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The California Sutter Health Approach

In 2006, Sutter Health, one of Northern California’s largest healthcare providers, aimed to give its patient financial services (PFS) staff (Souza & McCarty, 2007) all the necessary front-end and backend tools required to improve patient collections and the company’s bottom line. To do so required several steps, including internal assessment and analysis, the transfer of backend functions to the frontend personnel, associative staff training and skill development and the implementation of organizational policies and procedures. As demonstrated through the Souza & McCarty (2007) case study, Sutter Health also did so to increase and optimize information sharing and collections. This paper will show the reasons, discussions, meetings, steps taken, and the results that ended successfully in making the Sutter Health Approach one of the most effective in the United States of America.

Defining the Problem

Sutter Health is a non-for-profit community based healthcare and hospital system based in Sacramento, CA. As such, Sutter Health faced several challenges and difficulties, but its key problem was rested within (“The Sutter Health Story,” 20) “[…] the Sutter Health family, [the] 48,000 physicians, employees and volunteers that care for patients in more than 100 Northern California cities and towns, [its margins and practices]." In fact, internal organization-wide assessment and analysis elucidated how front-end collections could codify the practice and streamline accounts receivables in the process.

To detail the Sutter Health case and its innovative financial solutions, Souza and McCarty (2007) wrote the Healthcare Financial Management article, "From Bottom to Top: How One Provider Retooled its Collections." Throughout the 2007 case study, Souza & McCarty (2007) use data from their research to demonstrate how one of the largest health care providers in Northern California, Sutter Health implemented a completely new strategy to increase collections. Although Sutter Health did not break the mold, Sutter Health revolutionized how and when payments from new patients and payments for services provided were collected.

The successful program used by Sutter Health has aided the accounts receivable (AR) department in developing solutions to their problems. Despite this success, the department also recognizes the need for continuous improvement. While moving accounts receivable transactions from backend to frontend personnel and obtaining more payments through this means optimizes the process, the program necessitated much more organization and organization-wide cooperation.

Realizing that other problems and difficulties within organizations almost always exist, Sutter Health’s organizational assessment, analysis and evaluation also disclosed its strength, its number of locations throughout Northern California, as its deficiency. Souza & McCarty (2007) explained, "[…] that each facility acted as an independent ‘island’ of information.” Because of their numerous operating and accounting systems, it was impossible to obtain data and reports in the same format from every location. This made information requests time-consuming and costly. For this reason, Hummel (2004) examined these dissimilar accounting and reporting methods and contended, “There were no common practices within the organization.” Sutter health had to address this or suffer inefficiency and inefficacy.

Coordinating the Branches and Revolutionizing the Process

The following paragraphs of this paper show the research done by Souza, and McCarty in order to write the 2007 article, “From bottom to top: how one provider retooled its collections, on the strategy taken by Sutter Health.” Based upon the points detailed in the preceding passages, Sutter Health commenced this project in 2006. It commenced with efforts to solve the problem of its information "islands" and concluded with a solution to the accounts receivable department problem. The latter ultimately engaged the patient account representatives, collectors, and other members of the central business office of its Sacramento/Sierra region.

To accomplish this, Sutter's Health system worked from the backend forward. That is to say, it moved account receivable duties and tools forward to the registration staff. By doing so, Sutter Health ultimately reduced accounts receivable (A/R days) for the nine hospitals in the region from 65 to 59 (Souza & McCarty, 2007). Since each one of those A/R days equals $13 million that means the health system collected an additional $78 million (2007). This is a great accomplishment.

Problem Identification

Yet, Sutter Health did not just choose a course of action haphazardly. Instead, Sutter Health analyzed its revenue management cycle prior to implementing the new program and identified the following problems (Souza & McCarty, 2007):

1. “PFS staff could not access real-time information on key financial and operational indicators such as A/It days and cash collections. As a result, managers and staff often had to wait until the end of the month to set benchmarks, track progress, or make important business decisions (Souza & McCarty, 2007).”

