The Importance of Data Transparency in Evaluating Vendor Performance New Study by Healthfuse Identifies the Roadblocks to Achieving Maximum Vendor ROI
Hospitals are increasingly dependent on vendors to help manage a myriad of operational processes. While the goal is increased efficiencies, lower costs and improved collections, it can be challenging to identify the return these relationships deliver. 64 Percent of hospitals report being dissatisfied or unsure about their vendor’s performance. It’s not surprising that hospitals often have to rely on each vendor to report its own results. Because vendors have varying methodologies for measuring performance, their analysis is often skewed in their favor.
A recent analysis of vendor effectiveness reviewed billing and collection data from more than two billion hospital accounts, which equates to 8.3 million unique guarantors, or roughly 3.4% of the entire adult population in the U.S., yielded a clear picture of the issues hidden in the hospital-vendor relationship. The analysis, which spans 91 facilities in 29 states, highlights a number of issues for which there are answers. But you have to be able to identify the problem before it can be fixed.
Aging accounts receivable (AR) is an obstacle to cash flow for most organizations. The rise in self-pay has exponentially heightened the problem and increased downward pressure on revenue. Accounts placed with vendors that have aged beyond 120 days represent 19.5 percent of overall balances and more than 21 percent of all accounts. The Eastern U.S. is nearly double the rest of the country at 43 percent and 23 percent respectively.
The status of these aging accounts is due to several contributing factors:
- a lack of proactive inventory management
- absence of visibility into accounts once they’ve moved to the vendor
- failure of vendors to close the loop on accounts with unknown account-holds, due to issues such as patient complaints or bill disputes
Whether or not they had advanced analytics capabilities, it is nearly impossible to measure the return on investment with their outsourcers. Gaining insight into vendor processes and problematic trends requires advanced technology that goes beyond testing only a sub-set of accounts, one that captures all data down to the account level.
“No Activity” Accounts
Many hospitals accept no-activity accounts as unavoidable. For those relying solely on patient segmentation analytics to determine the best payment collections processes, that is likely the case. This method can actually increase the number of accounts that are never worked.
The number of calls placed to guarantors by early-out self-pay vendors was staggeringly low. Nationally, 50.7 percent of the time vendors are non-compliant with best practices, regulations or service level agreements (SLAs). Over a third of accounts placed with vendors for 31 – 60 days were never worked, and 22.9 percent of those aged past 121 days were never worked. Just over 18 percent of accounts with balances under $250 were not worked. When broken down between urban and rural areas, rural fared somewhat better.
Three primary factors emerged that led to incorrect analysis of no-activity accounts:
- presumptive charity scoring used as propensity-to-pay
- patients scores that were never re-evaluated to identify changes in financial circumstances
poor predictive variables for account scoring
This last factor is a missed opportunity for hospitals. Even when patients become able to pay, they experience unnecessary aggressive collections tactics that can harm patient satisfaction and negatively impact the hospital’s reputation.
Reducing “no-activity” accounts requires sophisticated auditing tools that can drill down to the guarantor level and flag accounts not receiving calls. These tools improve efficiencies and ensure patients able to pay are given the opportunity.
Patient Plans and Default Rates
A negative payment experience can lead patients to go elsewhere. They may even skip care altogether. When this happens, patients are at an increased risk of hospitalization and readmission, which can negatively impact the hospital’s bottom line in addition to the patient’s health. Three similarities affect poor self-pay collections: lack of SLAs, workflow segmentation centered on vendor profit margins instead of hospital collections, and excessive use of account status codes that lead to inconsistent and ineffective collection efforts.
The mismanagement of payment plans is apparent when you look at the rising default rate. In 2016, 77 percent of patients made only a partial payment. Sixty-eight percent with a balance of $500 or less and 99 percent with a balance of $3,000 or more were never paid in full.1 We found that as hospitals get progressively larger, the percentage of the population that makes a payment decreases:
- < 250M = 28.7%
- $251M – $500M = 22.7%
- $501M – $1B = 15.8%
- >$1B = 11.9%.
Effectively managing patient payments requires hospitals to focus on comprehensive patient payment data that takes into consideration each patient’s unique financial circumstance. When patients are offered plans customized for them, it increases their likelihood to pay, enhances the patient experience, and ensures hospitals achieve maximum patient pay revenue.
The time to act is now
With skyrocketing self-pay and increased regulatory burdens, hospitals face a growing risk of margin erosion. The role vendors play will become even more valuable, but only if hospitals have the tools they need to proactively monitor vendor processes and results. To achieve this, hospitals must have actionable data that enables full transparency into vendor effectiveness, along with tools to enable patient-centric payment plans.