Integral Healthcare News
For recent industry news articles and management resources of interest, please take a moment to review the following:
Getting the Most From Receivable Outsourcing Partner Agreements
Getting the Most from Receivable Outsourcing Partner Agreements
Healthcare organizations increasingly are turning to outside vendors for accounts receivable and revenue-cycle support services. Some organizations now have 25 to 100 percent of their self-pay collection management resources in the hands of one or more outside vendors. In addition to more traditional services such as collections and supplemental account follow-up, many providers also use vendor partners for other services, including:
- Days in A/R reduction projects
- Patient accounting system conversion projects
- Self-pay/patient portion collection management
- Contract reimbursement optimization initiatives
- 0-30 day billing recovery follow-up management
- Comprehensive Business Process Outsourcing (BPO) operations
Poorly constructed and managed service agreements in these areas could mean that a significant amount of realizable revenue and cash benefit is being left on the table—and with the predicted growth in self pay, these numbers will grow significantly. The following sample figures demonstrate just how much can be at stake from even a small performance gap;
- 2-3% missed cash recovery on $10 Million in bad debt = $200,000 - $300,000
- 2-3% missed cash recovery on $12 Million in early-aged account recovery follow-up = $240,000 - $360,000
- 2-3% missed cash recovery on $20 Million A/R reduction project = $400,000 - $600,000
Add to these amounts overall fees paid, administrative expense and the impact these various services can have on other internal departments and it is obvious that significant resources are at risk. As your self pay dollars continue to grow, so does the risk of these missed recovery dollars directly and negatively impacting your bottom-line.
Patient financial services leadership, therefore, must evaluate the effectiveness or their outsourcing partnership arrangements in achieving their organizations’ goals, as well as the return on investment of these arrangements.
“The Performance Delta”
A potential source of conflict in the relationship between a healthcare provider and a vendor is the business motivation of each. The provider is interested in optimizing and accelerating cash and account resolution performance at the lowest cost. The vendor, on the other hand, is interested in optimizing their margins while performing at acceptable levels, not necessarily at the optimum levels.
In addition, where providers expect a proactive proprietary attention to their business, the vendor often times works in a reactive fashion to the performance pressures brought by its many different customers. ‘…the squeaky wheel gets the oil theory…’
The effect that the gap in these two different (and, in some cases, opposed) business motives may have on performance outcomes can easily create a divergence, or delta, of several performance points, with lower cash recoveries and higher administrative costs as the result.
It is this “performance delta” on which revenue cycle and PFS managers must focus their energy. They must ask themselves several questions regarding their day to day confidence in their outsourcing relationship:
- Does my organization have high enough expectations regarding the service quality and return we receive from our outsourcing relationships?
- Is my organization optimizing its use of the service available under the agreement?
- Is my organization in a position to properly assess and optimize these service relationships, currently and on a sustainable basis?
The following check list can help revenue cycle management perform an initial assessment of their organization’s commitment to managing these critical receivable-support resources as well as providing some ideas to improve their ongoing commitment and increase their overall financial returns;
- How much of your organization’s annual cash recovery function is being performed by vendor partners?
- Is their recovery performance trending up or down? Are you satisfied with the trends? Why or why not?
- How much in annual fee does your organization pay to receivable-service vendors? What is the ratio of fees paid to monies recovered? Are you satisfied with this ratio?
- How does this cost/return actually compare to other internal service alternatives?
- What internal mechanism do you have in place to track and validate your organization’s financial relationship with these vendors (e.g., outstanding inventory, collection verification, fee accuracy and contractual and regulatory compliance?
- How accurately am I measuring performance among competitive vendors or other competitive alternative services?
- When was the last time your organization performed a detailed audit of any of your support-service vendors?
- Does your team have the time, resources and experience necessary to effectively conduct a vendor performance audit? Contract/Service Level Compliance audit?
- Were specific benchmarks and metrics formally established as part of your vendor performance expectations? Contract compliance?
- Have contracted benchmark and performance metrics or the original project purpose and scope been revised to reflect current and changing conditions?
- Have you examined the capabilities of your internal operations and resources in light of possible future decisions to expand, reduce or eliminate a particular service relationship?
Establishing an Evaluation Process
To establish a more effective vendor evaluation process, consider the following actions:
Assign staff to track and validate inventories assigned to vendors and the values of current outstanding inventory. This staff should track whether vendors are receiving and processing assigned portfolio dollars on a timely basis, that is, whether active inventories are indeed active and moving at an acceptable pace toward resolution. If the vendor program is based upon pre-charge-off account resolution management, staff needs to determine what impact this inventory is having on days revenue outstanding, bad debt expense, etc..
