Hayes' Healthcare Blog

9 Questions to Ask When Winding Down Your Accounts Receivable During an IT Transition

Posted by Sondra Akrin on June 7, 2017 at 9:00 AM

Demands continue to hammer healthcare organizations in today’s ever-changing environment:Revenue-Cycle-Blog-1-1.png

  • Increase patient engagement.
  • Reduce costs.
  • Meet new requirements of value-based care.
  • Comply with the Affordable Care Act (or the American Health Care Act or whatever new plan emerges from the ongoing congressional battle over healthcare.)

Organizations scrambling to meet these demands have become increasingly reliant on their IT systems. Practice management (PM) systems form the foundation of an organization’s business and many are coming to realize that the systems they have in place can’t get the job done. A number of older systems are slow, difficult to use and can’t keep up with the demands of a modern revenue cycle. The need for automation, data analysis and detailed reporting often requires the implementation of a new PM system.

While this may solve the needs of the future, it creates a ton of problems in the present. IT system transitions, though often necessary, are complex and affect nearly every aspect of an organization. One of the most critical aspects of a PM system transition involves the handling of accounts receivable (A/R).

Here are several key questions to ask as you prepare to wind down your A/R during a transition.

Do I stay or do I go?

The first decision you need to make is whether you will be transferring your A/R into your new system or will continue to manage it in the old system until you work it down. This is often referred to as a “financial conversion”. 

Many healthcare organizations going through a PM or billing system transition decide not to migrate their accounts receivables (A/R) from the legacy system into their new system. Most system vendors recommend keeping A/R clean in the new system since reconciling two systems can be a complex and messy process.

Can I identify all my A/R?

Making sure all receivables are accounted for is the first step of the process. Anything that’s been posted and recognized in the system is readily visible through normal reports. A tougher task is finding and managing missing or unbilled revenue. Significant unrecognized revenue can be tied up in unbilled, non-adjudicated revenue and rejections and appeals.

Develop a comprehensive plan to reach out to providers to ensure these receivables are included in the work down effort.

How much of my A/R can I expect to collect?

Performing a collectability analysis will help you decide what resources to devote to the collection effort. Start by establishing an aging cutoff. According to industry standards, 90 percent of accounts that are less than 60 days old can usually be collected. The collectability of receivables aged 121-150 days falls to 55 percent, and A/R over 180 days old plummets to five percent recovery.[1] Establishing a cutoff allows you to determine when writing off older receivables is more cost effective than increasing resources to try to collect them.

Should I try to collect everything on my own?

Evaluate the pros and cons of handling all collections in-house or whether it will be more effective to outsource a portion of the receivables to a third party. An outsource firm typically charges a percentage of what they collect regardless of the resources required to adjudicate. Therefore, it is usually more cost effective to have them handle the most difficult collection segments at a fixed cost versus adding internal resources. You can also decide to initially manage all collections internally then determine a point in time when you will turn the task over to an outsourced vendor.

How much staff do I need?

The staffing plan for a legacy system work down is often a moving target. That’s why it’s beneficial to assign a project manager to handle staffing resource allocation. The greater the portion of the project to be handled internally, the more critical it is to have someone specifically in charge of staffing. Whether outsourcing or using internal resources, an internal project lead is required to work with both the internal and outsourced teams. You must be ready to answer questions from outsourced staff daily so that questions do not build up and create an even older, tougher receivable to collect.

How will the wind down affect my team?

There are four groups on your team that will be impacted.

Ultimately your A/R reps will be most affected by a work down project, but the new system won’t generate receivables to manage for 30-45 days from go-live. In the short term, there is no need to reassign staff to the new system. Evaluate the work files after a month or so to determine the resources you will need to transfer.

Payers are not going to make things convenient by sending separate EOB’s broken out by new versus old systems so you will have to help your payment posters almost from the outset. They will continue to get the same 50 page, 10,000 line EOB that has both old and new system bills intermingled so they will have to create and reconcile separate batches of legacy and new system postings.

You will also need to provide additional immediate support to your cash control reps. You may be able to outsource some legacy system activity but you should manage cash control in house. Mixed EOB’s requires posting lines to the new systems and then sending a spreadsheet to the third party to handle the posting of the balance of the lines from the old system.

Your Customer Service Reps won’t be getting phone calls from day one but once patients begin receiving bills and statements from two systems that look completely different they will have to handle calls from confused patients. One way to simplify the situation is to provide two different phone numbers on the statements, one for old and one for new billing. The transition can be a stressful and trying time for CSR’s so you may want to consider outsourcing some tasks to help ease the burden.

How do I minimize patient confusion?

Make patients aware of the change well in advance. Post copies of the new statement in waiting rooms and hand out flyers when patients check in. Announce that you are moving to a new system, tell them the date of the change and ask for their patience during the transition. Use envelope stuffers when bills go out alerting them before and for several months after go-live until you are sure everyone is comfortable with the change. The more information you provide ahead of time, the better patients will be able to handle the changes.

How long must I keep legacy data?

Make sure you have a clear understanding of regulatory requirements and internal organizational mandates for record retention. The typical requirement is seven years but some organizations extend that to 10 years or more. Clarify your own requirements and the level of detail that must be converted well before your go-live date.

How do I handle archiving and storage?

Some organizations choose to manage this data internally, but supporting an internal option requires significant resources in people, hardware and software. Many organizations will use an outsource partner and if you decide to go this route you will need to provide policies and procedures for the retrieval of archived patient account information. Regardless of how you handle archiving, the key is making sure the data remains available for reporting and for any access that may be required once your old system is shut down.

A/R drives an organization’s cash flow and must be managed carefully during a system conversion. With internal resources committed to the overall system transition, it is often beneficial to partner with a third party consultant that can collaborate with the finance team to help plan and implement a work down strategy to manage receivables.

The best way to keep the revenue cycle operating effectively is to begin planning for the A/R work down early in the system conversion process. Evaluating every aspect of your existing A/R processes and planning for every contingency, can help to better manage your legacy A/R while simultaneously ensuring a more successful transition to the new system.

For more in-depth information, feel free to download our white paper, 4 Focus Areas to Ensure Efficient Legacy A/R System Work Down.

Hayes WHITE PAPER - 4 Focus Areas AR Work Down TN-1.png

 Download White Paper

[1] Industry Valuation of Accounts Receivable, Practice Support Resources Inc.

Topics: healthcare IT, healthcare revenue cycle, A/R management, Legacy System

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