Cutting costs in patient accounting departments

Healthcare Financial Management, April, 1994 by James J. Moynihan

Many patient accounting departments are trying to cut administrative costs by about 15 percent this year, but meeting that challenge without increasing outstanding days in accounts receivable will be difficult. Outsourcing some departmental tasks and using electronic data interchange (EDI) are options that can help patient accounting departments meet this challenge.

Electronic support services for patient accounting departments are widely available. Eligibility determination is a fast-growing EDI application. In some states, such as California, state Medicaid agencies require providers to submit eligibility inquiries electronically. Many payers will soon be able to receive the X12 270 eligibility inquiry transaction.

Many hospitals are substituting electronic claims submissions for direct data entry and paper-claims submissions. Some hospitals outsource the printing and mailing of paper claims for non-EDI capable payers. For many hospitals, it makes little sense to print and mail claims in-house.

The advent of EDI claims payments have created new opportunities for vendors. Some now offer automated remittance processing and generate paper secondary bills from Medicare's electronic remittances. This activity will be automated further in the next few years. Representatives from the HealthCare Financing Administration (HCFA) and its carriers and intermediaries are amending the ANSI X12 837 standard so that cross-over claims can be sent directly to secondary payers without any provider involvement. This activity should begin by the fall of 1994.

Most payers have not made the conversion to the X12 835 claims payment standards, but banks can provide outsourced data capture of remittance information through lockbox services. Hospitals that outsource these functions can receive reports via X12 EDI standards as well as the older Bank Administration Institute standards.

It makes sense for hospitals that employ collection agencies to be linked with them electronically. Collection agencies may be able to receive data regarding the status of accounts in an electronic format. They also should be able to transfer funds and remittance data from collected accounts to their provider customers using the X12 835 standard.

Cutting more administrative costs

A difficult question for many providers to answer will be how they can cut administrative costs in 1995 after they have exhausted the options suggested above. Cutting administrative costs will be an even greater challenge as more patient accounting transactions will stem from managed care contracts. The automation of managed care transactions represents the "final frontier" for many patient accounting departments. For many hospitals, managed care contracting has resulted in an increase in transaction volumes and staffing levels. How can more managed care business be conducted without adding more staff?

Managed care transactions finally are being standardized by the ANSI X12 Committee. This standardization represents a major shift from the way business has been conducted in the past. While much of the reimbursement system is based on Medicare rules, most managed care business conducted between payer and provider is a purely private-sector initiative. To date, private sector managed care practices in some areas of the country, such as in Southern California, have been engaged in a "free for all" in which practices are trying to establish market niches. Today, however, managed-care organizations in California are being asked by employers and other major buyers of healthcare coverage, including the California Public Employees Retirement System, for premium rollbacks. This may be facilitated by the first EDI managed care standards ready for use: the Health Care Services Information Review (279) and the Health Care Services Information Report (278). Both standards primarily are designed for the exchange of utilization review data.

There are two other initiatives underway that offer the potential for improved business practices. One initiative, which recently was submitted to the ANSI X12 Committee, is a request for a capitation payment standard. The difficulty in developing this standard will be due to a lack of provider participation in the ANSI X12 Committee.

The other initiative submitted to the ANSI X12 Committee has been the attempt by the healthcare transaction steering workgroup to define the medical encounter. As the country moves toward an encounter-based managed care system, there may be the opportunity to separate the invoice function from the encounter-tracking function.

This may be the key to improving long-term productivity in the patient accounting department. Imagine a world where bills are designed for payment requests and are not a catch-all for Federal data collection, determination of coordination of benefits, and other data gathering.

James J. Moynihan is a principal of McLure, Moynihan & Associates, Sherman Oaks, California. He can be reached on America Online at JMOYNEDI