Catholic hospitals are less religious about collecting accounts receivable than their secular counterparts and, in the worst cases, are jeopardizing their own long-term financial viability, a new national survey has found.
Because they take a "conservative approach" to collections, Catholics generally have more days of revenue outstanding and a larger percentage of older receivables. That has resulted in "mediocre receivable performance indicators," surveyors said. On average, Catholic hospitals that responded to the survey had 66 gross days of revenue outstanding in the fourth quarter of 1996 compared with a 61-day average among secular hospitals.
But the survey also identified an "elite" group of Catholic institutions whose performance demonstrates an ability to balance "their humanitarian mission with superior accounts receivable performance." These facilities averaged just 58 gross days of revenue outstanding, and uncollectibles accounted for less than 3% of their gross revenues.
Cincinnati-based Mercy Health System and Zimmerman & Associates, a Hales Corners, Wis.-based receivables consulting firm, culled these observations from a recent survey of Catholic hospitals. Nine percent of surveyed institutions-a total of 47 Catholic hospitals-responded.
Mercy and Zimmerman set out to determine whether mission affects billing and collection practices and to identify Catholics' best practices. The results clearly demonstrate "the less aggressive nature of Catholic hospitals," said Gary Prala, president of Progressive Services, a wholly owned subsidiary of Mercy. "There are some very well-performing Catholic hospitals," Prala noted, but among the majority "there tends to be room for improvement."
For instance, the "substandard performers"-those averaging more than 75 gross days of revenue outstanding-are collecting only 74% of their net revenues. The national average among Catholic hospitals is 88%, while the elite group of Catholics captures 96% of net revenues.
Substandard institutions' financial position is worsened by the level of bad debt and charity care with which they've become saddled. Uncompensated care represents 7.3% of those hospitals' gross revenues, compared with a national average of 4.8% for Catholic hospitals in the survey. The benchmark set by the elite group of Catholics is 2.8%. Most of the difference in uncollectibles reflects bad debt, not charity care. The substandard group also had the lowest percentage of receivables over 120 days old, which suggests that they've written off a larger percentage of old bills to bad debt.
"For them to continue to be able to provide care to those who need it, they simply have to become better business people," said Chuck Lund, president of Zimmerman & Associates.
In analyzing payer mix, surveyors discovered Catholic hospitals, on average, have higher levels of older and less-affluent patients. They also attribute 11% of gross revenues to the catch-all category called "other," a potential "black hole" that includes pending Medicare approvals and workers' compensation. That's five times the national average for all hospitals in Zimmerman's quarterly survey.