The benefits of having a vendor handle the wind-down of legacy system accounts receivable (A/R) are considerable, but providers need the vendor to demonstrate their expertise prior to the transition. Providers also want the ability to monitor and track the vendor’s progress during the engagement.
Often, the success of a revenue cycle conversion has little to do with how well the health system converts to the new system, but, instead, how well it manages the legacy A/R while they are converting. To keep cash flow at or above historic rates, most high-performing revenue cycle shops and reputable consultants recommend a legacy A/R outsourcing strategy to augment their efforts before, during and after a system conversion.
Working with a vendor partner experienced in system conversions and familiar with a myriad of revenue cycle platforms can alleviate these problems. The right partner enables your internal staff to train on a new platform and learn new procedures and policies, while the partner focuses their attention on your legacy A/R. This combined approach often ensures a successful conversion and steady cash flows—with the least amount of revenue leakage.
Providers that track key performance indicators (KPIs) and share that data with prospective vendors will be able to better evaluate the right partner beforehand. With benchmark data from their revenue cycle platforms, providers can properly set performance expectations and monitor vendor efficiency.
Here are five tips for providers looking to wield data and analytics for a successful legacy A/R transition/conversion:
- Don’t underestimate the importance of a successful legacy A/R rundown strategy. Revenue cycle leaders often have a high level of responsibility because of how critical cash flow is to operations. When it comes to a system conversion, cash flow will often slow down as internal teams learn the new revenue cycle platform. As inevitable conversion issues arise, there is a good chance the spotlight will be on legacy A/R at some point.
- Be ready to define what success looks like for your facility. Health systems should know the expected value of legacy A/R inventories in which they choose to outsource. Knowing the expected value of a portfolio to be worked by a legacy A/R partner will help monitor partner performance and ensure significant net revenue is not lost. For example, if you decided six months prior to a conversion to outsource all managed care receivables greater than 60 days old, it would be wise to know your internal liquidation rate on a similar book of business in prior periods. This will enable finance leaders to evaluate the effectiveness of the legacy A/R partner and identify any pockets of opportunity that need further attention.
- Evaluate past vendor performance in the proper context. When a prospective vendor shares metrics to showcase their performance, it’s vital to drill down to specifics. Market demographics, service mix, payer mix and negotiated rates will often significantly impact collection results. It’s important to review vendor performance for health systems with similar demographics, payer mix, size and scale. However, without knowing the specifics of the inventory worked for another health system, it’s often difficult to assess vendor performance without a thorough reference check.
- Give as much information as possible regarding the specific placement files to a potential vendor to get better pricing and a closer fit. Insist your RFP administrator includes as much information as possible about the nature of the outsourcing assignment such as:
- Scope of the engagement
- Gross and net value of the placements
- Number of accounts
- Frequency of the placements
- Type of A/R
- Age of A/R
- Payers included
- Payers excluded
- How long the agency can keep the accounts
- Any other rules of engagement
This will help the partner establish the most effective playbook and pricing models to ensure the success of the project and maximize legacy A/R recoveries for the provider.
- Consider whether you want custom reporting or just standard industry metrics. Hospitals rely on many standard industry metrics—days in A/R, denial rates, cash as a percent of net revenue, A/R aging, cost-to-collect ratios, write-off rates, etc.—to effectively manage the revenue cycle. Vendors can do more than just help liquidate legacy system receivables during a conversion. They can also help identify opportunities for improvement impacting a myriad of revenue cycle metrics. A true partner will help the health system improve operations by communicating these opportunities timely, which can also help build better workflows in the new system.
To learn more about our legacy A/R run down services, contact Parallon.