4 Focus Areas For An Efficient Legacy System A/R Work Down
Healthcare organizations have become increasingly reliant on their IT systems to carry out their everyday operations. Initiatives like Meaningful Use, ICD-10 and the Affordable Care Act (ACA) have led to widespread installation of new or updated healthcare IT systems. The implementation of the Medicare Access and CHIP Reauthorization Act (MACRA) and the continued shift from fee-for-service to value-based reimbursement models is making the optimization of IT systems a priority in a majority of organizations.
In the current climate of change, IT challenges abound. Many organizations are planning or are in the process of implementing a new healthcare IT system while concurrently managing a legacy A/R system work down. In order to maintain cash flow during a new system implementation, it is crucial for organizations to focus on four key areas to efficiently work down their old A/R.
Unfortunately the healthcare IT landscape remains unsettled. The rush to implement integrated clinical and billing systems has soaked up IT budgets, putting practice management (billing/financial) system upgrades on the back burner. That pent up demand is now surfacing as organizations scramble to update their practice management (PM) systems. Meanwhile, general dissatisfaction with EHR/EMR systems has led organizations to evaluate alternative technology solutions.
This unrest in the industry has resulted in a higher number of systems transitions as organizations continue to seek solutions that better meet their needs.The majority of healthcare organizations that replace PM or billing systems don’t migrate accounts receivables (A/R) from the legacy system into their new system. Most system vendors recommend keeping
A/R clean in the new system since reconciling two systems can be a complex and messy process. However, the entire provider level adjustment (PLB) issue is something that should be migrated from the legacy to the new system.
Legacy work down initiatives and learning a new system can reduce productivity levels and create chaos in the business office for a fair amount of time.To efficiently manage A/R during a transition, organizations must create a strategy and plan for working down receivables before bringing up the new system.This avoids having to simultaneously manage two buckets of receivables.
Although system changes are often necessary, managing the receivables process during the transition can be a challenge. This article provides ideas for organizations to consider as they plan for a legacy system A/R work down.
1. Strategy and Planning
The first area of focus is developing a clear A/R work down strategy and plan that involves quantifying all receivables, estimating their collectability and determining the most cost effective way to work them down.
Receivables Identification
Making sure all receivables are accounted for is the first step of the process. Anything that’s been posted and recognized in the system is readily visible through normal reports. A tougher task is finding and managing missing or unbilled revenue. Significant unrecognized revenue can be tied up in unbilled, non-adjudicated revenue and rejections and appeals. Develop a comprehensive plan to reach out to providers to ensure these receivables are included in the work down effort.
Receivables Collectability
Once you’ve identified all receivables, you should next perform a collectibility analysis.When discussing devoting resources to collecting A/R, it’s important to determine an aging cutoff.According to industry standards, 90% of accounts that are less than 60 days old can usually be collected.The collectability of receivables aged 121-150 days falls to 55%, and A/R over 180 days old plummets to 5% recovery. Establishing a cutoff allows you to determine when writing off older receivables is more cost effective than increasing resources to try to collect them.
HFMA has developed a definition for cost to collect to help organizations determine the amount of resources that should be devoted to various buckets of aged receivables. They calculate cost to collect as Total Revenue Cycle Cost divided by Total Cash Collected. For example, the potential revenue from $3 million over 180 days would be $150,000 dollars and would likely drop to $100,000 after contractual adjustments. You then need to estimate the cost to collect that amount. If the estimated cost exceeds the revenue, the obvious choice is to write off those balances.
In-House or Outsource
As part of estimating the cost to collect, you may consider evaluating the pros and cons of keeping all elements of the work down project in house or whether it will be more effective to outsource activities to a vendor. You might decide to handle all collections in-house or you could choose to outsource a portion of the receivables to a third party. An outsourcing firm typically charges a percentage of what they collect regardless of the resources required to adjudicate.Therefore it makes sense to have them handle the most difficult collection segments at a fixed cost vs. adding internal resources.
For example, aged Medicare receivables can be time-consuming and complex and are often a good candidate to outsource. Outsourcing frees up internal staff to focus on the receivables that are easier to collect. You can also decide to initially manage all collections internally then determine a point in time when you will turn the task over to an outsourced vendor. The decision on using internal resources vs. leveraging a third party vendor has a significant impact as you develop a staffing plan.
2. Staffing
The staffing plan for a legacy system work down is often a moving target
and needs to be an area of focus.That’s why it’s beneficial to assign a
project manager to handle staffing resource allocation.The greater the
portion of the project to be handled internally, the more critical it is to
have someone specifically in charge of staffing.Whether outsourcing or
using internal resources, an internal project lead is required to work with
both the internal and outsourced teams.You must be ready to answer
questions from outsourced staff daily so that questions do not build up
and create an even older, tougher receivable to collect.
