The Queen's Medical Center revamped its revenue cycle operations with automated billing and quickly reduced write-offs by $2.7 million.
With declining reimbursement rates and shrinking operating margins, health systems have increasingly focused on effectively recouping as much as they can from outstanding patient bills.
The Queen’s Medical Center (QMC), a 533-bed nonprofit hospital in Hawaii, recognized the need to improve its in-house billing and claims services last summer.
By implementing a third-party automated billing and claims system, QMC reduced write-offs from $2.7 million to $92,000 and improved its cash flow by $5 million
This strategy offers health systems and hospitals an effective digital solution to control the exponential costs of their in-house billing operations and better utilize their employees.
Lehua Pate, director of corporate revenue cycle at The Queen's Health System, which oversees QMC and three other hospitals, told HealthLeaders Media that she sought to optimize a "very inefficient process" when she began overseeing the system's revenue cycle operations in April 2014.
Pate focused on how to receive more timely and accurate payments while delivering clean claims, though she said improving staff productivity was another important goal.
Endowment makes revenue cycle operations important
For QMC, improving its billing and collections operations is critical to the larger financial health of the system and maintaining its endowment.
Founded in 1859 by Hawaiian royalty, QMC resides on land set aside after the passing of Queen Emma and has access to an endowment fund created by her remaining assets that exceeds $1 billion according to Pate.
The four hospitals in the system provide healthcare access to a large native Hawaiian population on the islands. Overall, 30% of the state population is enrolled in Medicaid or Medicare, with another 5% uninsured, according to the Kaiser Family Foundation.
When QHS hospitals are not profitable, they can receive funding from the endowment to cover hospital operation costs. Pate said that the improved cash flow from automated billing and collection services allows the hospitals to fund all operations, including capital funding requests, without tapping into the endowment.
Pate said one of the goals for the system is to eventually reach a point of consistent cash flow and bolstered operating margins while allowing the endowment to grow.
"In revenue cycle there is always continuous improvement, and I try to set reasonable, achievable goals," Pate said.
"Each year we're lowering our days in AR goal, increasing our expected cash collections, the timeliness of the collections, and the timeliness of processing charges. When you have your [AR] days down in the 40s, there isn't much room for improvement, but we're [always] shooting for the top 25 percentiles on a national basis," she says.
Financial and clerical results
Since implementing new automation billing services last August, QMC has experienced a drop in candidate for billing from 6.1 days to 3 days by the end of May. This means hospital was able to distribute final bill claims to patients with an account beyond the hold period. Pate said the reduction occurred before the internal goal set for the end of fiscal year 2018 in June.
QMC also saw a two-day reduction in days in accounts receivable (AR), which Pate said was a "significant" amount. In fiscal year 2017, QMC collected 66% of AR due within the first three months and 78% in the first six months. In fiscal year 2018, about 75% of AR due was collected within the first three months and 94% in the first six months.
The improvements have not only been confined to QMC's financial performance. The billing staff has seen its work become more effective and efficient, according to Pate.
Previously, follow-up staff were spending most of their time pursuing claims with various payers, receiving claims status updates, and working to secure timely collection on accounts.
Pate said the billing department has been "much happier" as the accounts and payers have provided more timely payments through the new automated system.
What did the programs do?
Automated bots work electronically with QMC's adjudication system, reaching out to the payer electronically, receiving an electronic claim status, and feeding it back into the EHR system hosted by Epic.
The notes are automatically added to the account so that the follow-up staff doesn't have to spend time on the phone pursuing a claim, which often took at least 30 minutes.
Additionally, some payers would limit the account inquiry to three accounts, meaning the follow-up staff would have to choose the top three accounts, either by age or dollar accounts.
The staff would then redial and wait another 30 minutes to get a status update on another three accounts.
QMC currently has 19 employees working on claims that have been returned by payers for additional documentation or a medical necessity review. When payers return to QMC, the follow-up team coordinates with various billing and collection departments to receive additional documentation or justification.
However, Pate said most of the time employees were waiting on the phone to receive claim status updates. The bots circumvented this process, instead allowing employees to work on accounts that needed manual intervention to secure payment.
Jack O'Brien is the finance editor at HealthLeaders.