Sutter Case Analysis Essay Example For Students

Sutter Case Analysis Essay An increasing issue within the health care field is the inability to collect debt from the growing population of uninsured or underinsured patients. Healthcare organizations may be struggling to meet operational margins because the industry has never treated its customers like other retail-oriented sectors of the economy. A McKinsy and Company report states that hospitals incur sixty billion dollars in bad debt annually because they typically collect only ten to twenty percent of a total uninsured patient balance after service. MacKenzie, 2009) This is due to a number of reasons, including poor accounting practices or a lack of patient information. This paper will discuss how one hospital, California’s Sutter Health, has taken steps to correct this issue. It will analyze the accounting practices put into place by Sutter Health and the success of this practice. This author will also provide an alternate solution to the issue of debt collection for self-pay patients as well as a n opinion concerning the actions taken by Sutter Health. First it is important to provide background information pertaining to California’s Sutter Health Hospitals. Sutter Health is a non-profit network of community-based healthcare providers. This organization provides care to more than one hundred Northern California communities. (Souza McCarty, 2007) Sutter Health is composed of hospitals, physician organizations and other health care service providers that share resources and expertise to advance health care quality. While the variety of providers is beneficial to the communities served, it posed an operating issue for the organization. (Hummel, 2004) One of the key problems that Sutter Health was experiencing was that each facility acted as an independent â€Å"island† of information. Due to the numerous operating and accounting systems it was impossible to obtain data and reports in the same format from every location. There were no common practices within the organization. (Hummel, 2004) Each facility followed different admitting and billing procedures. This resulted in a few facilities having accounts receivable days in the range of one hundred twenty, while others had fewer than sixty days. The lack of standardized revenue collection and integrated management reporting tools was adversely affecting the financial performance of Sutter Health. Hummel, 2004) In 2003, during their effort to standardize the operating systems, Sutter Health performed an analysis of the organizations revenue management cycle. The analysis results proved that Sutter’s current information systems were costly to maintain and did not provide the real time information that was needed. (Anonymous, 2005) The analysis provided Sutter with information that was valuable in determining k ey issues that were affecting their ability to collect debt and lower the facilities account receivable days. Most of the issues arose from the inability to access real time information which in turn affected the actual methods of collection that were being employed. The lack of real time information greatly hindered Sutter Health’s ability to collect debt from patients once a service had been provided. Since the needed information was not immediately available, managers had to wait until the end of the month to set benchmarks, track progress, or make decisions. This delay in information prevented account representatives from being able to prioritize and effectively work on their cases. Souza McCarty, 2007) This had a negative impact on the number of receivable days that each facility incurred. Due to the lack of information, Sutter Health had difficulty collecting on patient accounts. Sutter’s collection method focused on the back end staff- the central business office and collectors- rather than the front-end staff member to collect payments. (Souza McCarty, 2007) Patients were not being asked for their payment in a timely manner. Important information, such as the patient’s portion of responsibility and the verification of the insurer’s responsibility, was delayed due to the systems that were in place. Once the account representatives were provided with the information they needed patients had already received care and been released. It became more challenging to collect debt after a significant amount of time had passed between the date of service and the date of collection attempt. Reimbursement is reduced by forty percent post-service. (Anonymous, 2010) This resulted in an increase of account receivable days. After examining the information obtained from the analysis and realizing the importance of standardization throughout the organization, Sutter developed a solution that best fit their current situation. First on the agenda was to develop a standardized system within the entire Sutter Health organization. The organization chose a program based on the criteria that the program met or exceeded existing functionality, be easy to use, be cost effective and represent advanced and/or adaptive technology. (Anonymous, 2005) Sutter Health chose to use the MedSeries4 (MS4) throughout all of their facilities. This program has helped to standardize the organization’s patient accounting processes. The staff of Sutter Health is now able to prioritize and follow up on financial counseling, third-party payer billing and collection activities through an automated collection system. This system also has the capability of producing daily work list based on manager-defined account receivable criteria. Each facility is able to track accounts from the moment of pre-admittance through the time of potential assignment with an outside collection agency. (Hummel, 2004) This has also resulted in the facilities being able to provide data and reports in the same format. Another aspect of Sutter’s solution was to alter their collection method. Two Strong and Brave Women EssayNinety-seven percent of hospitals surveyed in the Healthcare Financial Management Association (HFMA) 2009 study, The Changing Face of Self-Payment in Hospitals, have experienced an increase in self-pay accounts receivable compared with the prior fiscal year. In nearly thirty-three percent of respondent hospitals, receivables are growing faster than patient revenue. (Koeing, 2010) Sutter Health took the necessary steps to reduce their number account receivable days. By standardizing their operational systems throughout the organization, Sutter was able ensure that each facility was able to provide and access data in an equivalent format. Sutter also implemented a front-end collection method. This helped to lower the account receivable days as well as increase the revenue of the organization. While I believe that Sutter adapted the most effective solution, there are other alternative to addressing the same issue. One alternative is receivable segmentation. This method instructs hospitals to determine a patient’s likeliness to pay their debt. The patients â€Å"collectability† status is based on several factors, including credit and income. Receivable segmentation provides healthcare providers with the opportunity to increase self-pay collections, decrease cost to collect, and improve self-pay account receivable days. Despite which method health care organizations use, it seems as though any measures taken may reduce uncollectable accounts and increase revenue. References Anonymous. (2005, October 19). Sutter Health Selects EPSis Solutions to Achieve System-wide Cost Standards and Performance Management . PR Newswire,1. Retrieved July 29, 2010, from ProQuest Database (Document ID: 913887581). Anonymous. 2010, June 05). MedAssets; Sutter Health Selects MedAssets Patient Bill Estimation Solution to Improve Collections and Help Consumers Understand Their Out-of-pocket Cost. Retrieved August 04, 2010, from ProQuest Database. Boehler, A. Hansal, J. (2006, January 01). Innovative strategies for self-pay segmentation . Healthcare Financial Management. Retrieved July 29, 2010, from http://www. allbusiness. com/banking-finance/ banking-lending-credit/10579823-1. html. Edmonds, T. , Olds, P. , McNair, F. , Tsay, B. (2010). Survey of Accounting (2nd ed. ). New York: McGraw-Hill Irwin. Healthcare Financial Management Association (HFMA). (2010). Managing the Self-Pay Cycle. Retrieved July 29, 2010, from http://www. emdeon. com/eNewsletters/Compass/Spring10/Managing%20the%20Self%20Pay%20Cycle%20HFM%20March%202010. pdf. Hummel, J. (2004). Financial Finesse . Health Management Technology, 25(2), 52-55. Retrieved July 29, 2010, from ProQuest Database (Document ID 538867911). Koeing, S. (2010, March 29). Five Strategies for Strategic Debt Recovery of Self-Pay Patient Accounts. Retrieved July 30, 2010, from http://www. healthleadersmedia. com/content/FIN-248700/Five-Strategies-for-Stra