Counting on Efficiency

March 1, 2006

Healthcare organizations in growth mode need financial information systems that can accommodate expansion.

Healthcare organizations are no different than most large corporations. Running them efficiently means putting in place a financial information system (FIS) that operates effectively on all levels, from individual departments to the corporate office. When an organization grows, especially through acquisitions, coordinating these systems across the enterprise is crucial.

Healthcare organizations in growth mode need financial information systems that can accommodate expansion.

Healthcare organizations are no different than most large corporations. Running them efficiently means putting in place a financial information system (FIS) that operates effectively on all levels, from individual departments to the corporate office. When an organization grows, especially through acquisitions, coordinating these systems across the enterprise is crucial.

The problem in healthcare, however, is that the best-of-breed approach taken by many institutions has created a world of disparate systems that require interfacing with other hospital systems. This can be a daunting task within a single hospital, let alone among a dozen facilities owned or operated by a parent company.

But things are beginning to change. Large healthcare organizations, and some vendors, have realized that financial information systems can no longer be relegated to back-office status. Their importance in patient billing, claims processing, materials management and even strategic planning requires that standardized business applications be accessible to key personnel across the entire enterprise, whether that means one hospital or a dozen.

In the case of St. Vincent Health in Indianapolis, that meant a network of 16 hospitals. For Orlando Regional Healthcare in Orlando, Fla., a total of seven facilities needed to be linked. Each organization’s decision to choose a single, integrated FIS that could be rolled out at each institution not only improved overall efficiencies, but also provided the flexibility necessary to support future growth.

Focused on Unity
Rapid growth posed a challenge for St. Vincent Health. Part of Ascension Health, the nation’s largest Catholic, nonprofit health system, St. Vincent added 14 hospitals to its network during the past decade, most with their own standards, processes and supporting technologies. In fact, these hospitals were running six different financial systems and 24 separate applications, says Stacy Schroeder, C.P.A., St. Vincent’s manager of financial consulting, who is in charge of the Lawson implementation for the enterprise. The problem was compounded because Ascension Health “has a common reporting system through Hyperion, the enterprise reporting software,” notes Dawn Davidson, St. Vincent’s controller. As a result, data going into

Hyperion Enterprise from each hospital had to be entered manually, she says.

Another major problem was supply chain management. With purchases being made at 16 different facilities with separate systems, the supply chain management team was challenged in trying to effectively manage contracts and product usage across the entire healthcare enterprise. But, the solution to all these problems was actually simple: invest in a single set of integrated, Web-based applications that could be deployed enterprisewide.

“In 2002, we started looking for a common system,” Schroeder says. The decision process and getting their capital request approved took about a year. Then, the search was narrowed to three vendors, but in the end, St. Paul, Minn.-based Lawson Software Inc. was the contract winner. In fact, the organization decided to purchase the bulk of Lawson’s Financials software, including Accounts Payable, Asset Management, General Ledger, Cash Ledger and Project and Activity Accounting, Schroeder says. In addition to the basic package, St. Vincent also purchased e-Requisitioning and e-Broadcasting software, as well as Lawson Add-ins for Microsoft Office.

Because procurement was a major concern, decision makers at St. Vincent also chose to purchase the bulk of Lawson’s Healthcare Supply Chain Management suite, Davidson says. Modules within this suite include Procurement, Lawson Receiving and Delivery, Lawson Par and Cycle Counting, and Case Carts.

Efficiencies That Count
Implementation of both systems took about 14 months, with the first go-live in September 2003. Interestingly, the roll out was accomplished incrementally, in stages. “We had four waves of go-live from September 2003 through July 2004, with two to three go-lives in each wave,” Schroeder explains. “Hospitals with common systems went first. Those with disparate systems went next.” Prior to rolling out the systems, some upgrades were necessary, including installing a larger server and updating Web browser capabilities, Schroeder says.

Although Lawson uses a standard set of formats, implementation of the financial systems required interfaces between Lawson and systems by Siemens, as well as other revenue cycle systems. Interfaces also were written to PeopleSoft and other payroll systems, Davidson notes. But all interfaces were written in-house, she adds.

