I recently had the opportunity to work with the central business office (CBO) of a large Midwestern university's faculty practice plan. As part of a broader strategic assessment, I was asked to uncover opportunities for operational improvement. Although most of the organization's overall performance numbers were comparable to its peer institutions, there were weaknesses exhibited in some benchmark measures.

Following a detailed analysis of data extracted from the organization's practice management system and interviews with staff, it became apparent that the CBO was greatly affected by the ability or willingness of some clinical departments to collect co-payments at the time of service.

Uncollected Co-payments
Hayes' analysis of one year’s worth of co-payment data included the following activities:

• Payments were identified by amount and type, which indicated where each payment was collected.
• Typical co-payment amounts for the major insurance payers in the region were identified.
• The location of where the co-payment was applied (either at the front-end or back-end by patient accounts) was summarized.
• A simple ratio was generated that compared front-end to back-end volumes over the reporting period; the higher the ratio, the better the performance. Weaker performing departments were identified, as well as the top performers.

This analysis revealed wide disparities in collection performance at the department level.

A second analysis was performed on co-payments that were currently uncollected and being billed to the patient. A second ratio was calculated over a shorter period which compared co-payments collected versus those un-collected and billed to the patient. These results distributed over the various departments were much the same, reinforcing the above finding.

Uncollected co-payments represent a lost opportunity to not only capture revenue at the time of service but also to minimize downstream costs of collection. The costs of not collecting co-payments are manifested in a number of ways and include the cost of printing and mailing of patient bills or statements. These costs can vary widely based on the organization's patient billing or dunning process.

Failure to collect co-payments from the patient at the time of service also greatly increases the possibility that the amount will never be collected as the patient or guarantor may choose not to remit payment when a bill is received.

Also directly affected is the CBO's patient accounts team. This client’s small team fielded relatively high numbers of incoming calls each day, as well as frequent walk-in individuals. Over 25% of all bills were for co-payments only, so the effect of uncollected balances on the team's ability to complete other assigned tasks was significant.

Recommendation
The recommendation for this client was to remind all clinical departments of the negative downstream effects of uncollected co-payments on the entire revenue cycle, with particular emphasis given to weak performers. If performance continues to lag, sharing the relative rankings among all of the departments may prove to be a motivational tool for creating improved compliance, ultimately benefiting the entire organization's revenue cycle.

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