Automated collection systems improve cash flow - includes related article on consistent follow-up

Healthcare Financial Management, Dec, 1989 by Edward F. Robinson

Automated collection systems improve cash flow

As healthcare organizations follow retail collection firms in adding computer based systems to track and recover receivables, they should consider potential benefits and pitfalls while shopping for the right system.

Retail collectors report sizable productivity gains as a result of using automated collection systems. A survey by the American Collectors Association(a) found that collectors using computerized systems handle twice as many accounts as those who manage their workloads with paper files.

The appeal for healthcare organizations follows a similar line. The foremost advantage of an in-house automated system is improved cash flow. Cutting days or even weeks off average collection time can make an important difference in a hospital's financial health.

Meanwhile, many business office managers must hold the line on adding new staff members at a time when the volume of self-pay accounts and third-party payment delays are at all time highs. Without additional staff members to handle problematic accounts, even less time is available to work on each account, and more accounts must be prematurely sent to outside collection agencies.

Benefits of automation

Computer systems bring greater efficiency, but they will not necessarily allow patient account representatives to handle more accounts per person. This is particularly true if employees already have difficulty completing their workloads. The systems can, however, dramatically improve overall recovery rates.

For example, with a computer tracking system, staff members can track accounts on a more timely basis. A broken promise or a missed payment is automatically flagged for attention when it occurs. In a manual system, a month might pass before an overburdened collector reviews the problematic account.

Increased collector productivity often means that more revenue can be recovered on a timely basis and that fewer accounts will be written off to bad debt.

Automation also broadens control over daily colleciton activities and decreases time spent compiling management reports and analyzing data.

Improved public relations is one outcome of an automated collection system. Any communication a payer has with a hospital regarding his or her bill can be documented in the system. Payments received can be recorded immediately. When patient account representatives contact a patient, they have an up-to-date picture of what has transpired with the account.

Most automated receivables follow-up systems require a dedicated computer system within the department. The hardware typically consists of a mini computer or a mid-range computer. Each user has direct access to the system through an on-line interactive desktop terminal. The departmental system, in turn, interfaces with the main hospital information system.

Application software designed specifically for hospital use is available from independent software suppliers. In most cases the software and hardware are sold as a total system.

PROCEDURE. A computer-based system completes the same routine that the business office normally follows to track receivables (see Exhibit 1).

The first step is to bring past due accounts into the departmental receivables system. This information can be transferred directly from the main system without rekeying data or creating paper files.

After the patient accounts manager reviews delinquent accounts, the system generates a series of dunning notices. If no response is received, the account moves into a selective dunning cycle, where it is assigned to a patient account representative for follow-up.

The assignment process also can be automated. The computer follows a set of instructions provided in advance. For example, some staff members may work on various third-party collectibles and others on self-pay accounts. Even more important, the computer can set priorities for accounts within each category. Accounts with large balances may be called first, followed by "broken promise" accounts.

When patient account representatives sign onto the system at the beginning of each day, they first work on the most important accounts.

Managers can enter the system at any time to review collection activity on an individual or group basis, to note whether accounts have been overlooked, and to reassign accounts if necessary. Using built-in analysis tools, they can quickly generate daily and monthly payment reports, analyze accounts by financial class, or follow performances of account representatives and outside collection agencies.

The system also continues to track accounts that are turned over for legal action or outside collection.

Possible features

The following system features help enhance staff productivity.

Linking accounts. The system should link multiple accounts to one guarantor. For example, outstanding charges may accumulate from recurring visits. More than one family member might be involved. Some software will incorporate a matching algorithm for identifying these accounts. The linked accounts then can be assigned to one person for follow-up, significantly cutting down the cost of working on each account separately.