As for training, Lawson trained the project team who, in turn, trained other users, Schroeder says. Since a lot of the training was performed before go-live, many staff members got the opportunity to learn to enter and retrieve data in an entirely new and different way. “There were a lot of users who weren’t computer savvy, especially support staff like those in food service and housekeeping,” Schroeder admits. “And a lot of our smaller hospitals were still on paper. There’s always resistance in trying to get to a common process, but now, people appreciate where they’re at.”

Since implementing the Lawson systems, the organization has gained a number of measurable efficiencies. For example, data entry into Ascension’s Hyperion reporting system has been entirely automated, reducing data entry time by 75 percent and saving more than $100,000 per year, Schroeder says, explaining that the $100,000 also includes savings from using the Lawson Add-ins for Microsoft Office (reducing data entry) and other Lawson features. Also, some of that savings is attributed to better in-house reporting, Davidson says. “We spent money contracting with a third-party vendor for depreciation results. With Lawson, we’re now getting accurate depreciation reports.”

Before St. Vincent switched to an automated batching process, the organization relied on an overnight batch system. “It was hard to give Ascension numbers outside the end of the month,” says Davidson. But with a “consolidated view” offered through Lawson’s Payables Management and General Ledger modules, those figures are available at any time.

Being able to access financial reports via the Web has led to additional savings in time and money. Before installing the new system, St. Vincent created 10 different sets of standardized financial reports on paper, which were copied for distribution. Even preliminary reports were sent to department managers.

Bells and Whistles
But not so anymore. With the Lawson system in place, Schroeder says she is now able to consolidate all those reports into one master report that everyone can access from their computers. If any changes must be made, they are made only once.

A growing organization also needs to manage an increasing number of properties and capital projects–everything from constructing a new wing on a building to purchasing large-ticket items. By using Lawson’s Project and Activity Accounting software, as well as Lawson Asset Management system, St. Vincent has staved off an estimated $1 million annually in budget overruns on capital projects. “We can set up a project and set a limit so that the invoice will not process if it gets to that limit,” Davidson says.

The organization also has realized savings in manpower. “We didn’t eliminate positions, but we directed our focus to other initiatives,” Davidson notes. “If we didn’t have Lawson, we would have had to add people. This makes us more efficient and frees up staff time.”

While St. Vincent’s successes are not unusual for an organization that has totally revamped the way it conducts business across the enterprise, both Schroeder and Davidson stress that a major project such as this needs top management support from start to finish. In addition, Davidson says, managers must not be afraid to reshuffle some key staff members during the system install. “If you want a successful project, put your strongest employees on the team.” And keep your expectations in check, she adds. “Get the system in place first, then branch out into all the bells-and-whistles functions.”

Fine-Tuning Financials
Keith Eggert, F.H.F.M.A., vice president of revenue management for Orlando Regional Healthcare (ORH), realized early on that a growing organization needs to upgrade and regularly fine-tune its financial systems.

As an IDN (integrated delivery network) comprised of seven acute care facilities ranging from the 517-bed Orlando Regional Medical Center to the 68-bed South Lake Hospital, the organization serves more than 640,000 central Florida residents per year and generates approximately 72,000 accounts per month systemwide. Managed care accounts for 50 percent of the payer mix, while Medicare is roughly 30 percent. Medicaid, self-pay and other payers make up the balance.

In the mid-1990s, ORH was using a mainframe-based hospital information system that was neither efficient nor scalable. Not only did it lack an integrated application suite, but it also could not meet the organization’s complex billing requirements. “It wouldn’t complete its overnight processing,” Eggert recalls. “We were only able to produce bills three days out of seven.” In addition, the cost to collect increased to four cents on every dollar collected, he adds.

Other inefficiencies resulting from this system included: a soaring in accounts receivable (A/R) days to 92; an increase in revenue cycle overhead costs; and a flattening in up-front cash collections.

Increased Cash Flow
In 1996, with the threat of Y2K also looming, ORH management made the decision to start looking for a new system. By 1997, the search had narrowed to four vendors, and ORH chose the Affinity system from CompuCare which, through a corporate acquisition, became QuadraMed Corp., now headquartered in Reston, Va. While QuadraMed Affinity includes a number of modules including Affinity Financial Information Management, Patient Information Management and Clinical Care Management, ORH also decided to purchase the QuadraMed Community Master Patient Index (CMPI) to better track patient visits and their treatment plans. “Now we have the ability to know, across the enterprise, where a particular patient is receiving services,” he says.

