Aged Trial Balance Analysis
Show us your ATB and we can pretty well figure out where your practice has been recently and where it is not going. The key to examining the ATB is look carefully at the trends and patterns by Age of the Receivables by payor, by sector or clinical service. It is important to have a complete understanding of the circumstances under which Third party payers pay the hospital for services. Are there electronic payments or paper? Is the clearing house adequate for the challenge of all of the volume? Are there significant denials related to the age of the receivables. Are there duplicates among the claims submitted? How long is it taking to get a clean claim out the door? Is there a problem with the billing system itself that Scrubs so hard that it is the barrier to getting bills out the door? Are there Work Queues that are not relevant but have become a dumping ground? The Aged Trial Balance is the best way of judging financial performance by all of the segments of the Revenue Cycle.
One of the great failures of Hospitals big and small, is not understanding the reasons for Denials and not having a program in place to manage them. Denials by payers are one of the best ways to diagnose problems within the Revenue Cycle. They also lead the organization to track denials back to the providers so that a complete diagnostic is possible, what we at HSMN call, the Root Cause Analysis. However, in the modern Hospital, the Revenue Cycle is often fragmented with each department doing the work of a silo. Unless and until the Revenue Cycle is a seamless continuum, the problem of unresolved denials will continue. The seamless continuum may not be possible in many places because of the history of the finance in the organization. How many times have we all sat through meetings with the “Revenue Cycle Folks” only to hear the finger pointing that consists of complaints about what everyone else is doing? For over 25 years, HSMN has worked closely with Hospitals, and large physician practices to create a Denials Management with Root Cause Analysis Program within the Revenue Cycle and to put in place “Sensitive Indicators” that allow the CFO, the HIMS Director, the PSO or the PFS director to see a trend and nip it quickly. Denials Management with Root Cause Analysis must be structured but it cannot be a silo. Everyone from the clinical staff through claims teams must Internalize Denials by understanding their root cause and the solutions.
Many practices outsource their billing and do not have the ability to do quality controls or checks on all of the aspects from coding to claim control. In both the hospital setting (where portions of the claims are outsourced) it is critical to monitor and to have in place sensitive indicators. A rising AR is a gross indicator. Getting behind the numbers to understand the drivers of the AR requires a Comprehensive review of both the internal departmental and the external vendor performance. HSMN has for 25 years helped to put into place those “Sensitive Indicators” the light up early enough to catch an emerging problem.
One of the most important outcomes of the ATB Analysis and the AR Consulting is a Cash acceleration objective. To achieve Cash Acceleration two things are critical:
- That the internal barriers in the Revenue Cycle are found and removed.
- That there is either an internal accelerator such as a special unit that can expedite getting claims out quickly or creating one. Also hiring an outside Vendor may be a very good solutions so long as items above are available.
- HSMN has worked with both large and small hospitals in helping them to create their own “Company” who will do cash acceleration. It is sometimes better to pay yourself the 4% than outsource it.
Credit Balance Resolution
Over the years many of our CFO clients have told us how frustrating it is not be able to Resolve Credit Balances. There is no magic to this process. Often we have recommended that the Hospital create its own unit to do this. We have found that clients may let the problem of Credit Balances grow incrementally until they become huge problems. The answer is to monitor closely the Credit Balance problems and work them concurrently rather than letting them be grow. It may seem that is costs more to do it concurrently but in the long run it is healthier and cheaper to set up an ongoing program.
Third Party Payer Review
For hospitals and physician practices, the “Contract” between the Third party payers and these entities is the basis for reimbursement. The truth is that only 60% of the payers in our country actually pay what to pay to that which they have agreed. In other words Third party payers whether by omission or design take discounts. Also the basis for denials should be plainly spelled out but new ones often are found to impede payments to the providers. HSMN for over 25 years have reviewed contracts against actual payment performance by Third party payers. Our methodology employs both Retrospective reviews of the clinical data in support of the service, the claim sent out by the provider, the EOB which describes what the payment is for. It is critical that we determine whether there are internal Revenue Cycle problems or whether true discounts are being taken by the Third party payers. In many of our engagements this has turned out to be both a financial gain and an awakening of the Revenue Cycle departments to be more sensitive and careful about comparing remittances to Claims.
Evaluation of Outsourcing Vendors
For hospitals as well as Physician practices, the hiring of vendors to perform a series of revenue related tasks is common practice. It is wise to allow vendors to work on special projects while the internal staff tries to keep current and improve processes. However, for over 25 years we have found that Vendor performance is not always so carefully monitored. Critical to good outcomes is the ability to set and monitor benchmarks for performance in renewal of contracts (especially if they are likely to be ongoing). We urge groups and hospitals to have someone internal monitor performance on a quarterly basis. Use the same benchmarks that you would use when you are looking at your entire Revenue Cycle. The Vendor represents a portion of the revenue. HSMN can help set up and model such performance evaluations of “Revenue Cycle” vendors and help the organization (MD Practice or Hospital) set the bench marks by looking at institutional goals and the history of performance by the Vendor. HSMN can also help determine who in the organization is best equipped to handle such ongoing monitoring.
Creating a Central Business Office or a Shared Billing Office
HSMN has helped practices and community hospitals set up Shared billing offices to handle the overflow of k billing as volumes increase and to work with Accounts Receivable that are over 90 days old. Hospitals or practices that have more than 8% of their receivables falling into the over 90 day category should consider this option. While there are billing companies who will undertake this kind of work, it is often more profitable for physician groups and/or small hospitals to create a shared service by setting up a special or separate corporation which can be profitable on its own. The profits come back to the owners and in most cases saves money. The staff can be very incentivized to work hard to bring in the money. They will not have the same constraints as hospital or practice employees but all of the rewards of a business.