HSM 543 The target for days in accounts receivable (which the board and CEO set some years ago)
Accounts Receivable Crisis07:20 PM MT03/09/2016Scenario SummaryIt is the second Monday night in October and it is now 3 a.m. You cannot sleep.You are the CFO of Marysville General Hospital, a 300-bed community hospital inthe Midwest. Your hospital board meets at noon on the second Tuesday of eachmonth. You have a truly awful report to give the board, and you are dreading itmore than anything else you’ve done in your 15-year career as a hospital seniormanager.The target for days in accounts receivable (which the board and CEO set someyears ago) is 55 days. When AR days are at 55, cash flow to the hospital isstrong and you can meet all monthly obligations while putting some money awayinto investments for the hospital’s future.It has been several years now since the hospital has seen its AR at 55 days.There have been many factors, but AR has been in the 70–80 day range forsome time now. Last month it crept up over 90 days, and this month you have thepainful task of reporting to the board and CEO that the hospital is carrying 100days in accounts receivable.You must come up with a plan to bring AR days back in line, and you will not beable to accomplish that alone. It will take cooperation from the medical staff, theclinical departments, health information management, the business office, andmany others. But it must happen and it must happen soon, or your communitycould actually lose its hospital.Your Role/AssignmentCome up with a plan to bring AR days back in line. It will take cooperation fromthe medical staff, the clinical departments, health information management, thebusiness office, and many others, so include how you will involve thesedepartments in devising a solution.As you prepare your process improvement plan, keep the following in mind.What further data collection will you conduct before beginning to write yourplan?What will be the elements of your plan?For each element, who will be the key players and what will be their roles?What resources outside of senior management will you engage?How will you present your plan at the board meeting?And how will you know that your plan has been effective?CHARACTERSBill Walker(Bank President)Mack Wilson(Board President)Dr.JohnEvans(ChiefofStaff)Katrina Eaton(CEO)Martina Jacks(Medical StaffLinda Freed(Business Office Manager)You(CFO)BrianBillings(CIO)Nancy Stritmatter(CNO)The SituationAt the board meeting, you give your financial report. You actually have a smallprofit to show for the month on the income statement, but as you are going overthat report in the board packet, you notice that all six board members havealready turned past the income statement to the accounts receivable report. Oneboard member actually has his mouth open, jaw dropped, and another is lookingat you over his glasses. This is not good.Your board members are community representatives; they care about thehospital, and they know how important the hospital is to the town of 35,000people. They are all very worried. They know what has happened to othercommunities when their hospitals have failed financially. Everyone in this roomhas a tremendous stake in the survival and success of the hospital.After you give the accounts receivable report, there is a prolonged silence. Youwish somebody would just yell at you and get it over with, but that does nothappen.Mark Wilson: How many payrolls?You know exactly what he means, and you answer:Becky Santos(HIM Directoryou: A little less than two.With the cash on hand, you can meet the hospital payroll completely only oncewithout pulling money from the hospital investments. Those investments arereserved to replace and improve the technology of the hospital, to expandfacilities when needed, and to replace the hospital itself someday if that becomesnecessary or appropriate. Dipping into those investments to meet payroll is areally bad sign for any hospital.Mack turns to your CEO Katrina Eaton:Mark Wilson: What are we gonna do Katrina? Now I’m officially scared.Katrina: Mack, the senior managers are getting together right after thismeeting to come up with a plan. No excuses, AR is out of control, and I amscared right with you. I’d like Bill (bank president) to stay after the meeting for afew minutes; I think that we should talk about a credit line for the hospital until wecan turn this thing around. Board members, we will be back to you at theNovember meeting with a detailed plan to get AR back in line for this facility.Whatever it takes, we are going to start bringing cash in the door here. And wemay tick some people off in the process, so please get ready for the phone calls.The board completes the rest of the its business; nothing eventful—reappointingdoctors, monthly reviewing statistics, accepting donations from the foundation,planning a holiday open house, and welcoming a new