set up," says Kivimaki.