Academic hospitals struggle with managing cash flow

Academic hospitals often provide cutting-edge care and research, but they also have to pay the bills, a sometimes vexing task when cash is left on the table due to outdated claims management systems.

That was among the issues discussed at last week's Healthcare Financial Management Association (HFMA) annual conference by a panel of revenue cycle experts--Steven F. Honeywell, Kevin McLaren and Mike Albright. Honeywell is senior director of patient accounting at the University of Pennsylvania Health System. McLaren is associate director of revenue cycle enhancement at University of California San Francisco (UCSF) Medical Center. Albright oversees revenue cycle services at Indiana University Health System.

The trio discussed the implementation of "big projects" at their hospitals and systems in order to improve revenue cycle management and collections.

Cash flow management has been a big issue in recent years. In a report issued last year, Moody's Investors Service concluded that cash flow at hospitals has been constricted by rising expenses.

UCSF Medical Center decided to tackle the issue with the installation of a revenue cycle management project, switching its older billing systems to a newer one from Epic. It was a tough job: UCSF spent tens of millions on so-called "legacy costs"--keeping the old system operating while the new one was installed and tested. And when the system was finally running, claims were often routed to the wrong insurance carriers. As a result, the average time it took to pay a claim briefly shot up from 30 days to 60. But a year after the installation, cash flow increased by nearly 18 percent, while the amount of work expanded to increase collections was up only 3 percent.

Penn Health System also installed a new system that focuses on the financial management of its ambulatory care delivery. Within a year, accounts receivable were down to an all-time low of 35 days, and staff could be reallocated to other areas of healthcare delivery.

Indiana University Health implemented a number of changes, including overhauls to its reconciliation of cash transactions and the way they are posted. As a result, 90 percent of postings are now made within four days.

Although the projects have all been a success, McLaren noted that creating a workgroup and including the hospital or healthcare system's chief financial officer is crucial. "You have to make this a priority," he said.

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