cardiologist to the staff.Lots of positive things going on at the hospital, but nobody in the room can reallyfocus on any of that. They are all still looking at the big "100.47 Days" at thebottom of the AR report. The meeting adjourns.Gathered in the CEO’s office are the CNO Nancy Stritmatter, CIO Brian Billings,Business Office Manager Linda Freed, HIM Director Becky Santos, Medical StaffCoordinator Martina Jackson and Chief of Staff Dr. John Evans, and yourself. Dr.Evans does not routinely attend management meetings, but he was at the boardmeeting and followed the group into Katrina’s office. He comments:Dr.John Evans: I like you folks a lot, all of you, and we have good thingsgoing on at Marysville General these days. But I need to tell ya, I’ve known thisboard for some years, and they are nervous right now. And if they don’t see somereal improvement in cash fast, they really might start over with management.They get phone calls and mailings all the time from that outfit in Nashville thatbuys and manages community hospitals. Nobody wants to see that happen. I’mrooting for you, and I’ll do whatever I can to help. Gotta round on my patientsnow.Waiting in the lobby outside Katrina’s office is Bill Walker, president of FirstUnited Bank. He sees Dr. Evans leave and calls out.TitleBill Walker: I’m out here when you’re ready for me Katrina.The group overhears CEO Katrina chatting with Bill at the office door.Katrina: I never thought I would have to ask you Bill, but can you give me arate quote on a $250,000 credit line, just in case we need it for payroll? I amconfident in this team and their ability to turn the cash flow problem around, but Iam not sure how quickly that will happen.Bill walker: Will do Katrina, and I agree that a credit line would be better thanselling off investments if we get that tight. Back to you by COB tomorrow.Bill departs, leaving the management team to its task. Katrina looks at you.Katrina: You own the process here. We are all with you, but you are going tohave to lead the change. I have a doctor and his family in for a visit today, andthey are arriving in a few minutes, so gotta go. Please give me a report by end ofweek.Katrina hands you a black marker. You step up to a flip chart and begin to write.TitleYou: We need a process improvement plan, folks; a good one.Everyone nods and looks at the dry-erase board:DRYERASE BOARDAdmissions/RegistrationClaims ProcessingChart DocumentationPayment PostingCharge CaptureSecondary Billing/Patient FollowUpyou: Linda, as business office manager, you own the admissions process.How is that going? Is there room for improvement?Linda: Lots of room for improvement, especially in getting current insuranceinformation. We have some inexperienced people doing admissions, especially inthe evening, and they are just not great at checking to see if the patient’sinsurance information has changed. And from 11 p.m. to 7 a.m., the ER nursesare taking down registration information. I know that they are trying, butsometimes we cannot read the copies that they make of patient insurance cards,and they also forget to ask about coverage changes. If my department is billingan old insurance company or we have the incorrect plan codes, we have nochance at all of collecting. Under the admissions heading, I’d say those are thetwo biggest problems—bad insurance information and unreadable data from thenight shift. I’ve wondered if it would actually pay for itself to have an experiencedadmission clerk on duty all night.Nancy: Gosh that would be tremendous. The nurses are so busy, and nomatter how much we preach the importance of insurance information, the nurseswill always give patient care priority. I think it would be good for business andgood for staff morale to have a clerk here 24/7.You: Ok, thanks for the insights on admissions. We know we have someproblems to solve there. Moving ahead to charting now. Becky, you, and yourHIM team own the charts. How do you feel about that aspect?Becky: Overall, charting is good these days. We’ve implemented electronicmedical records (EMR) and that has definitely helped, but we have two docs, Dr.Linscott in family practice and Dr. Patel in internal medicine who are just notgreat at documenting. I know that we are losing money there. We can’t code thehighest legitimate diagnosis for the patient, because there is not enough detail ontheir charts. As you know, Dr. Patel is our number one admitter to the hospital! Ifwe could get her to chart more thoroughly, it would be worth hundreds ofthousands of dollars a year in my opinion. And then of course we have the Dr.Nielson problem (everyone groans). Patients love him and he is just the nicestman, but he will not complete his charts on time and we cannot code the chartsfor billing until he does. That really slows down billing and cash flow.You: Got it, two docs with charting issues, and our time honored with tryingto get Dr. Nielson to do his charts. How late is he right now Becky?becky: Today he has 27 inpatient charts over 30 days post-discharge. I’destimate that at $120,000 in revenue if we could bill them.