But not surprisingly, ORH also faced challenges in scheduling due to the use of multiple systems. Eggert says an inordinate amount of time was being spent researching information needed for billing prior to a patient’s arrival; there were increased wait times, often causing a delay in treatment, high denial rates and problems completing patient accounts.

In 2000, ORH began implementing Encompass, a seamless scheduling and preregistration solution from Tempus Software, now a division of QuadraMed. The first ancillary to go live was nuclear medicine, and other ancillaries were gradually added. By early 2004, the conversion was complete and was followed by an upgrade to TempusOne version 8.02, which includes Call Back Reminder and Medicare Medical Necessity Screening.

Using a seamless ADT (admission, discharge, transfer) interface, account numbers are assigned and patient visits are stored in Affinity. The interface engine also sends patient and specific visit information to other information systems including laboratory, clinical, radiology and pharmacy, Eggert notes.

The results have been dramatic. Since 2000, ORH has decreased days in A/R from 92 to 53. In the past two years, up-front cash collections have increased by $1.5 million, while medical necessity denials have decreased $1.2 million. Wait times in registration have decreased by 50 percent, and call abandonment rates in scheduling have dropped from 11 percent to a low of 2 percent. To further explain these results, Eggert says, “At conversion, our A/R days hit the mid-90s. Over a three-year period, we achieved a drop to the low 50s. That translates into a $75 million increase in cash flow. In fiscal year 2005, we collected $1.042 billion in cash on Affinity.”

Improved EDI Transactions
QuadraMed Affinity also has helped ORH expedite payments and ensure HIPAA compliance with transactions and code sets. Under HIPAA’s stringent electronic transaction requirements, standard EDI transactions are designated “270” for outbound eligibility queries from the provider to the health plan, and “271” for replies from the health plan to the provider. A “276” designation is a standardized query from the provider to the payer requesting a claims status. QuadraMed Affinity’s HIPAA EDI modules have EDI 270/271 capabilities from the registry in the Affinity insurance area, which is activated at night so the system can auto query. Affinity also is 276- and 277-functional, with 276 embedded in the collection flow.

ORH, however, has tweaked the system to fit its own preferences. “There are enormous cost savings using EDI transactions, and Affinity is very flexible,” Eggert states. “We have 270 and 271 firing during registration, not at night because that’s the most efficient time to resolve any issues.” He also says both 276 and 277 have been installed, but adds: “The majority of payers are not ready to receive a 276 and send back a 277. The enforcement is not there, so we are not transmitting 276 and 277 to any payer yet.”

Additionally, all claims in QuadraMed Affinity are generated in 837I and version 4010a, which are federally mandated. The system is fully compliant with 835, the standard electronic transaction for remittance. “With the 835, we’re now 75 percent to 80 percent compliant on payments and we’re sending 100 percent 837I, which compiles at night,” Eggert notes.

Gains in Productivity and Collections
Another feature in QuadraMed Affinity that saved ORH money is the system’s Internal Collection Agency module. In the past, ORH had contracted with an outside collection agency, but began using the system’s module full-time about a year and a half ago. “Doing this electronically through Affinity’s Internal Collection Agency allows us to operate our collection agency at 3.6 cents on the dollar, versus paying 18 to 20 cents on the dollar to an outside collection agency,” he says.

The system also has allowed ORH to improve efficiencies among the 185 employees in the organization’s central business office through collector and patient business productivity standards, coupled with weekly evaluations based on the use of Affinity to enhance productivity management. “The system runs productivity levels for billers and collectors,” Eggert says.

For example, a set of predefined steps in collection-flow procedures creates a work list for employees to follow each day.

Yet, when it comes to assessing the bottom line, Eggert is pleased by what he sees. “As a billion dollar corporation, keeping our operating costs at or below three cents on the dollar is vitally important. What we have been able to do with Affinity is tremendous.”

For more information about QuadraMed Affinity,
www.rsleads.com/603ht-205

For more information about Lawson’s Financials,
www.rsleads.com/603ht-206

Richard R. Rogoski is a free-lance writer and contributing editor to HMT. Contact him at [email protected]

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