An innovative, multi-tiered process to manage the hospitals’ commercial accounts receivable (AR) continues to produce significant benefits. This best-practice approach incorporates three phases:
- Internal staff works commercial accounts up to 60 days from billing date
- A primary AR vendor works accounts for the next 120 days from day 60 to 180
- A pre write-off vendor, also known as a secondary AR management firm, focuses on highly-aged claims of 180 billing days or greater
The progressive, triage strategy helps ensure all partial, late or denied payments are systematically worked to resolution, regardless of size or age. As part of the process, the performance of both internal staff and external vendors is assessed monthly against a set of pre-defined benchmarks.
This “found” revenue has become increasingly important in the face of tightening hospital margins, according to its director of patient financial services (director).
By 2006, the health system understood that working accounts aged greater than 60 billing days with its 170-strong internal billing staff was not a cost-effective use of limited resources, given the health system’s sizable revenue base and the ongoing demands associated with managing and adjudicating current claims. As a result, the health system assigned aging accounts inventory of over 60 days to two external primary AR vendors, each of whom worked an equal number of claims monthly.
Although this approach was successful in reducing write-offs, the health system decided to further streamline the aging claims management process and bring greater specialization and focus to its denial resolution efforts.
Going forward, one AR management company, designated as the primary, would be responsible for working claims aged between 60 and 180 days from billing. The second firm ̶ HFRI ̶ would function as the secondary or pre write-off resolution vendor and work only those claims that were 180 days or older. While a tiered vendor process has been utilized by hospitals to work self-pay balances, this was an innovative approach to manage insurance claim AR recovery with payers. A third, zero-balance vendor would retroactively examine closed claims to assess payment accuracy and ensure every avenue had been pursued to fully collect any potentially available reimbursement.
Under the system’s tiered AR approach, approximately 20% of commercial claims typically remain uncollected after 180 days. These highly-aged claims, that have been worked by the primary AR vendor, then flow to HFRI, the pre write-off service partner.
HFRI relies on a combination of robotic process automation (RPA) and intelligent automation to organize denials and delays by root cause. Specialists trained to address each denial category then work to pursue the claim to resolution in 90 days or less, regardless of size. As part of this process, HFRI’s root cause analysis enables the company to provide the entire health system with ongoing guidance about ways to improve the revenue cycle at the front-end to reduce denial incidence in the first place.
The director states that HFRI and the primary AR management vendor function as virtual extensions of the health system’s billing staff. That means both are fully integrated into the hospitals’ information and cash remits systems and subject to system policies and procedures.
The AR management firms also are subject to monthly report cards that illuminate their performance against predetermined metrics, and both internal staff and external partners are required to score 90% or better. The report cards assess six performance areas, ranging from accurate claim and expected payment information to precise documentation of payer interactions via phone and/or email, including escalation to the supervisory level when required, as well as the specific actions taken to resolve the claim in the context of required deadlines and time windows. If the target score isn’t achieved, penalties or adjustments are made.
“We don’t really view this arrangement as outsourcing,” the director said. “Our partners must meet the same requirements as internal staff, and I think ultimately this approach gives us the greatest return for our AR management investment while also providing us with the most flexibility.”
A critical factor in the success of the tiered AR management approach has been the thorough working knowledge of the complex California payer market maintained by their partner firms, including HFRI. According to the director, this knowledge is critical to understanding who ultimately is responsible for paying a claim, given the area’s large concentration of Medicare and Medi-Cal managed care arrangements and numerous payer-provider risk-sharing contracts.
HFRI Pre write-off Collection Results:
- Consistent monthly report card scores of 99% or better against rigorous performance standards
- Collected $70 million in revenue from highly-aged claims since 2012
- 100% resolution of all assigned claims
- Produced an average net collection rate of 67% on accounts that otherwise would have been written off
- Rapid identification of self-pay accounts enabled more efficient patient billing and collections
“We appreciate the work HFRI does and how responsive they are to our questions and input,” said the manager of vendor management and credit and refund. “They are a valuable partner in the execution of our total accounts receivable strategy.”
She added that “we may pay our vendors a little more than what other companies might charge, but we believe the investment is worth it, since they’re ultimately able to put more money back in our bank account.”