Are Hospitals Auctioning Debt?

Understanding Modern Cash Flow Strategies

By Ross Filder

By Karen White PhD

www.HealthcareFinancials.com

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.”

Hospital Revenue Cycle Management

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Augmentation thru Technology Adoption

[By Karen White PhD, and Staff ]

Several major hospitals, or healthcare systems, have filed bankruptcy this fiscal quarter. These include a two-hospital system in Honolulu; one in Pontiac, MI; Trinity Hospital in Erin, Tennessee; Century City Doctors Hospital in Beverly Hills, and four hospital system Hospital Partners of America, in Charlotte. 

And so, since cash flow is the life blood of any healthcare revenue cycle management initiative, it is important for physician executives and healthcare administrators to appreciate the impact of modern health information technology systems on this vital function.

Functional Area Targets

Technology plays a key role across all health entity revenue cycle operations. By functional area, the following are key targets:

Patient Access

This is the front-end of a hospital’s revenue cycle. It is made up of all the pre-registration, registration, scheduling, pre-admitting, and admitting functions. Enhancing revenue cycles in this area requires the following:

  • a call center environment with auto dialing, faxing, and Internet connectivity to quickly ensure and verify all pertinent information that is key to correct and timely payment for services rendered;
  • Master Person Index software to eliminate duplicate medical record numbers and assist with achieving of a unique identifier for all patients;
  • registration and admission software that scripts the admission process to assist employees in obtaining required elements and check that insurer-required referrals are documented;
  • denial management definition, including focus on how to obtain all the correct patient information up front while the patient is in-house; and
  • imaging of data up front.

Health Information Management

This is the middle process of a hospital revenue cycle and is often still referred to as “Medical Records.” This area is made up of chart processing, coding, transcription, correspondence, and chart completion. Better control of revenue cycles requires the following recommended technology:

  • chart-tracking software to eliminate manual outguides and decrease the number of lost charts;
  • encoding and grouping software to improve coding accuracy and speed and improve reimbursement;
  • auto printing and faxing capabilities;
  • Internet connectivity for release of information and related document management tasks; and,
  • electronic management of documents.

Patient Financial Services

This is the back-end process of a hospital revenue cycle. The operations include all business office functions of billing, collecting, and follow-up post-patient care. Recommended technology to optimize these functions includes the following:

  • automated biller queues to improve and track the productivity of each biller;
  • claims scrubbing software to ensure that necessary data is included on the claim prior to submission; and
  • electronic claims and reimbursement processing to expedite the payment cycle.

Automation

Automation can lead to decreased paperwork, process standardization, increased productivity, and cleaner claims. In 2004, Hospital & Health Network’s “Most Wired Survey” 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. Today, these top hospitals tend to be larger and have better access to capital in these times of credit tightening.

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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.

MORE: Rev Cycle Mgmnt

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