Volume IX Number 2

May 2003
 

The Newsletter of

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Vital Signs

[Editor’s Note: The following is a Press Release issued 5/1/03 by D E K A Y E Consulting, Inc., and is based on the results of its PFS Power Rankingssm system.]

HOSPITAL COLLECTIONS IMPROVE REVERSING TWO-MONTH DECLINE

DEKAYE Consulting, Inc., a Long Island, New York, consulting firm, released its latest PFS Power Rankingssm summary data that measures hospital Patient Financial Services departments’ performance. The Monthly National Average (MNA) for April 2003 scoring (for March 2003 data) is 17.0, which represents

a 1.8 increase over the 15.2 scored last month. This score reversed a two-month decline from the 17.7 recorded for the January 2003 rankings. As a result, the Historical National Average (HNA) remained unchanged at 17.0. However, this marked the first time since the inception of the PFS Power Rankingssm that the HNA and MNA were at the same level.

Company President and CEO, Allan P. DeKaye, MBA, FHFMA, indicated that, "We saw the re-bounding occurring early in April, as the first hospitals began reporting." He went on to add, "The convergence of the HNA and MNA mark a new ‘starting’ point for PFS departments, albeit at a level lower than it had been previously." PFS Power Ranking data is instantaneously available as each hospital enters its data throughout the month, allowing for early trend analysis and preliminary performance predictions.

Mr. DeKaye noted that improved cash collections in all payer groups played an essential part in the recovery. He singled out the large improvements in the "Self-Pay and Other," and to a lesser, but still significant extent, "Commercial and HMO" collections as making important contributions to the overall rankings. Reductions in A/R, though modest, also helped hospitals improve their overall ranking scores.

The North Central region registered an impressive gain of 7.7 points to lead all regions with an MNA of 22.7. With a 5.3 point increase to 20.3, the Southeast region had the second highest score. The Northeast and South Central regions, with ranking scores of 14.0 and 12.5, respectively, posted declines over the prior reporting period.

For the first time in several months, hospitals in the 651+ bed size category led with a 22.0 MNA, an increase of 12.0 points over last month’s rankings. The 251-650 category increased a modest 0.8 to end with a 15.5 score, while the 0-250 grouping fell for the second consecutive month to finish at 16.8.

Fueling this gain was the fact that 29% of the reporting hospitals had MNA scores above 20.0. This is an increase from last month when only 23% of the hospitals had scores that high. The ranking analysis revealed that hospitals improved their scoring in four of the five reporting categories. The increases in "Strength" (Cash and A/R) and "Quality" (All Payers), as well as in "Consistency" in performance contributed to the reversal. In the "Detractors" category, it was important to note that for the second straight month improvements in the amount uncoded for Medical Records was recorded. Also, timely reporting improved. The only category posting a (small) decline was in "Production." A number of hospitals reported that increases in new service volume in the current month contributed to their inability to post higher scores in this category. Hospitals with lower scores (and some not reporting) cited system conversions with having a pronounced negative impact on scores, or the ability to report.

The monthly Power Rankings are based on participating hospitals responding to a 14 question on-line survey that requires them to answer YES or NO to a series of performance based inquiries. The questions measure cash flow cycle operational sequences in terms of "Strength, Quality, Consistency, Production and Detractors." Hospital data is ranked, but individual identities are not shown. A perfect score would be a monthly rating of "30.0." Rankings are instantaneously determined when the survey is completed, but current rankings can change within the month as each hospital enters its data. Subscribers also receive a more detailed analysis, and access to "Bulletin Board" postings related to the scores.

Mr. DeKaye, whose national consulting practice focuses on hospitals, physicians, other healthcare providers and corporations, is the author of The Patient Accounts Management Handbook. He will be speaking on PFS performance and bench-marking on June 24, 2003 at the HFMA Annual National Institute (Baltimore, MD), and again for the South Carolina HFMA Annual Institute (June 5, 2003) in Myrtle Beach, SC. For more information, and to join PFS Power Rankings visit their web site at: www.pfspowerrank.com, email to: pfspowerrank@aol.com, or call (516) 678-2754.

Perspectives and Commentary

Achieving Agency Effectiveness

By Allan P. DeKaye, MBA, FHFMA
President and CEO
DEKAYE Consulting, Inc.

Changing Roles for Agencies

Over the last several years, collection agencies have begun providing more than the traditional bad debt follow-up on self-pay uncollectibles. As was often the case, agency success was often enhanced by their ability to evidence third party insurance where the hospital had failed. The experience gained by unearthing insurance and billing those carriers created a new line of business, often referred to as "Day One Billing."