2. (Souza & McCarty, 2007) “The hospitals' accounting system did not allow managers to isolate and analyze select data or generate reports on demand to the level of detail required. Instead, the region relied on a specially trained programmer to develop these reports, often leading to costly delays in identifying and correcting problems.”

3. (Souza & McCarty, 2007) “The central business office (CBO) staff also suffered from the lack of real-time information. With access to only a list of the outstanding accounts assigned to them, account representatives could not prioritize effectively or monitor their progress.”

Benchmarks and Targeted Solutions

In order to turn the situation around, Sutter focused on a select set of primary benchmarks (Souza & McCarty, 2007):

* Gross A/R days (less capitation and credit balance accounts)

* Cash collections

* Unbilled A/R days

* Billed A/R days

* Percentage of A/R over 90, 180, and 360 days

* Major payer A/R days

To increase collections and reduce A/R/ days, Sutter Health’s strategy focused on empowering individual PFS staff members to assume responsibility for each account they deal with. This yields a greater sense of job ownership and appeals to employee motivation. Since this empowerment essentially makes each PFS member in the CBO an owner of his or her own business, Sutter has also provided these PFS members with a customized dashboard to track progress toward meeting individual and team targets. This maintains communication across the organization and coordinates efforts despite separateness.

For example, Sutter Health helps PFS staff manage their businesses effectively, by providing them with a set of tools that allows them to (Souza & McCarty, 2007):

* Prioritize and automate account work lists

* Sort accounts in various ways, such as by dollar amounts, oldest previous work date, and payer

* See at a glance their ranking within their work group and office wide, based on their performance as a percentage of the target achieved.

Although these tools are proving very beneficial to the staff members because they tell each staff member how he/she is doing, they also show these members how and where each of them could improve. It does so by pointing out which accounts, if worked successfully, will have the greatest impact on their A/R days and cash collection goals. In other words, it assists with decision-support and tracking.

To coordinate efforts, communication processes and maintain communications, managers have their own receivables dashboard and tools, enabling them to (Souza & McCarty, 2007):

* Query all aspects of receivables for trending purposes and identify problem areas

* Drill down to the patient account level

* Monitor revenue, payments, adjustments, receivables, and days for periods from the previous day and week to the previous 18 months

* Calculate average daily revenue by day and 30-day period

* Assess their performance for the month to date, and estimate likely results at the month end

* View all receivables or select any segment for quick analysis

* Generate timely reports on demand, including aging analysis, A/R stratification, discharged not final billed (DNFB) analysis, credit balance analysis, and analysis of problem payers" (Souza, & McCarty, 2007).

Obviously, the synthesis of these two components, their reporting capabilities and analyses provide managers and individuals with the most up-to-date information. They also coordinate efforts and help keep individuals actively engaged within the Sutter Health process. For all these reasons, these tools solve the problems of information “islands” and disparate reporting an information sharing.

Other steps included the denials management component implemented in late summer. When the registration staff were granted online access to the information required to produce clean claims, the cycle was complete. In fact, this year-end addition reflected Sutter health’s goals, to grant all parts of the Sutter health organization access to all the data required to increase collections.

When half of the required billing elements on a UB92/04 originated at the point of access, Sutter Health capitalized on the opportunity to reduce claim denials. After all, the point of access presents the greatest opportunity to delimit such occurrences. Accordingly, Sutter Health ensures optimum performance at this crucial juncture, by mandating each registration be analyzed by a rules engine before the patient leaves the registration desk to identify potential problems. Some examples of problems or errors identified at this stage may include but are not limited to the following (Souza & McCarty, 2007):

* Workers' compensation or liability financial class lacks accident information.

* Workers' compensation is filed with an occurrence code other than 04.

* The patient's guarantor is under 18 years old.

* The patient's marital status is widowed, but the relative is listed as husband, wife, or spouse.

