New York Methodist Hospital was feeling the pinch of diminishing cash flow.
In the heat of the moment, outpatient departments at the Brooklyn, N.Y., hospital were drawing blood, scanning bones and performing other ancillary procedures without obtaining the referrals and preauthorizations that most managed-care plans require. Despite repeated appeals to payers, they were denying payments.
Sometimes patients sought outpatient procedures even though the hospital did not participate in their HMO network.
"How do you tell a patient, 'You can't come in for a test,' when they're frantic and they're standing right in front of you?" asks Jane Jackson, director of patient accounts at the 560-bed hospital. She knew there had to be a way to head off payment denials.
So Jackson's office rounded up the heads of the radiology department, laboratory and other ancillary services and laid down the law. A new policy has been in effect for a month: When doctors or patients schedule outpatient appointments, the department must ask whether payers have cleared the visits. Appointments are scheduled only with the required preauthorization.
Billing and collecting payment for outpatient services is a thankless, migraine-producing job, which far too few hospitals do well, according to data from Ernst & Young.
The accounting firm, which audits hundreds of hospitals across the country, has noticed that providers' books are building up substantial outpatient accounts. The backlog is "the biggest surprise we've noticed this (Dec. 31, 1998, auditing) season," says Donn Szaro, a partner and national director of healthcare industry services at the "Big Five" accounting firm. In some cases, accountants have seen outpatient write-offs as high as 70% of outstanding accounts, he says.
Aspen Publishers, Frederick, Md., produces a benchmarking report called the Hospital Accounts Receivable Analysis, or HARA, which recorded an uptick in open outpatient accounts. The U.S. average rose to 37,569 in the fourth quarter of 1998 from 31,725 in the year-ago period.
Fueling the problem is the shift of healthcare services to outpatient settings, experts say. Hospital business offices generally haven't focused on those smaller accounts, because of the consuming battles waged against managed-care payers for reimbursements for big-ticket inpatient procedures (June 21, p. 104). Patient-accounts managers often complain about a lack of time, staff and money to follow up on unpaid outpatient accounts. But they end up shooting themselves in the foot because of their failure to pursue those unpaid accounts.
"Ultimately, that has more of a financial impact, because it's smaller dollars, but it's larger volume," says Kiran Batheja, director of patient accounts at St. Barnabas Hospital in the Bronx borough of New York.
If the logjam in outpatient cash flow could be traced to a single impediment, it would be hospitals' failure to obtain required information and authorizations upfront, according to patient-accounts managers and accounts receivable consultants.
"The cleaner it is on the front end, the easier it is on the back," Batheja says.
But cleaning up the front end is often easier said than done.
For instance, with so many different hurdles to leap for each payer, the authorization process itself can be a minefield, says Bill McMillan, former director of business services at San Antonio Community Hospital in Upland, Calif.
Suppose, he says, a patient comes to the hospital for a laboratory service, but that patient should have gone to the reference lab down the street. The hospital now faces a dilemma: Refuse to do the test and risk the patient's ill will or do the procedure, then wrangle with the insurance company for payment.
San Antonio Community decided it didn't want to inconvenience patients. The facility delivered the service and tried to recover payment on the back end. But patient accommodation gave way to economic reality, and the hospital started playing by plan rules. "After a while, it's a losing battle," says McMillan, now chief financial officer at Canfield & Associates, an Orange, Calif.-based specialist in accounts receivable.
The barriers to payment can be as mundane as collecting copayments and getting correct coverage information from harried patients who require urgent care. "It's difficult to ask for money upfront. It's difficult to get all the information you need," says Cheryl Sobun, editor of Health Care Biller, a publication of Aspen Publishers.
Ensuring compliance with government payment rules gums up the claims process, too, says one healthcare revenue-cycle specialist who asked for anonymity because of client skittishness about fraud-and- abuse issues. To avoid coding mistakes, more hospitals are shifting that function from the various sites of outpatient service to their medical records department, he says. That can create a backlog in medical- records before the claim even goes out the door.
Batheja has encountered another roadblock: Medicaid managed-care payers in the region do not accept electronic claims, he says. On top of that, he says, "they all require copies of records to be attached to the claim. So now I've got to take a record and match it up to a claim. So there's staff time involved there." Fortunately, St. Barnabas maintains electronic patient records. "It's still a laborious task-but it's a little more easy to control (by having patient records on line)."