The growing role that agencies have played have helped hospitals through difficult transition periods, notably those associated with a systems conversion, in response to staffing difficulties or turnover at the management level. For some, outsourcing has been an effective way to leverage shortages in manpower, or to compensate for difficult conditions. For others, it has become an easy way out to offset inefficiencies in the cash flow cycle. Regardless of the circumstances, knowing how effectively agencies are performing can make a difference in how well the Patient Financial Services (PFS) department is perceived from an overall A/R management perspective.

While agencies can take on the role as "PFS (or business office) extenders," billing companies can’t take on the role of a collection agency–that is, collecting on behalf of another party. But for purposes of this article, the hospital’s ability to analyze and determine the effectiveness of its outsource vendors (whether billing company or collection agency) is an important task that is often overlooked. This article will focus on the importance of determining agency effectiveness.

"Performance Reporting" is more than "Acknowledgment Reporting"

Most agencies will provide clients with acknowledgment of their placements, as well as an inventory of open and closed accounts. An essential step in effective agency monitoring is to review these reports, and ensure that account status is properly reflected in the account detail, as well in any related status or financial class category. Since hospital information and patient accounting systems will vary in the way active and inactive accounts on the trial balance and in bad debt are noted, there may be variables or unique elements that need to be considered in conducting any form of assessment.

Periodic account reconciliation between the hospital’s trial balance and each agency is important so that expectation of performance against a specific case load can be properly evaluated. Overstating the amount assigned to an agency places an undue burden of inflated expectations by the hospital. Similarly, an agency’s performance will be diluted when being compared to its peers if its caseload is misstated.

There are two methods we suggest be used, in part depending on the resources available, and the ability to utilize systems’ reporting and downloading capabilities. The two methods are (1) the Quick Compare (QC) and (2) the Agency Effectiveness Rating (AER).

The QC, as the name suggests, provides a more instant analysis of agency performance. The QC can be expressed as the following ratio:

QC =        $ Collected by Agency for Period (e.g. month or quarter)/
                       $ Assigned to Agency (as reported at month or quarter end)

When comparing the QC between two or more agencies, the one with the highest QC is performing at a higher level. Account reconciliation is an essential element of the evaluative process. If you are valuing accounts already closed-out by the agency in their inventory, you will be understating the agency’s performance. Be careful to either report collections received by the hospital during this period, as well as balances as reported on the hospital’s trial balance. Don’t mix agency and hospital reporting, as time frames and cut-off dates may result in potential double counting. Some agencies use software to report this (or similar) value, and this too can be used as a QC measure.

The AER requires a few more calculations, and takes into account the following factors:

A = # of accounts on which an Agency collected over a specified number of months (e.g., 6 months)

B = Agency $ collections for a specified number of months (e.g., 6 months)

C = Agency contingency fee for amounts collected

D = Total Agency Referrals (in # of accounts) for the same period used above (e.g., 6 months)

E = Total Agency Referrals (in $ value of accounts) for the same period used above (e.g., 6 months)

F = The average numbers of days from placement to collection of the first payment on each account (this generally requires a greater tracking capability usually accomplished by downloading files into spreadsheet formats)

The AER is the sum of the following ratios:

AER = (A/D) + [(B-C)/E] - [F/# days specified (e.g, 6 months x 30 days)]

This ratio recognizes that effective agencies will work account volume sufficient to produce a result that demonstrates its ability to offset its fees in a timely manner. The agency with the higher AER is performing at a more effective level than its peers.

However, all measures have limitations. While the mix of cases assigned to vendors may be different, the ratio approach tends to neutralize those differences, although it may show you where the fee and return are disproportionate. The timeliness factor is also important, as agencies that turnaround cases more quickly (as long as they are thorough) are providing you with a value-added service.

Creating Partnerships

All too often, vendor selection is based on convenience, and not on a more rigorous set of criteria. One important element is the ability to recognize that an outsource vendor (especially one doing "Day One Billing") is truly an extension of your PFS department. As such, they should have performance goals and targets, and be held to a standard similar to what you’d expect from your staff. Why?

Because this is not simply recovery of bad debt–but the need to recognize collection goals for current and aged A/R active on the trial balance. The vendors that can "stand and deliver" are usually capable of generating higher QC’s or AER’s than their competitors. To the extent that they can excel, they should have "bragging rights," and be able to boast performance that should be duplicated at your location.