* The patient type is not valid for hospital service.

* The patient is age 65 or older, but the Medicare insurance plan is missing.

* The patient had Medicare in any plan code, but the Medicare secondary payer questionnaire is missing.

* The health insurance claim number or policy ID number is XXXXX

* The patient address includes errors in format, punctuation, and/or abbreviations.

* The patient has duplicate medical record numbers.

This front-end claims analysis enables PFS staff to quickly identify problem areas where corrective action and/or further training is needed. In the same way, computer interfaces and decision support systems allow the system to flag accounts that require special handling. If the system identifies one of the conditions that require action, the admitting clerk receives an alert. This alert might include a description of specific action he or she should take thereby negating the possibility of ambiguity. Although the system contains numerous coordinated alerts, examples of such messages might include (Souza & McCarty, 2007), "Patient has other accounts with returned mail; please check for valid address," or "Patient has other accounts in bad debt; please request payment" (Souza, & McCarty, 2007).

Further research conducted by Souza and McCarty (2007) also showed that Sutter Health’s system that delivered a simple prompt to the registrar to collect an amount previously established with the patient during preregistration could make all the difference. To verify this, the health facility tested a tool to track how much money each staff person collected up front. Notably, Sutter Health also hoped to link this tool with evaluations. After all, this linkage could provide estimating and contract management systems reports to evaluate registrars. They could also compare and detail the percentages of contracted rates and established targets collected.

Cost Containment and Targeted Training

To offset costs, Sutter Health’s system is designed to support the existing PFS and registration staff. Because of this, Sutter Health did not need to hire a more formally educated staff or increase wages from its standard of $10 to $20 an hour. However, the system does require targeted comprehensive training. For this reason, each department and position therein might receive a different type of training. For example, registration staff members, who are not accustomed to asking people for money, receive training that focuses largely on effective patient communications and includes role-playing and script rehearsal. By contrast, CBO staff, who are used to asking people for money, need training in stewardship of their assigned accounts. Therefore, CBO staff not only learn to use the tools provided and their functions but also attend a three-hour group training session, which focuses on the concepts and principles of effective receivables management. These lessons include but are not limited to (Souza & McCarty, 2007): how to take ownership of problems, make autonomous decisions, how to solve problems, identify trends, and use that information to boost performance (Souza & McCarty, 2007). The CBO staff members also learn how to use performance feedback-based results rather than just activity-based ones.

In order to resolve issues associated with target training, Sutter Health chose Med Assets' Receivables Manager and MyMentorTM applications to give managers and staff access to the real time information they need to do their jobs. Additionally, these applications empowered these individuals and provided them with the intelligence to work smarter, make more informed and more profitable decisions. This merely reinforces the decision-making and problem solving processes.

Communication, Benefits and Timely Solutions

With Receivables Manager, the region's nine facilities' managers now access information about key performance indicators, such as A/R days and cash collections, almost instantaneously. The application's digital dashboard enables managers to identify and analyze potential issues and trends on a daily basis. Managers also have the ability to create detailed reports on the spot. Using a series of simple drop-down boxes, Receivables Manager allows users to isolate and analyze data for each payor or staff member, enabling faster problem resolution and increased leverage in negotiations (Souza & McCarty, 2007).

The results that Souza and McCarty found showed that Med Assets' software helped the region's central billing office detect an error in a major payor's contracted rate, which could have resulted in thousands of dollars in underpayments. Due to the system’s efficiency, the error was detected within days rather than weeks, allowing Sutter Health to proactively improve its cash position. MyMentor produced similar results. As a complementary application that empowers business office personnel by prioritizing and automating account work lists and analyzing productivity trends, Sutter Health's business office staff is increasing efficiencies, reaching individual, and team goals faster. Designed specifically for patient account representatives, collectors and other business office staff, MyMentor provides each user with a customized dashboard that tracks his or her progress in meeting targets - allowing users to analyze their performance and compare it with others in the department.