Most organizations focus on the A/R representatives when considering the challenges of an A/R work down, but there are actually four key groups in a typical business office that are impacted by a legacy system work down initiative.
A/R Representatives
Although A/R reps are significantly impacted by a work down project, it’s important to understand that the new system will not generate receivables to manage for 30-45 days from go-live.Therefore it’s not necessary to take half of the existing A/R staff and assign them to the new system right away. Once the new system has been running for a month or two, evaluate work files to determine the volume build up.As the workload grows, transfer resources from the old system to the new system as needed. Repeating this process at the end of each month results in a gradual shift of resources from one system to the other.The project manager is responsible for maintaining the fluidity of this type of staffing plan.
Payment Posters Resources will likely have to shift much more quickly with payment posters. Payers are not going to make things convenient by sending separate EOB’s broken out by new versus old systems. Instead, posters will continue to get the same 50 page, 10,000 line EOB that has both old and new system bills intermingled.This dramatically reduces the productivity of payment posters who must first identify which lines belong to which system and then must toggle between the two systems to ensure everything is posted correctly. This requires creating and reconciling separate batches of postings. When mixed EOB’s begin to arrive, processing time can easily double. Unlike with A/R reps, this is an incremental workload so gradually shifting resources will not solve the problem.The project manager will have to hire additional FTE’s to offset the decreased productivity and increased redundancy required to manage the two systems.
Cash Control Representatives
Choosing to outsource some of the activity related to the old system can reduce the pressure on internal resources, but cash control should continue to be managed internally.When a mixed EOB arrives, internal staff will need to post lines to the new systems and then turn over a spreadsheet to the third party to handle the posting of the balance of the lines from the old system. To accomplish this transfer successfully, you need a mechanism in place to separate payments appropriately.That task usually falls to the cash control team which acts as a “traffic cop.” They direct the correct payment batches to the proper group and then reconcile the two to the actual cash that came in to ensure the complete EOB has been posted to one system or another.
Customer Service Representatives
As with the other groups, CSR’s won’t be getting phone calls from day one from the new system. However, once the system has been up and running for several months, patients will begin receiving bills and statements from two systems that will look completely different.This will likely cause confusion and patients will turn to customer service with their questions. The CSR’s then must try to interpret from the patient’s conversation which system created the bill he or she is discussing.This requires toggling between systems with the pressure of the patient interaction on the phone or in person. One way to help mitigate that situation is to provide two different phone numbers on the statements, one for old and one for new billing, which will easily differentiate the requests.The transition can be a stressful and trying time for CSR’s who often feel the brunt of patient frustration with the system changes. Some of the tasks performed by the A/R representatives, payment posters and CSR’s can be outsourced which can help ease the burden of the transition.A/R follow up and collection can be separated by types of payments or providers, but payment posting and CSR activities should be strictly broken down by new vs. old system handled either in house or by a third party vendor. Cash control must always be handled internally.You would never want to hand that over to a vendor because of the sensitivity of the transactions that are inextricably linked to the financial arm of the organization.
3. Execution
Effective execution is another key area of focus for a successful A/R work down project.
Policies and Procedures
Once you decide how you are going to tactically handle the old system vs. the new, you will need to modify your policies and procedures (P&P’s) to ensure they reflect your decisions.There are often questions from internal and third party auditors on how you are managing the transition process, and the best way to respond is to direct them to an updated P&P manual. The update should include modifications that address both internal and outsourced activities and reflect your go-forward plan. The transition affects several key areas of your organization including hospital and physician charges, insurance payments, mixed EOB’s, patient balances/payments and charge corrections that should all be addressed in your P&P updates. It’s critical to work flow the new processes in all of these areas to make sure everyone understands the handoffs, checks and balances and reconciliations both operationally and systematically.Your P&P’s should address these adjusted workflows and be able to stand up to internal and external audits.
Clean Up and Reconciliation
Accounting for all your receivables during the transition is crucial so it’s important to perform clean up and reconciliation in the old system before you go live. Cleaning up loose ends in the receivables area requires advanced planning and tenacity.
Unbilled, missing and non-adjudicated revenue One of the thorniest problems involves unbilled and missing revenue.This revenue is not yet in the system and the business office has no visibility to it so they can’t manage what they don’t know about. Some providers are lax when it comes to getting their charges in and that poses a significant problem when you are looking to transition systems.
You may have some reports that will help you identify this black hole such as patient appointments without a related invoice or admitted hospital patients with no charges for specific days of their stay.You’ll have to get to those providers to discuss unbilled charges. Some organizations establish cut off dates and inform the providers that if the charges are not in by that date, they will not be paid.
Other items include non-adjudicated revenue which has been billed but which has not yet been responded to by the payer, and rejections and appeals that are still in process.You should have a good handle on what rejections have been rebilled and which are sitting in appeals waiting to be adjudicated and resolved.