It’s a Two Way Street

Outsource vendors should be expected to provide you with feedback. This should include their own critique of performance: both yours and theirs. Inability to refer accounts on agreed upon time frames is a responsibility of the hospital. Reporting patterned problems with accounts is an agency responsibility. Setting goals and objectives should be a joint effort. Reviewing performance should be done monthly. It should not come as a surprise that many CFO’s and Vendor Executive’s have differing views of performance success.

Vendors tread too lightly in criticizing PFS performance for fear of alienating management, and potentially jeopardizing new or continuing referrals or placements. Yet they wonder why the business may have been lost or not renewed. While hospital PFS directors and Vendor Representatives should be meeting at regular intervals (e.g., monthly or bi-monthly), the senior executives of both entities should meet at least quarterly, or no less frequently than every 6 months, so that the only "surprise" should be the extent to which goals were surpassed!

: Ask The Expert

by Allan P. DeKaye, MBA, FHFMA

Q: A patient presented a Health Care Card issued by MultiPlan. It wasn’t an insurance benefits card, but one indicating that it would pay an amount towards the patient’s self-pay bill. Should we accept it?

A: Surprise! Peoples Health Plan. Not accepted here? Did you ever go to a restaurant only to find that they didn’t accept your credit card when it came time to pay? Or wouldn’t take your discount coupon? So far, only the negatives have been discussed. Let’s examine if there’s an upside.

First, know your customer. In this case, MultiPlan. So getting in touch with them is a good thing. Historically, MultiPlan has often repriced bills at rates lower than those negotiated, and often has attempted to take discounts it wasn’t entitled to.

That said, if the card is being made available as a "self-pay" card, almost like a pre-paid phone card, then let’s see who’s buying it. If it is truly for someone who’s uninsured, under-insured and/or out-of-network, and they’ve just been registered as self-pay in one of your ambulatory areas (specifically not the ER), will MultiPlan pay the amount of the card? Let’s say the service was $100.00 and the card’s value was $75.00, would you accept it as part payment or as payment in full?

Recently Tenet Health Care issued a statement amending how it would treat uninsured patients, in effect, offering them a "self-pay" network rate for services rendered. Think about these two actions. If the service was rendered, and the patient’s been registered as "self-pay," how effective is your hospital in (a) collecting the amount due at time of service, or (b) within 1-2 billing cycles, without having to write it off to collection?

While this may be a case of the "glass is half-full," hospitals should consider how many uninsured patients they have, if they are in a area where MultiPlan has a market presence, and what their own self-pay policy is.

Keep in mind that any policy change, especially where it involves offering self-pay discounts should be reviewed in light of its compliance impact. Policies and procedures need to reflect consistency of the way you treat patients, and should not be construed as "offering something of value to induce patient referrals."

Perhaps its an opportunity for providers to examine what they might be able to do mitigate the impact of the uninsured in their service area, while improving their market presence. But still check with MultiPlan, maybe they’re selling the "gold" card that pays 90%, or if they are only selling the "plain" card that pays 50%.

Q: Industry averages suggest that one (1) collector for every 4,000 accounts is a standard. Is this an acceptable average?

A: While some reports identify one collector for every 4,000 open accounts, we need to examine what the statistic shows vs. what the needs actually are. To a large extent, the calculation of 1 FTE for every 4,000 accounts results in part from the statistical average of the reported number of open accounts and the number of FTE’s assigned to work them. The resulting average should be viewed as "this is today’s reality." However, is it the correct standard?

We can easily challenge the standard by asking, could I (effectively) work 4,000 accounts in a month? It would be more correct to ask if the 4,000 accounts could effectively be worked in the average 22 working days (not 30 or 31 calendar days). For ease of arithmetic, assume 20 working days/month. That means that 200 accounts need to be worked (effectively each day). Two questions should be raised: is 200/day possible, and what does "effectively" mean?

Two hundred a day may be possible when accessing a claim status inquiry from a payer’s web site; but "effectively" should mean that "the account was advanced towards payment." It might also be achieved in the Self-Pay area, if you are using predictive dialers and automated account scripts to pursue patient responsible amounts.

But 200/day may not be attainable if the effort is not organized, priorities haphazardly assigned, performance not monitored, and feedback not given to the staff. If the resulting number was 25, or 50 accounts a day, it could take almost 60-120 calendar days to work the existing file of 4,000 accounts, not the one month noted above. [Note: This may not even take into account that new accounts are also being added each day to each staff’s work queue.]

