AAR Reduction

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Accounts Receivable Reduction Case Studies

Trinity Health, SMDC Health System, and Carolinas HealthCare System are examples of large healthcare group providers that successfully implemented best practices to reduce AR delays. Below you will find a deep dive of my findings.

TRINITY HEALTH

Change Healthcare shared the case study of Trinity Health, a large integrated healthcare system based in North Dakota. Trinity Health manages more than 150 providers and two hospitals, as well as a 292-bed facility. Trinity Health struggled with falling collections, increasing self-pay accounts and AR days, and shrinking cash flow.

Trinity partnered with Change Healthcare to implement the following best practices:

• Conduct on-site assessment to identify key issues causing the delay
• Implement AR follow-up services to pursue receivables from payers and self-pay accounts
• Implement processes to monitor overdue claims, and file and pursue related appeals

Trinity reported that as a result, its AR was cut by more than 50%. It also increased gross collections by 6%. Change Healthcare also reported that Trinity decreased AR from a commercial payer (insurance) by 47% at the same time. Finally, Trinity processed 26,000 credit balances worth over $3 million.

SMDC HEALTH SYSTEM

An older case study (2009) by ASQ Healthcare Division concerned SMDC Health System, which managed 17 locations with four fully owned hospitals. While the case study is older, it highlights some valuable information worth noting (below).

SMDC's AR had piled up especially in the DNFB portion. The company wanted to develop a status dashboard to monitor AR DNFB and reduce its gross day's revenue outstanding (GDRO) by two business days. One GDRO amounted to $1.8 million.

SMDC partnered with ASQ to implement the following best practices:

• Address root causes of delays, e.g. insufficient staffing, inadequate cross-training, redundant processing steps, etc.
• Brainstorm techniques for process optimization, cross-training, and communication
• Create a dashboard measuring and monitoring key processes directly affecting DNFB

ASQ reported that SMDC's gross AR's lead time was cut in half from eight days to 4.6 days as a result of implementing the initiatives above. Gross day's revenue outstanding was also reduced by nearly three days, bringing in over $5 million. Finally, SMDC benefited by more than $150,000 on annual interest income.

CAROLINAS HEALTHCARE SYSTEM

Another dated but relevant case study (2003) involved Carolinas HealthCare System (CHS) which was, at the time, the largest healthcare system in North and South Carolina. CHS managed nearly 5,000 beds and over one million patients in its numerous facilities and hospitals.

CHS struggled with several business issues including AR claims delays and slow response times to payers due to poor organization of overflowing eligibility data. CHS implemented its own best practices to address its process bottlenecks, including:

• Create a background process for legacy registration applications
Coordinate with registration and patient accounting personnel to ensure operational needs will be met
• Implement a single-source concept with eligibility access for most of its major payers

CHS reported that as a result, its AR days were reduced by 50% from 100 to 50 days. Its eligibility denials also decreased by over 90% and post-billing adjustments were cut by over 50%.

NATIONAL BILLING PARTNERS

As additional material, I included the report by National Billing Partners concerning the case study of a nine-provider practice specializing in cardiology. The practice was seeing around 47,000 patients annually but unable to cope with its AR billings. NBP reported that 40% of the practice's AR was outstanding for over 120 days or nearly four months.

NBP helped the cardiology practice provider to implement the following best practices:

• Identify problem areas causing the delays, such as disorganized billing and collections process
• Identify primary targets to catch up on outstanding and incorrect billings
• Develop streamlined process and best practices native to the current staff
Train staff and physicians to manage and update electronic medical records (EMR)
• Create financial projections to help staff stay on track

NBP reported that the cardiology practice provider cut down its AR time by half from 65 to 32 days. After six months, the practice had reduced its AR outstanding from 40% to 21%. It also enjoyed a collection ratio of 98.1% and cut back on its in-house billing costs.

CONCLUSION

To wrap it up, Trinity Health, SMDC Health System, and Carolinas HealthCare System are examples of large healthcare group providers that successfully cut AR delays after implementing best practices to improve AR administration and processes.
Sources
Sources