New survey results indicate hospitals have been getting paid faster this year. Yet experts say the improvement is likely to be short-lived.
The revenue cycle is receiving top priority as hospitals, squeezed by reimbursement and cost pressures, attempt to boost cash flow any way they can. Many hospitals have made progress in getting money into the till faster, experts say.
Yet any recent acceleration in collections is having limited impact on cash flow because hospitals have increased write-offs for bad debt and charity care.
Furthermore, payments are likely to slow again as a result of Medicare's new outpatient reimbursement system--using ambulatory payment classifications, or APCs--which took effect Aug. 1.
Hospitals' gross days' revenue outstanding fell to 62.8 days in the third quarter, a 4.1-day improvement from the same period last year and the lowest level since the first quarter of 1998, when it was 61.8 days, according to Aspen Publishers, based in Frederick, Md. The figure represents the average time it takes hospitals to be paid. The data are contained in Aspen's quarterly Hospital Accounts Receivable Analysis, to be released in early December.
Editor Gene Lass says the numbers show that hospitals are focusing operationally on accounts receivable despite business office staff reductions and other obstacles. "Overall, I think you could say that things are improving," he says.
But APCs are a new hurdle. Charles Lund, chief executive officer of Zimmerman & Associates, a revenue-cycle consulting firm based in Hales Corners, Wis., says APCs are accounting for a growth of two to three days in receivables, although that situation is likely to improve as hospitals adjust. "They're having to do more checking of patient charges," he says.
Despite a push by hospitals in many states for prompter payments by HMOs, there is little evidence of improvement on that front.
But Robert Borchet, president of Best Practice Associates, a Skaneateles, N.Y.-based revenue-cycle consulting firm, says he expects hospitals' HMO receivables to decline in early 2001 because of enforcement of prompt payment laws, some of which were enacted in the past two years, and the fact that payers and providers are working to eliminate glitches.
One example is in New York, where the Greater New York Hospital Association has been working with two payers, Oxford Health Plans and Aetna, to improve the claims process.
As a result, Oxford has established a system to notify hospitals of coverage decisions almost concurrently with when services are delivered, says Patricia Wong, the association's senior vice president for finance and managed care.
However, while complaints from hospitals regarding those payers have subsided, other plans are generating more criticism, association officials say. The problem is each company has its own complex rules regarding medical necessity, they say.
"It's the old carnival game. You hit one gopher on the head and another one pops up," says association President Kenneth Raske.
If there is light at the end of the tunnel, it could be the Health Insurance Portability and Accountability Act of 1996. HIPAA requires standardized electronic submission of claims data, which should ultimately accelerate payer reimbursement.