What does this mean? If you are averaging 4,000 accounts/staff, you’ll need to get 200 effectively worked accounts in a 20 working day month to "complete" the work assigned to that individual. For payers who’ve automated their claim status functions, this may be doable. But then again, some accounts (notably those that are "clean claims") assigned to each staff member will "close" with payment in time frames that range from 20-45 days, and will come off the work queue (but will be replaced by others as they are added). Here’s where aging analysis and payer balances need to be considered in prioritizing the work–since 200/day may not be attainable under all related circumstances.

So what measure should we be looking for? It’s okay to use the 4,000 accounts/staff, or whatever measure your hospital actually has. But, perhaps more important is, how may accounts can be worked by however many staff you actually have assigned. You may not be able to work all open accounts in a 20 work-day month; but through priority "targeting," you can improve the outcome. If you’re able to effectively work through 200+ accounts/day, the next question should be can I do more/day, or can I do it with less staff?



 

The Contributor's Corner

Same Day Rule

By Bill Cox
Senior Executive Director
HMI Corporation
Brentwood, TN

The Same Day Rule is based on the discounting requirements of the Outpatient Prospective Payment System (OPPS) where certain Ambulatory Payment Categories (APCs) are paid at fifty percent (50%) when performed on the same date as another APC.

This rule differs from the so called "72 hour rule" which requires that all related outpatient services performed within three calendar days of an admission be combined with the admission and will be paid as a part of the Diagnosis Related Group (DRG) payment. The "Same Day Rule" applies only to outpatient services.

Patient accounts managers are constantly faced with the need to correct claims for services when they are provided on the same day. The issue of creating a new claim or posting the charges to an existing claim for recurring services seems to have been a thorn in the side for a number of years. On September 12, 2002, Medicare issued Transmittal A-02-087 to Fiscal Intermediaries.

This transmittal clarifies that all OPPS services provided on the same date of service are to be billed on the repetitive claim (Medicare’s term in the transmittal for claims with recurring services). If a non-OPPS service (such as Laboratory, Occupational Therapy, Physical Therapy, Speech Therapy) is provided on the same date as an OPPS service, they may be billed separately.

Services reported using revenue codes 33x, 342, 41x, 42x, 43x, 44x, 482, 493, and 91x are considered to be repetitive services. All services reported using these revenue codes, with the exception of 42x, 43x, and 44x are subject to OPPS.

Some examples of how claims should be submitted under the Same Day Rule:

As you can see, the clarification to the Fiscal Intermediaries still leaves patient accounts managers with the same dilemma. A possible solution would be to flag any new registration for a patient with an open recurring account in order to alert the registrar that an account already exists and should be used for all charges. The Health Information Management Department, or other department where the coding staff is assigned, will need to be brought into the loop in order to ensure appropriate coding of the combined services on the recurring claim. This solution would lessen the problems of the patient accounts department while increasing the complexity of coding the claims.

[Editor’s Note: For more information, or for questions, Mr. Cox can be reached at: 800-659-5145 or email at: bcox@hmi-corp.com.]

     Conversations with Colleagues

Collections and Bad Debt Management

In this issue, we asked our colleague:

Bryce Pattison
Director Of Business Development
Advanced Asset Alliance
Sioux Falls, SD

about collections and lowering bad debt. Here are his responses to our questions.

On Target (OT): What has been the most significant industry accomplishment for this area in the past year?

Bryce Pattison (BP): Acquiring and verifying the CORRECT demographic information of the responsible party - then using this data to effectively pursue self pay accounts early in the aging process. Additionally, more healthcare facilities have finally realized the true financial impact of collecting self pay amounts AT THE TIME OF SERVICE OR DISCHARGE. This includes co-pays, deductibles, and proration amounts. Healthcare organizations are now taking control of these accounts. They are "setting the standard and expectation" with their patients. Simply "sending a statement" each month is no longer a viable option when managing self pay accounts.

(OT): What will be the most difficult challenge facing this area in the coming months?

(BP): Maintaining the necessary commitment to the pursuit of self-pay balances. All healthcare organizations are trying to do more with less. The commitment to successfully pursue self pay accounts early in the aging process requires staff, training, capital resources, and outbound calling technology.

A business office is often the first department to experience staff reductions and the last to enjoy the budgetary increases necessary to effectively pursue self pay accounts.

[The] Solution: outsource your troublesome self pay accounts to a partner that specializes in contacting self pay patients. The increase in cash recoveries and improvement in cash flow will absolutely offset the fee charged.

[Editor’s Note: For more information, or questions, Mr. Pattison can be reached at: 605-978-9666, or via email at: bpatt@aaa-coll.com. ]


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