Dignity, Optum form revenue cycle management company

Dignity Health, a large and expanding health system based in San Francisco, has formed a revenue cycle management company in a joint venture with Optum, a subsidiary of insurer UnitedHealth Group.

Optum, based in Minneapolis, holds majority interest in the newly created company, Optum360. Dignity Health is a minority owner and entered into a 10-year contract with Optum360 for revenue cycle management services at a cost of $250 million per year, the health system said in annual financial filings. The company will focus on the full set of services, including registration, pre-authorization with insurance companies, and clinical documentation/coding to ensure that the medical record is complete and in compliance. This also would include working with insurance companies and patients on payment and reimbursement.

Michael Blaszyk, the chief financial officer and chief corporate officer for Dignity Health, said the health system saw an opportunity to diversify into revenue cycle management, but to do so would require technology that Dignity Health lacked.

Optum brings that technology to the joint venture, said Bill Miller, CEO of OptumInsight, the consulting and analytics arm of Optum, formerly known as Ingenix, and Optum will gain scale for its revenue cycle management services by working with Dignity Health.

Miller said that the expansion of privately insured households next year under the Patient Protection and Affordable Care Act will create a new market for the company, but the newly insured were not the reason the joint venture was formed.

Newly insured patients will enter a healthcare billing system that is “flat-out broken,” said Blaszyk, The newly created joint venture will seek to simplify billing, he said.

This is the second deal between Dignity Health and UnitedHealth. The partners formed a joint venture, SharedClarity, last year to manage costs for physician preference items.

Dignity brings “certain equipment and the intellectual property related to its internal revenue-cycle management functions” to the joint venture, the system's financial records said. Dignity Health, which includes 37 hospitals in three states, reported $9.4 billion in patient revenue for the year that ended June 30.

The new business will include 3,000 employees from the health system and OptumInsight.

The deal is the latest to diversify Dignity Health's operations. In July 2012, the system paid $455 million for U.S. HealthWorks Medical Group, which operates occupational health and urgent-care centers.

Dignity Health's entry into revenue cycle management follows a similar move in mid-2012 by Catholic Health Initiatives, Englewood, Colo., which became a minority owner of the revenue-cycle company Conifer Health Solutions.

Follow Melanie Evans on Twitter: @MHmevans