Paying it forward: How Houston Methodist improved collections, lifting margins

Scott Ulrich, director of revenue cycle for the Houston Methodist Hospital System.

Scott Ulrich has a saying: No margin, no mission.

As director of revenue cycle operations for the faith-based Houston Methodist Hospital System, Ulrich says it takes a strong financial margin to deliver on the hospital's most import reason for being.

"We have a strong commitment to our community, and we have a strong commitment to providing quality leading care to our community," he said. "That takes an investment in resources, it takes an investment in people, buildings, equipment and physicians. So, it's important for us to make sure we protect that and be able to upgrade our facilities, upgrade our services and provide the very best."

For Ulrich, that means a focus on process and outcomes as the primary means to improving revenue cycle performance and safeguarding the mission of the 1,500-bed system. 

[Also: Survey: Healthcare finance execs expect to outsource collections]

"Often when we're looking at revenue cycle deficiencies or opportunities, when we start digging into the details we often see that it's a process issue. That either we haven't enabled our responsible staff to do the right thing, we've made a process too complicated so that it's impossible to follow the steps to a proper conclusion, or the process doesn't fit the problem."

When either of those happens, it's time to revamp, he said.

Solving for collections

In February 2007, Ulrich and his revenue cycle team discovered many broken processes were hampering their abilities to collect on their revenue, due in large part to the rise of high-deductible health plans and the overall increase in financial responsibility that patients now hold for their care. Houston began taking a closer look at revenue cycle deficiencies and discovered breakdowns in communication and a lack of common understanding on key issues, a problem that had rendered point-of-service collections an "ill-defined term" and hurt their ability to work efficiently.

To tackle the system's collections issue, the first thing Ulrich said they had to do was precisely define what was meant by point-of-service collections, something that's more complicated than you'd think. They defined it as any payment from the patient within five days of the date of service, and were able to create measures around it for benchmarks and best practices.

Ulrich and his team also realized there was too much variation in how POS collections were being discussed with patients. Some employees were just discussing copays, others deductibles, and still others were just talking about non-covered services. Armed with a newly agreed-upon definition of POS collections, the team took it one step further and minted a policy defining what exactly an out-of-pocket expense meant for patients. That new policy would dictate that the copay, deductible, co-insurance and non-covered services together make up a patient's estimated out-of-pocket liability. Because the process for estimating that can be very complex, they created common, system-wide tools to help with those estimates so that they could give patients an accurate assessment of the cost of services.

[Also: Revenue cycle tips: Improve customer service, boost collections]

They also created a minimum collection procedure, setting the ideal collection goal at 100 percent of the estimated liability but allowing staff to be flexible with payment amounts as long as a portion of the out-of-pocket was paid at the point of service. If that wasn't possible either, the case was passed on to a supervisor. All of this meant training and education for those on the front end of the revenue cycle process including patient access, scheduling and finance. Their goal was to hold staff accountable for having those discussions with the patients ensuring a higher level of service and making sure the patient understood and accepted their liability.

Ulrich said once you've done that, the likelihood a patient will make payments throughout the revenue cycle continuum increases. In the first few years of the changes, Ulrich said the difference was night and day. Some hospitals reported triple-digit improvement year over year, others showed high double-digit improvement. Equally strong was the feedback from patients about the streamlined system now in place to inform them of their financial obligations up front. With it, they said, came far fewer surprises and an enhanced ability to make informed decisions about their care.

"I've always looked at point of service collection as that wonderful intersection between service, quality, and good revenue cycle practice. It's been fantastic but I want to make sure that everybody realizes it wasn't fantastic because we're standing there at the desk with baseball bats in our hands forcing money out of people's pockets. It was fantastic because people responded to this new level of service," Ulrich said. "We never asked for money from people that they couldn't afford. We always made provision for that. We have wonderful charity policies that allow for that. We never asked money from people that were not prepared to pay because of emergency or unexpected illness. It was just a matter of having the conversation in a quality way about what that expected liability would be."

Drained by drug denials

As overall revenue cycle processes at Houston were being changed, another problem was also emerging in the infusion department, which handles therapies for patients struggling with cancer, rheumatology or recovering from transplants -- that had a bad effect on the cycle.

Scott said he and his team noticed the hospital was writing off a considerable amount of denials for high-cost infusion drugs, and by the time they caught it it was to late to recoup the revenue. As before, they found rampant breakdowns in communication and a fragmented authorization procedure that often left patients with hefty bills. For instance, often-used Bevacizumab (brand name Avastin), which is used to help treat colon, cervical, brain, lung and renal cancers, among others, is typically administered in multiple infusions depending on the treatment plan. The usual infusion costs about $25,000 depending on the dosage.   

