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Understanding Modern Cash Flow Strategies
By Ross Filder
By Karen White PhD
As a sign of the contracting economic times, some struggling hospitals are using a new method to collect revenue: the Internet. It has become a channel to cut write-offs and bad debt ratios, which lower stock prices if publicly held.
Rather than simply hiring agencies to collect patient bills, hospitals have begun to put their accounts receivable (ARs) up for auction online. Bidders on the debt include the same agencies that serve the hospitals, some of which provide guaranteed payments to hospitals in exchange for access to the debt.
Strategy Attractive to Buyer and Sellers
The auctions are also attracting other companies that buy the debt outright. For example, one method that a facility based medical practice used to auction debt was for the hospital to determine the criteria it would use for selecting the debt to be auctioned. The criteria generally focus on ARs that are a certain age, but demographic regions, legal accounts, and monthly payment accounts were also be considered.
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Request for Proposal
Once the criteria are determined, a listing of accounts is generated and supplied to potential buyers along with a Request for Proposal that asks each potential buyer to provide information on their experience in servicing hospital-type ARs, as well as details of their expertise, collection techniques, references, and price.
Usually the winning bidder will pay a flat price for the entire AR. It is important for the hospital to understand that when auctioning ARs the winning bidder owns the accounts and their collection tactics will not necessarily comply with the hospital’s standards for collections.
Automation
Automation can lead to decreased paperwork, process standardization, increased productivity, and cleaner claims. In 2004, Hospital & Health Network’s “Most Wired Survey” [1] found that the 100 most wired hospitals — including three out of the four AA+ hospitals in the country — had better control of expenses, higher productivity, and efficient utilization management. These numerics are much higher today. Additionally, these top hospitals tend to be larger and have better access to capital.
Assessment
The positive return on investment in technology increases allocation of funding to technology. This correlation is important because it begins to link the investment in information technology with positive financial returns in all areas of a hospital’s business, including the revenue cycle.
Conclusion
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[1] See http://www.hhnmostwiredsurvey.com. The Most Wired Survey is conducted annually between January and March to “promote the effective use of information technology in achieving clinical and operating excellence.”
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Filed under: Health Economics, Healthcare Finance, Insurance Matters, Research & Development | Tagged: ARs, cash conversion cycle, Hospital & Health Network’s, hospital cash conversion, hospital cash flows, karen white, Ross Fidler, www.healthcarefinancials.com | 1 Comment »
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