Teaming up

Health systems are striving to get a better handle on their revenue cycle—and perhaps make some money on the expertise—as patients with private health insurance become responsible for greater shares of their bills and millions of Americans get new health insurance under the healthcare reform law.

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. The new venture follows a similar move in mid-2012 by Catholic Health Initiatives, Englewood, Colo., which became a minority owner of Tenet Healthcare Corp.'s revenue-cycle subsidiary, Conifer Health Solutions.

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

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

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 a year, the health system said in annual financial filings.

The new company will focus on the full set of services, including registration, pre-authorization with insurance companies, and clinical documentation and 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.

Dignity brings “certain equipment and the intellectual property related to its internal revenue-cycle management functions” to the joint venture, according to the system's financial records. Dignity, which includes 37 hospitals in three states, reported $9.4 billion in patient revenue for the year ended June 30. The new business will include 3,000 employees from the health system and OptumInsight.

Miller said 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,” Blaszyk said. The newly created joint venture will seek to simplify billing, he said.

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

Follow Melanie Evans on Twitter: @MHmevans