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June 2009
A "Quick Fix" Sometimes Isn't
Dear Reader,
When healthcare companies are desperate to improve cash flow, they’re tempted to look for a quick fix. They often consider a complete reversal of the current billing and collections system, such as bringing billing operations in-house, moving them to an outside company, or switching to or from a centralized or decentralized business office.
 Get an Accurate DiagnosisIn anarticle for Healthcare Financial Management, authors Kerschner and Raaf discuss first taking time to evaluate workflow processes before implementing new billing systems. The article is specific to technological conversions, but the main point speaks for any change. They state, “Prior to a conversion, re-examine existing revenue cycle processes and workflows. System conversions are often undertaken to reduce labor costs and improve cash collections. But many times, these goals are not realized because even the best systems cannot make up for poor workflows, processes, and communication.”
In 50 percent of theworkout projectsA/R Recoveryperforms for healthcare companies that have gone out of business, the company had made significant changes to its billing operation. Often these changes were intended to do one of two things: increase cash flow or decrease expenses. But one without the other isn’t an improvement.
Brace for Immediate Impact
It’s important to realize that in the short term, cash flow may be negatively impacted while the new system gets up and running. In this case, lenders need to make sure things turn around quickly. Otherwise, A/R builds up, is soon beyond timely filing and can’t be collected.
Healthcare companies in financial distress need to take certain steps before making a drastic change.
- First, evaluate the solution and determine where the weaknesses are in the billing and collection process.
- Then, set clear goals and expectations, and monitor the process closely.
- Finally, shore up existing operations with additional, more experienced staff or hire anoutsource agentfor the receivables no one is collecting, while keeping everything else in place.
Bottom line:If the problems with declining cash flow are internal workflow processes and communication, no radical system change can fix it. Address these problems first, and then evaluate the need for a more dramatic change.
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