CPGH to outsource some collections

Posted: Thursday, August 01, 2002

Hate being on the receiving end of anonymous second-party bill collectors calling the house? Central Peninsula General Hospital clients behind on their bills can expect contact of kind since the board of directors approved resolutions to outsource accounts receivable collections functions.

During a presentation at last week's hospital board meeting, Karina Bradshaw, director of patient finances, said the goal for using outsourcing vendors was to reduce delinquent accounts 120 days or more old to 10 percent, to decrease past-due bill days to 60, to increase collection of high dollar accounts and to maintain clean accounts receivable.

She said currently the hospital has an unmanageable amount of aged small-dollar accounts (less than $500) and an unmanageable amount of self-pay accounts, or accounts that clients pay themselves or after insurance payments. Together, these factors prevent the finance department from focusing collection of high-dollar accounts, she said.

"Nearly 7 percent of the hospital's revenue is in bad debt," said Mike Haggerty, general accounting director. "That's in the $3 million range."

He said this impacts the cost of CPGH's services.

"Whatever you're not collecting in order to pay for costs of services, you have to pass along to expenses," Haggerty said.

Bradshaw's presentation said the hospital reached this state because of inexperienced staff, a lack of management, lack of accountability, lack of motivation, and lack of accounts receivable analysis and follow-up.

A recent trial with OSI Collection Services, one of the firms approached to tackle high-end accounts, showed nearly three times the amount of revenue recovered. Pre-OSI monthly collections showed $57,000. In June, OSI collected $178,000, Bradshaw said.

She recommended outsourcing collection services for self-pay and small-dollar accounts until automated functions could be brought on line and hospital staff could be trained. As the quantity of accounts decreases, the need for outside help would decrease, she said.

This would cost an estimated $500,000 for the remainder of the year for collection and billing fees in-house. OSI would be paid $166,000 annually to collect on self-pay accounts overdue by more than 45 days but less than 120 days. The hospital would contract Clear Management Solutions to collect on bills of $500 or less for an estimated annual cost of $105,000.

Some board members offered their reservations of the plan.

"There are people that complain to me about getting a bill at the same time as they get their collection notice," said board member Bill Reeder. "They are concerned that getting a human voice to talk to about a bill will be an issue."

Board vice president Steve Hoogland said he could not see a definite end to the need for outside services and thinks that will affect costs.

"What I'm hearing is this is not a short-term solution," he said. "I'm concerned that by going in this direction at this time, we're not sure of the full cost it would incur this facility."

Board member Tom Boedeker said the hospital had been backed into a corner by not acting sooner on the issue.

"We've talked about this quite extensively," he said. "This may not be where we want to go for the interim, but we really don't have much choice. If we want to bring this (outstanding payments) down, we have to outsource."

Motions were put on the floor to approve resolutions authorizing agreements with the two collection agencies and each was unanimously approved.

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