Six Sigma process greatly increases New Jersey ED’s cash collections

Methodology is new to health care

A thriving emergency department (ED) cash collection program is the latest manifestation of Marlton, NJ-based Virtua Health’s use of an innovative quality assurance and process improvement strategy called Six Sigma. The ED project has been "wildly successful beyond our dreams," says Kathleen Reilly-Santomero, corporate director of patient business services/patient access for the health system, which includes four acute care hospitals and an ambulatory center that has an ED. Together, the five EDs see more than 125,000 patients annually.

The cash collection effort began in October 2003, and by June 2004, the five facilities had collected more than $452,000 just in managed care copays in a setting where previously there had been no cash collection at all, she says. Another $280,000 in payment-due notices were distributed during the same period to patients who couldn’t pay on the spot, Reilly-Santomero notes — roughly a quarter of which were returned with payment within 30 days. Within 60 days, about half were returned with payment, she adds. Any patient who pays without being billed saves the hospital roughly $25 in billing costs, Reilly-Santomero points out, not to mention the percentage of the payment that goes to a vendor if collections are outsourced.

Virtua Health’s embracing of the Six Sigma methodology came about as a result of the health system’s partnership with GE Corp., she explains. "We are in the process of building a brand-new, state-of-the-art hospital, which will be a GE showplace. It will have the latest GE equipment, from CAT scan units to PDA systems for physicians," Reilly-Santomero adds. As part of that relationship, Virtua — one of the first five hospital systems to partner with the company — received management training that included Six Sigma, which has been described as a measure of quality that strives for near perfection, she notes.

A web site devoted to Six Sigma defines it as a "disciplined, data-driven approach and methodology for eliminating defects [driving toward six standard deviations between the mean and the nearest specification limit] in any process — from manufacturing to transactional and from product to service."

Although use of Six Sigma is more widespread in the manufacturing sector, it still is new to health care, Reilly-Santomero says. "It is a system of measurements, where everything is measured and analytically controlled and contained. If you reach Six Sigma, you’re perfect," she explains.

While Six Sigma has been used for years in industry to measure things such as "how many chocolate crunchies went into ice cream," its application to health care is somewhat on the cutting edge, Reilly-Santomero notes. "We’re using a manufacturing methodology in a human environment, so it has to be tweaked. We have to take into consideration the humanness of what we deal with," she says.

System’s not 100% perfect

Those overseeing the cash collection project, for example, knew from the beginning that it couldn’t reach perfection, Reilly-Santomero adds. "It’s an ED; we felt at least 50% [of patients] would be unable to pay for whatever reason, whether they had insurance or not, because they’re not in a position to have money with them. "So scoping that 50% of patients would be our perfect,’ we could only make three sigma,’" she explains. "Right off the bat, [the project] was an instantaneous success," Reilly-Santomero notes, adding that the outcome also held an interesting surprise.

Project leaders considered leaving the ambulatory center out of the cash collection initiative, she explains, because the majority of patients there were uninsured. Interestingly, though, while not bringing in a lot of money to the project, that facility consistently has collected the most accurate amounts from those who do present with insurance.

With three sigma, this project’s definition of perfect, the ambulatory center is at just under two sigma, a higher rating than that of the four Virtua hospitals, Reilly-Santomero says. Part of the reason, she adds, is that the ambulatory center is a much smaller facility, where the registration area allows staff a better view of the patients than at the larger hospitals, which have four or five different exits from the ED.

The success continues’ 

The significance of the Six Sigma project is that "the success continues," she points out. "It doesn’t stop, [as] can happen with other projects."

The five phases that make up a Six Sigma project are referred to as DMAIC, Reilly-Santomero says, which stands for "define, measure, analyze, improve, control."

"We systematically work through those five processes," she adds, "and it’s the last phase — control — that keeps the project flowing with continual follow-through so that it doesn’t fall short and disappear." The in-depth analysis that often is lacking in other projects is done in advance with Six Sigma, Reilly-Santomero says. "With the cash collection project, for example, we wanted to know how many copays we were collecting on the back end, and how many days it takes to [get payment] if we’re not collecting," she adds. "Then we measured all that data to find out what portion of that amount we could collect on the front end," Reilly-Santomero continues. "When we determined an appropriate number, we measured and analyzed and said we probably could collect only 50% of the total dollars on the front end."

Identifying the self-pay patients

When the cash collection program expands to include uninsured patients, she notes, project leaders will do an analysis to determine how many patients are genuinely self-pay customers, from whom the hospital actually collected revenue, at each campus.

