How many directors of patient financial services (PFS) have told their organizations that they have enough cash? Cash makes everyone happy--and those who manage receivables and patient financial services for a living learn the lesson fast.

While cash flow has been a constant, nagging issue for PFS departments for many years, financial managers at today's healthcare organizations (HCOs) are increasingly attuned to the importance of comprehensive revenue cycle management. Cash flow obstacles and reimbursement erosion by payer groups have resulted in the full emergence of the processes behind managing cash flow. The principle of supply and demand has escalated interest in revenue cycle management to all-time highs. Demand for cash reserves, improved bond ratings, continual capital investment and the need for inflation management have required focused attention, not just on maximizing growth, but also on optimizing opportunities for impacting net reimbursement.The supply side of cash management has come of age in healthcare. Once solely the domain of PFS and the finance department, the business aspects of healthcare now encompass multiple departments and levels of management across an enterprise. For Rex Healthcare, the emergence of revenue cycle management teams resulted in the coordination of multiple efforts, including the selection of Web-based technology, to generate increased cash flow and improve financial performance

Established in 1894, Rex Healthcare is a 394-bed acute care, community hospital in Raleigh, N.C., and a member of the UNC Health Care Family. Rex's 3,000 employees provide a full spectrum of healthcare to Wake County and the surrounding area.

In the new millennium, Rex faced momentous financial problems due to system conversions, reliance on outdated processes and staff instability. Accounts receivable (A/R) days were 113 net, and within PF8, cash-posting backlogs were up to 8 percent of billed A/R. Contractual adjustments were over budget by up to 5 percent. Credit balances, due to over-contractualization, represented nearly 10 percent of billed A/R.

Inefficient communication, along with priority and process disconnects, allowed millions of dollars a year to hemorrhage from numerous areas, including denied claims, underpayments and contractual/ process errors. More than 50 PFS employees relied on a paper-intensive system to process more than 170,000 claims and 300,000 explanations of benefits each year. The PFS call center was overwhelmed with up to 1,000 billing-related calls each day.

The problems emanated from various points in the organization. PFS had experienced four directors and five managers in three years. The enterprise's best-of-breed system design led to 140 different applications in use across the HCO. Individual departments generated massive amounts of data, but integrating and converting the data into meaningful information was an arduous task. Rejected and denied claims were not being efficiently worked or accurately reported.

Use of e-mails, Excel spreadsheets and Access database tools became the common integration and communication method for too many staff, but this "virtual integration" approach was also frustrating, labor-intensive and error-prone.

During this time, Rex also created a denials management process within the confines of the existing financial system. However, it generated too much paper, lacked consistency and created rework. Also, it lacked payer-inclusive rules and the critical operational reports necessary to make solid management decisions.

Rex Healthcare needed to improve its financial performance. Hand-in-hand with that objective, the HCO wanted to prepare for future expansion. To do so, it had to reduce its dependence on paper, improve enterprise communications and stop the cash drain from denied claims, underpayments and poor processes. All internal processes--communications, generation of reports, interdepartmental data sharing--had to be optimized for efficiency.

Investigating the Internet

Before searching for a technology solution, enterprise managers and departments embarked on an internal analysis of the organization, identifying key steps ill the revenue cycle, quantifying the cash holes and flowcharting a number of internal processes for redesign. Interdepartmental teams then tackled the delineation of internal objectives in areas such as compliance, ABN (advance beneficiary notice), revenue cycle, denial management, financial procedures and supply chain.

Denial management was a key PFS performance area and a priority for improvement. PFS also initiated a proactive internal denial strategy while conducting a search for alternative solutions. Although enterprise managers evaluated stand-alone, in-house document imaging and revenue management systems, they ultimately decided that in-house products were too costly and that Rex lacked the necessary resources to develop and support an in-house solution.