The longer these buckets remain unresolved, the longer you have to hang on to the old system.This also adds stress to the coders and charge entry team who have to log into the old system to post charges when they are already posting to the new system.
Balance forward payment plans and credit balances Part of the clean-up process involves transferring patient payment plans. This may require setting up an entirely new plan for any new charges.
Credit balances are an important consideration that are often overlooked and can include patient or insurance refunds and adjustments.These require significant investigation since staff has to toggle between two systems for as long as both systems are active.A patient may have a credit balance in the old system but a charge in the new system and the two need to be reconciled. Effective checks and balances on the movement of money between systems is critical because revenue that’s already been reported is being taken from one system and credited on the new system.
Other areas to consider include methods of handling unapplied cash between the old system and the new – cash received from payers that cannot be allocated to specific patient accounts.Also, prepayments for things like cosmetic or other elective services must be considered.
Patient Education
Having a plan to educate patients can help minimize confusion. It’s best to start making patients aware of the change well in advance. Post copies of the new statement in waiting rooms and hand out flyers when patients check in.Announce that you are moving to a new system, tell them the date of the change and ask for their patience during the transition. Use envelope stuffers when bills go out alerting them before and for several months after go live until you are sure everyone is as comfortable with the change.They may still be surprised and confused but the more information you provide ahead of time, the better able patients will be able to handle the changes. Scripting for customer service staff can also help with patient education.
Outsourcing
If you decide to outsource, you will need to lay out the workflow and have appropriate processes in place to execute effectively.There are many nuances to outsourcing so it’s beneficial to work with a partner to help with the RFP, contracting and implementation process.
Negotiating contract terms is key to an effective outsourcing strategy.When it comes to collections, most vendors charge a percent of revenue collected. Be careful of contracts that include other fees for writing off charges that have been rejected but aren’t worth appealing.Also avoid allowing a percentage on adjustments, which is like paying to write off receivables. The goal is to make sure the contract is fair and reasonable in relation to the marketplace.
Your partner can help with a cost to collect analysis based on the vendor contract. Look at the detailed fee structure for specific activities.A/R collection is normally a straight 5-10% of revenue collected. Payment posting and customer service aren’t directly tied to collecting revenue so look at those fees closely. Check clauses to make sure you’re not paying too much for something you can do more cost effectively in house.
It’s best to select a vendor who can conduct their work activities using your system. It’s difficult to effectively track what a vendor is doing outside your system.You don’t want to get involved with a vendor who has to use an extracted data file transfer system or excel spreadsheets to report back to you. Include a Service Level Agreement (SLA) that clearly outlines how the vendor will communicate issues, request write off approvals and provide feedback.The SLA is also an important vehicle for the outsourced agency to report productivity, resources assigned and outcomes. A well structured SLA will provide the proper level of transparency with the vendor and is key to a successful outsourcing relationship.
4.Archiving and Storage
As you get to go-live and beyond, you will need to make arrangements to keep the data in the old system available as you transition to the new system. Make sure you have a clear understanding of regulatory requirements and internal organizational mandates for record retention.
Every organization is different.The typical requirement is seven years but some organizations extend that to 10 years or more. Clarify your own requirements and the level of detail that must be converted well before your go-live date.
If your transition is the result of a merger or acquisition, you likely face an even higher level of complexity when it comes to archiving. Clarify which entity has the ultimate responsibility for the records before you develop your storage strategy.
Many organizations will use an outsource partner to handle archiving and storage so you will need to provide policies and procedures for the retrieval of archived patient account information.
Deciding how to handle archiving can also spur discussions of your IT infrastructure as a whole.You may decide to use cloud resources rather than expanding your internal hardware footprint. Conduct a three year and five year ROI analysis to determine whether a cloud-based or on-premises solution is the best choice.
Regardless of how you handle archiving, the key is making sure the data remains available for reporting and for any access that may be required once your old system is shut down.
Summary
A/R drives an organization’s cash flow and must be managed carefully to avoid any interruptions.This is especially true during the critical time of a system conversion.With so many internal resources committed to the overall system transition, it may sometimes be difficult to effectively handle the legacy A/R work down processes as well. Many organizations solve this dilemma by partnering with a third party consultant that can collaborate with the finance team to help plan and implement a work down strategy to manage receivables.
The best way to keep the revenue cycle operating effectively is to begin planning for the A/R work down earlier in the system conversion process. Evaluating every aspect of your existing A/R processes, and planning for every contingency, can help to better manage your legacy A/R while simultaneously ensuring a more successful transition to the new system.
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As the healthcare industry shifted, we saw an increased need for new thinking and ideas to drive revenue growth and practice performance. Our approach reflects the dynamic needs of providers today. Contact us today and discover how RMC can help you manage and grow your practice revenue. E-Mail Us: sales@rmcdelivers.com | LEARN MORE
Sources - Hayes Management