Another organization looking at the issue of uninsured patients, Reilly-Santomero explains, has decided that instead of billing for every item, it would come up with a set amount, and if the patient could pay that, would write off the rest. The idea is that the hospital "is not tracking [the patient] down to get every dime," she adds. The advantage to the hospital is that billing and collection costs are eliminated, explains Reilly-Santomero. Virtua likely will consider that and other approaches as it looks at expanding the cash collection effort, she says.

With a Six Sigma project, there are typically one or two sponsors — occasionally more — who set the parameters, she adds. "They say, This is what we would like to [have as] the bottom-line outcome.’ With cash collection, for example, it was the chief financial officer.

"Who the sponsor is depends on what the project is," Reilly-Santomero points out. "It usually is a person who can make a decision even when it comes to spending money — the approvers of the final plan."

After a project is developed in a "work out" — an examination of how work can be taken out of a process — those involved report to the sponsors, answer questions, and literally get a wave of approval or a "whoa," she says. "It might be a whoa’ because they wanted 10 full-time equivalents, and can only be given five."

Getting clinician buy-in

Key to the success of the cash collection project was gaining the cooperation of nurses and other clinical personnel, notes Karen Foster, manager of patient access management at Virtua Hospital, Voorhees campus. "We had to come up with a process for identifying patients who need to make a cash payment, so we decided to have registrars mark those charts with a red stamp," she explains. The charts are stamped after the patient is triaged, and then a card with managed care information is presented to a registrar, Foster adds, although no mention of payment is made at that time.

Because the registration area is isolated from the triage area and waiting room, it was particularly important to get the buy-in of clinicians, she says. After the patient goes to the treatment area and receives care, the nurse handling the discharge sees the red stamp and directs or escorts the patient back to the registration desk to make the copay, Foster adds. Patients whose charts do not bear the red stamp exit from the treatment area and do not go back by registration, she notes.

Because only managed care patients are directed to the registration checkout window, Reilly-Santomero points out, "the total volume isn’t hitting a cashier space — only those who actually have copays."

"The physical layout is a big issue because [managed care] patients have to be registered, taken to the ED, and then returned to registration [for checkout]," Foster says. "It’s a challenge because there are lots of exits."

"We are anticipating having decentralized registration within about three months," she adds, "which would put registrars, including a checkout person, right in the ED."

The department already does a great deal of bedside registration in the ED, but in moving a registration desk into the area "visibility to the patient would be greatly improved," Foster explains. "Where [registrars] sit now, they can’t see the patient at all."

Although there was some initial reluctance on the clinical side to take a proactive role in the payment process, she says, cooperation came through convincing nurses that "it’s not a clerical process; it’s a team process that will benefit the entire hospital. "You have to walk softly and carry a big stick," Foster notes. "Everyone is working in the Six Sigma project and understands that we needed to do [cash collection]. Once you have the right people in the room and the right buy-in, it trickles down to staff."

It helps that, at the Voorhees campus, the patient base typically has good insurance, she says. "These are generally people who pay their bills. Often in this environment, they’re offering to pay." Those who don’t pay on the spot get the payment-due notice and have five days to send in payment before they are billed, Foster adds.

The project will be expanded over the next year to try to capture payment from self-pay patients, who now are billed after service, Reilly-Santomero says. "Those who need assistance will be directed to a financial counselor. That happens in phase two."

Patient throughput next up

The newest Six Sigma project on the access horizon has to do with patient throughput, she notes. In that work out, project leaders will look at "where we can take work out and consolidate the effort," Reilly-Santomero adds. They also focus on the customer or customers involved, she says. "Sometimes, the customer is yourself. Sometimes, it’s the physician. Sometimes, as with patient throughput, the customer is many people — physician, patient, clerical staff — so you analyze and get the voice of the customer." That might involve bringing in small groups or doing a survey to get customer feedback Reilly- Santomero says.

As part of the work out, project leaders put the existing process on a big piece of paper on the wall, a process map that shows 150 steps involved in getting patients in and out the door, she notes. "We get the right people in the room — clinical folks, registrars, supervisory personnel for patient access, the nursing manager, the patient accounting and billing folks — and they look at the map to remove some of the work in the process."

With an initiative in the outpatient area, the goal is to speed the flow of scheduled patients so that they are coming in, having the service, and walking out the door, Reilly-Santomero says. "That may mean realigning staffing, and retraining. If so, we do that. We start with a clean slate."

[Editor’s note: Kathleen Reilly-Santomero can be reached at (856) 325-3305 or by e-mail (]