Assemble 12-18 months worth of the most recent performance data from the provider and/or vendor and trend the last four to six quarter-end results. After determining the performance trend (positive, negative or stagnant), analyze the reason for the trend. If competitive services are in place (more that one vendor service), determine if or how much of a gap or variance in trending exists between the different competitors and why. This trend analysis should reveal the cost to the organization of such gaps and make it possible to calculate the net value of several points of improved performance. Then compare the trends and performance levels with your internal work-flow and account-resolution initiatives to make it possible to adjust internal/external processes appropriately.
Revisit service agreements and the original purpose and objectives for initiating the vendor arrangements and services. Determine whether the current process is functioning as intended and whether it needs to be revised or updated based upon environmental and vendor changes, such as technological advances, changing staffing requirements, additional reporting needs, payer type shifts, patient population change, patient satisfaction data, regulatory compliance issues, volumes involved, and so forth. Consider also if there is a possible benefit to expanding, reducing or eliminating the current service relationship?
Communicate findings of the evaluation to relevant vendors. Discuss performance trends, inventory activity and ways to mutually improve the benefits of the program. Discuss expectations and establish measurable improvement goals and milestones. Document these targets, if appropriate. Also consider establishing a shared risk/reward relationship with selected vendors as a means of aligning incentives to performance improvement.
If the findings seem reliable and the vendor response is adequate, intervals for future review can be more flexible and less rigorous.
However, if issues arise that cause some concern or the business motives of the organization’s partners are unclear or inappropriately aligned with those of the organization, the relationship warrants a closer look. Reference checking, detailed auditing of all aspects of the outsourcing program, and frequent review and updating may be required.
If the evaluation reveals serious deficiencies in the relationship, take immediate action. Place the vendor on notice with an aggressive corrective action plan, to be followed by a detailed audit of all aspects of the program. Begin a formal search for potential replacement vendors.
Outsourcing receivable and revenue cycle support can reap many benefits for healthcare organizations. Those benefits however, will only be as great as the actions PFS managers take to optimize their outsourcing relationships. An organization’s internal employees perform up to their maximum potential when they are given clear expectations, solid direction, frequent feedback, constructive direction and plans for correction of deficiencies. Receivable and revenue cycle support vendors need much of the same management guidance. These actions may induce the organization’s outsourcing partners to discover a new and better approach to performance and customer service.
‘…Inspect Rather Than Expect…’
For further information or to discuss any questions or clarification needs that arise, please feel free to contact me directly at 303-324-2977, firstname.lastname@example.org
Michael J Yont, CHFP
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Commentary: 'Insurers Will Do Just About Anything to Avoid Public Plan'
Insurers Will Do Just About Anything to Avoid Public Plan
Les Masterson, for HealthLeaders Media, May 13, 2009
Health insurers are so concerned that a public insurance option could destroy their business that they have made concessions over the past few months that would have seemed impossible only a year ago.
While gender disparity in insurance premiums is not allowed in employer-based and government-sponsored health plans, most individual health insurance plans do not follow those laws. In fact, individual plans, which cover about 18 million Americans, are subject to state laws and only about a dozen states have limits on gender ratings, according to Claire Miley, member of the healthcare practice area of Bass, Berry & Sims law firm in Nashville.
In addition to concern about the healthcare reform train barreling down the tracks in Washington, DC, insurers have also taken notice of Sen. John Kerry's (D-MA) recently proposed bill to outlaw the practice of setting premiums in individual insurance based on gender.
Lawmakers are looking at individual health plans closely because they are the only area of growth for health insurers. Newly unemployed are turning to individual health insurance as a safety net, but individual plans are quite different from the employer-based system that most know. These differences, including charging higher premiums for women and individuals who are sicker, have caused some lawmakers and advocates to take a closer look at individual plans.
In the public's view, uneven gender ratings are unfair and call to mind earlier controversial industry practices. "The insurance industry abandoned ratings based on race decades ago, even though race-based ratings were once justified on the basis of actuarial statistics," says Miley. "And some commentators have noted that, while women are the only gender capable of bearing children, healthy children benefit society as a whole and therefore society as a whole should support the costs."
The latest proposal to end higher premiums for women follows on the heels of the insurance industry's recent announcement that it would not charge higher premiums to sick members and would accept all Americans, regardless of illness or disability, if the feds mandated that everyone have health insurance coverage.
The bottom line is that health insurers think they could be in trouble if the Congress and president create public competition. Part of the problem is that Obama and Congress have not developed a specific public insurance plan. Without knowing the specifics and how to compete against a public plan, health insurers are making concessions in hopes that policymakers will remove a public option off the table.
