Restructuring Patient Financial Services for Maximum Effectiveness - John Muir/Mt. Diablo Health System

Healthcare Financial Management, August, 2000 by Vicki C. Lee

Following its formation as a regional IDS, John Muir/Mt. Diablo Health System in Walnut Creek, California, adopted an innovative approach to reorganizing its patient financial services (PFS) functions. Instead of consolidating all PFS functions into a single centralized business office, the IDS divided PFS leadership responsibilities into two areas: daily operations and technical functions. The director of daily operations oversees PFS clerical staff who are responsible for admitting functions, billing, follow-up, and related activities. The director of technical functions is responsible for implementing, uploading, and maintaining the various information systems; contract tracking and compliance; and regulatory compliance.

Newly formed IDSs may face insurmountable problems if they attempt to merge patient financial services (PFS) departments from multiple facilities into a single, centralized business office (CBO). Such was the conclusion of John Muir/Mt. Diablo Health System in Walnut Creek, California, when it evaluated how best to consolidate finance functions among its newly combined facilities.

John Muir/Mt. Diablo became an IDS in 1997 as a result of the merger of John Muir Medical Center in Walnut Creek and Mt. Diablo Medical Center in Concord, California. John Muir/Mt. Diablo's finance reorganization began with the consolidation of general accounting functions. Responsibilities were reallocated as the IDS appointed directors to lead new enterprisewide departments of payroll/AP, budget and analysis, and general accounting. In general, John Muir/Mt. Diablo was satisfied with the results of this phase of its reorganization effort.

When the IDS turned its attention to PFS functions, however, it was less certain about how to proceed. Most IDSs choose to consolidate all PFS functions into a CBO because they believe that melding jobs previously performed at multiple sites is the best way to eliminate duplicate functions.

Yet John Muir/Mt. Diablo's executive decision makers were aware that other IDSs in their region had not fared well with this approach. Many IDSs had worked for months, or even years, to establish their enterprisewide CBOs, only to experience a major defection of CBO management. During just two years in the San Francisco Bay-Sacramento market area alone, six directors and as many managers left their positions. Most of these PFS leaders had survived major staff reorganizations following mergers and had come out with the top job; in some instances, they had successfully held a PFS leadership position for years.

It also became apparent that finding a qualified person to manage a CBO for a large, regional IDS is no easy task. John Muir/Mt. Diablo observed that many of the IDSs whose PFS leaders had left their positions had endured long and difficult searches to find their replacements. John Muir/Mt. Diablo's financial decision makers also had received reports of a newly formed IDS in the Midwest that went through five PFS directors in one year.

Before launching its own reorganization process, therefore, John Muir/Mt. Diablo decided to conduct an informal survey to find out why so many PFS leaders apparently were dissatisfied. The IDS expected to discover a variety of reasons: different corporate culture, style clash with a new senior manager, too large a workload, or simply a better opportunity elsewhere. The IDS was surprised to find, however, a single, almost universal, explanation: the exiting leaders regarded the job of running a CBO for a large, regional IDS as too difficult for just one person to handle.

Pitfalls of the CBO Approach

Consider the difficulties that face a PFS director in a CBO. The director first and foremost must be well grounded in the fundamentals of financial management, with a strong working knowledge of routine matters such as how to calculate reserves on the balance sheet, what documentation is required to support the cost report, and how to develop and monitor productivity standards.

The director also must be able to read and understand all the terms and conditions of the wide variety of contracts that affect the CBO. Third-party-payer contracts alone can range from full capitation to straight fee-for-service arrangements. The contracts generally are complicated, with carve-outs that are difficult to track.

In addition, there are literally volumes of Medicare/Medicaid billing regulations that must be understood thoroughly. Absorbing all the information in a 30-page bulletin packed with ICD-9 codes, composite rates, and an increasing number of complicated billing regulations is challenging enough, but this information also must be disseminated and explained to staff. Furthermore, to ensure the IDS is in compliance with the regulations, the CBO director must establish formal compliance programs and oversee the associated ongoing education and monitoring.

Perhaps the most onerous task facing CBO directors is coordinating and consolidating the various information systems in the IDS. PFS departments typically use different software programs for producing accounts receivable, submitting electronic claims, receiving electronic deposits, tracking eligibility, checking for regulatory compliance, and scheduling patients. Maintaining many diverse systems is itself a full-time job.