A leading cause of denials seemed to be drugs being used in an "off-label" manner from the manufacturer's recommendations, which then affected coverage. The other major culprit was a patient's high out-of-pocket liability, which often meant they were on the hook for more than expected.

[Also: Expert tips for better billing and collections in healthcare]

These denials were happening, Scott said, because the key players weren't communicating. Those on the revenue side expected that the physician was obtaining the authorization for the treatment ordered, so Ulrich's team was not necessarily matching the authorization to the series of services actually provided. "Some of that was because the schedulers were specialized schedulers embedded within the infusion clinic. Their knowledge was to get patients into chairs in the proper timing but they didn't necessarily have the knowledge to add all the rest of the information that our insurance verification team needed to give to Aetna," he said. "Then the physicians thought somebody else was doing it, somebody else thought the physician was doing it and so it was just everybody kind of pointing at everybody," said Ulrich. Something had to be done, not just to stem the flow of unpaid expenses, but to ease the stress mounting on patients already facing severe illness.

A chain of fixes

Ulrich's team was already looking at participating in drug-replacement programs when drug companies started bending its ear about copay assistance programs to help patients bear the financial burden of treatment, as well as helping the hospital collect more payments. But each drug company had their own set of rules and regulations for such programs, and Ulrich said they realized their fragmented system just wouldn't be able to handle it. So they did the math, and working closely with their pharmacy, physicians and other key players decided an infusion-specific financial counseling team would save the hospital lost revenue and greatly benefit patients.

Thus was born the Infusion Financial Counseling Program. Starting out with two full-time counselors, the program is now up to four staffers: two financial counselors, one specialized insurance verification person and one drug-replacement specialist. Each of them got trained by the pharmacy on how to read drug requirements, how to understand what is being ordered, drug names and authorization processes. They also had drug companies come in and train the counselors on copay assistance programs, all in a two- to three-month training period.

Ulrich said patients now got detailed conversations about the cost of care and what they should expect in out-of-pocket expenses before treatment. Counselors walked patients through complex paperwork. Most importantly, patients were reassured that someone was looking out for them.

"The lightbulb comes on over patients that says oh my gosh I can do this. Great. This is nothing to be afraid of. I'm ready to fight. I think it's been like night and day for our patients from what we used to be able to offer," Ulrich said.

Bottom line boost

The counseling program, which has been in full operation for two years now, costs $225,000 a year to run. They now have the ability to work with the drug companies and utilize drug-replacement and copay assistance programs, in addition to just operating at a higher level of accuracy and efficiency when it comes to authorizations. That has saved the hospital millions.

Ulrich says since its inception, the program has yielded $1.5 million from drug-replacement programs, $350,000 from copay assistance and $2.4 million in overturned denials for infusion therapy. Prior to the program's full implementation, Ulrich said the Houston Methodist system was averaging $575,000 a year in denials. In 2015, Ulrich said they expect only $275,000 in denial related write-offs.

Like Healthcare Finance on Facebook

Moreover, as a result of all of the improvements to A/R operations at the point of service, Houston Methodist has seen an overall rise in annual point-of-sale collections from fiscal 2010 to fiscal 2014 of about $28 million dollars. In 2008, collections totaled $23 million. Houston Methodist's annualized 2015 results through November project collections totaling $51 million, according to data provided by Houston Methodist Hospital System.

Their "avoidable write-off" and bad debt rates have also reached a new low. Houston Methodist is now at 1 percent of net revenue for avoidable write-offs. As for bad debt, they come in at one percent of gross revenue.

Setting the example

Ulrich said the approach he and his team used to solve the pressing issue of high-cost denials and create the infusion counseling program will steer their problem-solving course moving forward. "Bringing all the players around the table: revenue cycle, clinical providers, clerical people who are entering charges and talk about what each of us do, talk about where the gaps are in that and then talk about solutions. Revenue cycle for me is a hospital-wide approach. All of us have to participate."

He said you can look at innovation as just not doing things today the same way you did them yesterday, and making better use of the tools that are right in front of you. Looking beyond the data and analytics to the human causes behind it, engaging unexpected partners like they did with the drug companies, and thinking outside the box can drive the bottom line as long as your focus remains on the patient. "I think that if we invest in the right tools to serve our patients well, then we're served well in our revenue cycle and in our bottom line. It creates that trust, that two-way communication, all those things. Doing the right thing really does have it's rewards."

Twitter: @BethJSanborn