Keeping cash flowing after a buyout

When a hospital system welcomes a new physician practice into the system, there are many concerns from staffing to office culture. But for the financial department, limiting the disruption of the revenue cycle is paramount. A few steps taken early in the acquisition process can make a big difference in how smoothly the acquisition goes. 

One of the first things that must be addressed is physician credentialing with payers. Although the insurance companies know the physicians, the sale triggers a new tax identification number. This, in turn, means that doctors must be re-credentialed under the hospital's number. That re-credentialing process takes some time.

"We like to have 90 days to get everything converted so it will run smoothly when we take over," said Chris Bergman, chief financial officer for The Christ Hospital Health Network in Cincinnati, Ohio. 

This can be a balancing act for the financial side of the hospital. In many cases, the doctors may be in a hurry to cash out and become employees of the hospital. The full window may not be open to get the paperwork done. 

If the credentialing isn't completed by the time the deal concludes, it is impossible to bill the visits under the physician's number since that entity no longer exists. You also can't send requests for reimbursements under the hospital's number while credentials are pending. 

"Often there is not 45 to 90 days before the buyout is official," said Shon Brink, executive director of finance at Greenville Health System in South Carolina. "In that case the bills are held in a pending file. Once the credentialing is completed, the bills can be submitted. The real loss is the decreased cash flow and increased accounts receivable during the transition time."

A hospital's financial management should be involved from the earliest stages. Bergman suggests a compliance review of practice coding practices. Although the hospital isn't buying liability for the practice's presale activities, it could impact the worth of the practice. 

"The hospital needs to get comfortable that the physician's RVUs (relative value units) are sustainable over the term of the employment contract," he said. "You are essentially measuring the quality of the earnings of the practice."

The financial front office also needs to look closely at the acquired practice's electronic medical records and billing systems. Unless the practice is still paper-based, a decision will have to be made early on to either stay with the old system or move to the hospital's immediately. 

"If the legacy EMR and billing systems are connected, you may not want to disrupt that," said Brink. But, if the practice's systems are not connected or they are using paper, starting fresh on the hospital's system may make the most sense.

Above all, the hospital doesn't want to disrupt patient care or productivity. Hospitals want the patients to come into something better and not something that is more difficult.