One of the challenges of a hospital merger or acquisition is integrating the existing financial systems after the deal is done—which can result in significant revenue losses. It’s an issue worth looking into, given that healthcare mergers and acquisitions are on the rise: healthcare M&A activity is expected to remain robust for the remainder of 2012. A report released in January by the Norwalk, Conn.-based Irving Levin Associates, Inc., notes that the volume of hospital M&A deals was up 12 percent in 2011 compared to the year before.
Norton Healthcare, an eight-hospital system based in Louisville, Ky., experienced the problem in 1998, when the two-hospital system acquired five hospitals from Humana, a managed care company in the Louisville area. The acquisition brought about a thicket of issues in which the staff attempted to sort the remittances from the insurance companies into the hospitals’ billing systems, according to Peggy Taylor, Norton’s manager of PFS/Cash Refunds. Norton inherited four new billing systems and seven different databases (one each from Norton Hospital and Kosair Children’s Hospital, and one from each of the acquired hospitals).
All of the hospitals were placed under the same tax ID, so the payments were recorded on the same eligibility of payment (EOB) remittances from the insurance companies. This required Taylor’s staff to sort the payments for each hospital—the larger remittances were actually color-coded for each hospital, a process that took three to four days—and then handed off to posters who recorded the payments for each hospital, Taylor says.
A Struggle with Paper-Based Systems
Norton, whose billing systems were paper-based at the time of the acquisition, was confronted with a fast-growing crisis, Taylor says. Her staff had to manually “scrub” more than 700 pages in a typical week of remittance transactions and input the data into the correct billing system, a task that took three staff members eight hours each to accomplish; and then additional members to enter the information into the appropriate billing system and double check the data. Overall, it took 37 staff members four and a half days to complete the remittance transactions. It simply couldn’t keep up, and was soon facing $14 million in un-posted or identified cash and running six to eight months behind in posting.
Following the acquisition, Norton began to consolidate staff from all of the hospitals under one roof, including billing, collections and customer service, Taylor says. She adds that her department continued to struggle: “We were the ones who were subjected to all of the different remits that were coming in from all of the payers, and the facilities were commingled on the same remit.”
Realizing that the manual process was unsustainable, Norton made the decision to automate the process with a system that could help cope with multiple databases, Taylor says. In 2001 it selected CSC Papers (now OnBase, supplied by Hyland Software, Inc., Westlake, Ohio, following Hyland’s acquisition of CSC Inc. in 2010); OnBase, which is live in across the entirety of Norton’s patient financial services system with the exception of the physicians group, Taylor says.
From her department’s perspective, the key advantage of the automated billing system is the ability to post into a single, unified system rather than into different databases, Taylor says. Posters, after choosing the correct account number for each of the facilities, are able to post into a single template that automatically records the posting to the appropriate hospital. EOBs and checks are scanned into OnBase, which puts out an image so the posters can record the payments and adjustments to the facilities, she says. It also calculates adjustments, “which is tremendous when you are posting as much as you are,” she adds. Taylor adds that the system provides automatic comments that go into the databases of the facilities for future follow-up, providing information on the data that was posted, the accounts receivable number, the batch number, the user’s initials, and the denial and remark codes.
Taylor says that at the time of the acquisitions, her staff was posting between $30 million and $35 million per month; within a six- to eight-month period, of going live with OnBase, it was posting up to about $80 million, she says. Currently Norton is posting $120 million.
Reconfiguring the Workforce
Taylor says she has not made any staff reductions. “The workflow has been streamlined,” she says. “Each new area that I set up remains in place today, and they are very effective at what they do.” Fewer staff was needed for timely scanning of batched checks, receipts and EOBs. Manual data entry and color coding were eliminated early on. Keying in of data was probably reduced by 60 percent, she says.
At the same time, timeliness and accuracy of the data processing increased. Certain edits are set up to check for posting errors, which are identified and corrected immediately. “By automating the majority of the process, we were able to transition staff to roles such as credit balance follow-up, cash posting analysts reviewing denials, and control for managing the balancing/reconciliation process,” she says.
She adds that automation has improved and simplified Norton’s audit and control procedures, because it provides a single point of reconciliation and reporting for all of these payments. “By the time six to eight months rolled around, we were back to where we should be,” she says.
Taylor says Norton has refined its patient financial services office to include departments that work on denials and revenue recovery. “It is very important for us to report those denials and the money associated with those denials, to report them correctly,” she says. She also set up refund analysts to see if they’ve overpaid, and who also look at credit balances. Credit balances have been reduced from $30 million in 1999 to $3.8 million today, she says. “I believe that OnBase was the tool that helped us standardize Norton healthcare’s workflow, and provide the necessary management and resources for evaluating our daily processes, Taylor says.
Norton says that it has achieved a 70-percent reduction in unposted or unidentified cash to $3.6 million, which is under the 2-percent national norm for monthly postings. It has achieved an 80-percent reduction in necessary staff to post remittances. That has allowed Taylor to transition staff to roles such as credit balances analyst, which directly affects the bottom line, Taylor says. It has reduced its time to complete its weekly remittance transactions from four and a half days to 48 hours or less. With less time and staff dedicated to processing remittance transactions and more transparent processes, Norton improved its relationship with its customers through faster and more accurate responses to questions.