It appears to be working. While a public option seemed like a real possibility two months ago, the likelihood is less today. I spoke to Robert Laszewski, president of Health Policy and Strategy Associates, LLC, in Washington, DC. Laszewski, one of the leading healthcare thought leaders in Washington, DC, offered me a surprising view on healthcare.
While many outside of the beltway think a comprehensive healthcare reform package will pass this year, Laszewski says there simply isn't the money to fund Obama's $1.2 trillion reform package over 10 years. Instead, he believes lawmakers may pass smaller reforms that won't tackle the major issues.
But Miley is not so sure. She sees the public option as a "realistic possibility." Nevertheless, health insurers are playing defense and view the public option as a threat to their survival. In turn, they are using the logic of the great philosopher Mick Jagger—You can't always get what you want; you get what you need.
Insurers have opposed changes to gender ratings in the past. However, if cutting this kind of bedrock practice means they don't have to face a public option, health insurers are willing to change the way they do business.
Note: You can sign up to receive Health Plan Insider, a free weekly e-newsletter designed to bring breaking news and analysis of important developments at health plans and other managed care organizations to your inbox.
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Obama Looks to Improve Rural Health
Obama Looks to Improve Rural Health
Cheryl Clark, for HealthLeaders Media, May 8, 2009
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Though the Obama administration's proposed 2010 rural health funding for the Health Resources and Services Administration was cut by $44 million, the budget also includes many increases for rural health, according to the administration.
In fact, the overall reduction from the 2009 budget of $125 million comes primarily because of the elimination of two programs, the $26 million Delta Heath Initiative in Mississippi and the $20 million Denali Project in Alaska.
"It was felt that the needs in the region were largely met through prior investments," says Health Resources and Services Administration spokesman David Bowman.
He says the full funding for rural health includes many increases, much of them found in budgets for other parts of the administration that serve urban areas as well as rural. For example, health centers will receive $2 billion, and while some health centers are in urban areas, "most health centers are located in rural areas," Bowman says.
Professional training, grant support and scholarships for physicians, dentists, and other types of health providers will receive $2 billion, largely through increases of National Service Corps, which received $135 in 2009, but will go up $34 million in 2010. The NSC provides scholarships for medical and dental school and helps physicians and dentists repay loans.
Many of those who benefit will agree to serve in rural underserved areas, Bowman says. The clinic and physician support line items are in other portions of the budget, he says.
Indian Health Services, meanwhile, which serves a large number of Native Americans in rural areas, would be a big winner, with a total of $4.58 billion under the proposed 2010 budget. Clinical services would receive an additional $324 million ($3.74 billion), preventive health support would receive an additional $9 million ($144 million), and Indian health professionals would receive an additional $3 million ($41 million). The administration's line items also include $4.98 billion for Indian health facilities, a $454 million increase.
Alan Morgan, CEO of the National Rural Health Association, says he is "excited to see that the President's budget includes increases to rural health grant programs. I am optimistic that we will see this support for improving our nation's rural health system continue as the debate begins on Capitol Hill."
Morgan also says the Denali Project and Delta Health Initiative programs are very important, but are earmarks. He suggests Congress will put them back in because both programs "have had great results—and they have great champions on the hill too."
Bowman says the Denali Project has received more than $300 million since 2000 for construction of health facilities in rural Alaska. The Delta Health Initiative, launched in 2006, brought seed money to projects providing chronic disease management, pharmacy, dental, school-based mental health services, and teenage pregnancy prevention to rural areas of Mississippi.
Bowman emphasizes that large increases in health center and health professional training, highlighted in other portions of the federal budget, will make up for most deficits in those areas.
Other programs classified as rural received small increases or stayed the same. The budget for Black Lung Clinics, which screen coal miners for the disease and provide treatment and rehabilitation for active and retired coal miners remains at $7 million.
Funding for cancer screenings for workers and residents adversely affected by mining, transportation, and processing of uranium products primarily used in the nuclear arsenal, mostly in the Four Corners area of the West, also stayed the same at $2 million.
Additionally, the administration yesterday released a budget overview that promised $55 million for rural healthcare services grants to improve quality and $8 million for rural efforts to expand telehealth. The $55 million is a $1 million increase over 2009 funding.
The Obama administration's proposed budget also promises to help 50 million underserved Americans, who live in rural and poor urban neighborhoods.
Cheryl Clark is a senior editor and California correspondent for HealthLeaders Media Online. She can be reached at email@example.com