(EVERYONE) Geez… holy smokes…unbelievable… well there’s a big part of the problem right there.You: Ok, how about charge capture, Nancy. We used to lose a small fortunein lost charges. Has the new computer system helped that?Nancy: It is just remarkable everyone. The IS folks under Bill’s leadershipare helping us to capture charges like never before. The old stickers gettingthrown away on disposable items and missed charges for tests and treatmentsare almost eliminated now. If a particular procedure is ordered by the doctor, theIS system knows to look for certain charges to go with it, and it won’t give up untilwe give it some. The new computer is a persistent little guy or gal or whatever itis.(EVERYONE) Laughter.Bill: So glad to hear that things are better now Nancy. The new MedXLcomputer system has probably paid for itself already in my view, and we’ve onlyhad it for 10 months now.You: Ok, so charge capture is not the problem. How about claimsprocessing? Linda and Bill, you both own pieces of that.Linda: Too many rejected claims folks. Definitely could be better. Everyinsurance company has different requirements, and it is so hard for my staff tokeep up with that. Even within the same company, their rules seem to changeevery time we turn around. I’d say that we have between $700,000 and $800,000a year in rejected claims.Bill: I think I can help with that. MedXL has an optional “Clean ClaimsModule” that might make sense for us. The people at MedXL load the claimsrequirements for the 150 most common insurance companies into our system,and then update it monthly for us. It is about $10,000 up front and then $2,000 amonth for support.You: Ok, something to consider then. We must improve performance onclean claims. How about payment posting, Linda?Linda: Just not a problem anymore. MedXL helps us to get payments intothe right places when they arrive, and it reminds us to bill secondary insurance orthe patient. Not an area of concern.You: Ok, helps to know that. How about billing secondaries and patients?Linda: It won’t surprise you that collections on self-pay patient accounts arejust awful, right around 15 cents on the dollar. We are writing off so much to baddebt these days that it’s killing us.Matrina: I have a suggestion there if you don’t mind. Several of the busiestdoctors on staff are doing something in their own offices that might help thehospital. They are offering a 25% discount to patients who pay their bills within 10business days. Many patients are taking advantage of that and paying their billsquickly.Linda: I’d probably take advantage of that also, but 25% strikes me as apretty big discount!Matrina: Let me put it to you the way Dr. Evans puts it—I’d rather have 75%now than 60% a year from now when the collection agency finally gets paid.Linda: That is a valid point. We have so much going out to collectionagencies now, and they charge us 40% right off the top for what they collect onour behalf.You: Ok, something else to consider. Any other ideas?Linda: One thing that would really help is if we could actually talk to thepatients about their bills.Becky: Gosh, we are making our own calls to try and collect aren’t we,Linda.Linda: Yes, but we mostly just talk to answering machines. The businessoffice is open from 7 a.m. to 6 p.m. and with husbands and wives working thesedays, we play a lot of phone tag with people, even with sincere people whoprobably would make payment arrangements with us if we could just chat withthem.You: Ok, one more thing to solve then. Folks, I’ve greatly appreciated yourhelp and I am going to put together a draft process improvement plan for all ofyou to look at. Katrina wants something from us by Friday, and our plan must bepristine by the November board meeting. Watch your e-mail for a draft plantomorrow or Thursday, and shoot me some feedback as soon as possible.End of You DecideCome up with a plan to bring AR days back in line. It will take cooperation fromthe medical staff, the clinical departments, health information management, thebusiness office, and many others, so include how you will involve thesedepartments in devising a solution.Present your comments in a 2 page paper explaining how you will proceed.Grading Rubric:CategoryPointsDescriptionUnderstanding20Demonstrate a strong grasp of the problem at hand. Demonstrate an understanding of how the course cto the problem.Analysis20Apply original thought to solving the business problem. Apply concepts from the course material corrsolving the business problem.Execution30Write your answer clearly and succinctly using strong organization and proper grammar. Use citationsTotal70A quality paper will meet or exceed all of the above requirements.
