Your Billing System Needs An Overhaul: How To Make A Successful Transition

By Nick Vennaro, Executive Vice President and co-founder, Capto Consulting

Every commercial entity wants to get paid fairly for the work it produces, and health systems and hospitals are no exception. Recently, as waves of payment reforms have swept through the industry, reimbursements have generally shrunk and consequently so have margins. This has put a much sharper focus on improving the effectiveness of billing and collection, and provider organizations have been investing a lot of time and money in trying to improve their performance.

This effort has, of course, been complicated by many other factors including the growth of patient self-pay as a percentage of overall revenue, the transition to a mix of fee-for-service (FFS) and values based reimbursements, and the concomitant drive to better understand the actual organizational cost of episodes of care, which for many organizations has catalyzed adoption of cost accounting principles.

Provider organizations want to get a much better handle on what drives their profitability and they look jealously at other industries that have this down to an exact science, something not so easy to accomplish in healthcare. Every Big Mac MacDonald’s produces has the same components and requires the same labor, but every knee replacement is different. Also, idea of determining where all expenses come from and then associating each expense with a profit center, a patient, an episode of care is a foreign concept for many hospital accounting departments.

These challenges notwithstanding, the journey to cost accounting is the only path available to get the informational power required to go toe-to-toe with payers — public and private — and negotiate fair compensation for sustainable business.

For many providers this journey hits a serious speed bump when it gets to the existing billing system, often the weakest link in their evolving revenue cycle. They cannot afford to leave money — and more importantly: data — on the table due to moribund systems that under-bill, trigger audits, impede effective collection, and fail to capture data in a way that can be associated with cost centers. Now is clearly the time to look at the new approaches and technologies coming into the market and take full advantage, but properly preparing for that search is just as critical as the technology itself.

Making The Case To Management

One of the first challenges when looking to implement the new system will be to get leadership buy in. Without the decision-makers championing a billing system transition, it simply won’t happen — the resistance to change is too high and the cost in capital expense, on-going costs, dedicated resources, and overcoming organizational inertia will be steep. So strong champions at the leadership level are key, and they should be ready to take up the flag. Of all constituencies in the organization, leadership is most in touch with the need to compete successfully in the new world of FFS and value-based reimbursement.

Couching the pitch to the C-suite in terms of transitioning to value-based care and being lean and nimble in the changing healthcare market is a given, but you are going to need to ground the discussion in cold, hard financial facts about improving billing performance today. To prepare for this, look at data and reports around billing errors, receivables aging, collections, and staff hours spent handling billing inquiries to help determine the return on investment for your organization. All of this helps an organization build the business case for a new billing system. Be sure to have key billing performance metrics prepared to prove your case such as your organization’s average number of days in A/R and discharged not final billed (DNFB). Then try to make a reasonable projection around what level of improvement you can expect. For context, the 2015 Map Awards winners averaged 37.45 net days in A/R and 3.90 DNFB.

Another area of focus should be patient satisfaction. It is well-documented an efficient and accurate billing process is linked to customer satisfaction and loyalty. Your current customer satisfaction ratings are an important baseline measurement. An efficient and proven way to measure customer satisfaction is implementing a Net Promoter Score (NPS) metric.

The tangible costs such as staffing, hardware, software, and licensing are easy to obtain and evaluate. The less tangible impacts such as customer satisfaction, staff productivity, workforce readiness, communication, and training are harder to measure and often overlooked. Weighing costs against the intended outcomes such as staff reductions, new functionalities, improving your accounts receivable performance, and increased customer satisfaction determines how the company will create its business case and measure the success of the transition.

Focus On Outcomes

Once you’ve sold your executive team on the idea of preplacing the billing system, you likely have specific strategic outcomes that were discussed and agreed upon in those meetings — so don’t lose sight of those. Unfortunately, it is rare to see the intended outcomes of the billing system replacement articulated or widely communicated throughout the organization with clarity. Use the goals from the initial conversations about this replacement as your roadmap throughout the process. Remember the replacement itself is not the goal, it is the improvements in: patient satisfaction, financial outcomes, and metrics across the board. Be sure to keep these values at the forefront of conversations with the IT department, vendor selection committee, and any candidates your team meets with. Outcomes are often overlooked, but should be the driving force in a new billing system’s decision process.

Be sure your goals also align with your patient populations. For example, is web-based billing important? Do you need direct patient billing? Or, increasing self-service may be your goal: younger consumers especially are used to using company websites to resolve issues, check the status of payments, and to understand the billing process. How can you make the process easier for elderly patients with special needs? What will your company require to accommodate the various constituencies? And don't forget the aesthetics key to the user experience. Is a more consumer-friendly look and feel needed?  As institutions move to providing mHealth and Telehealth solutions customer experience and ease of use will be expected and this expectation will carry over to other systems your patients interact with.

Understand Future Needs

As you determine the goals of the billing system replacement, be sure you are considering the future needs of the institution. There will be more interest from patients in how much and where their money is spent as billing moves to a direct-to-patient model. You will need the ability to flex and embrace new business models and adapt to the ongoing evolution in billing and reimbursement models. As the industry continues to develop, you will want a system that is as futureproof as possible to handle whatever the coming years bring.

Integration Requirements

To ensure a successful integration of your new billing system, you first must understand what it will need to integrate with. You will want a solution that fits with your existing architecture and systems environment, yet is open to adapt to new technologies and business models.

It will also be necessary to understand the system integration requirements for your organization. Will the billing be part of a full practice management software suite, a partially integrated system with collections, or a stand-alone system? There is no absolute right or wrong decision related to the question of purchasing an integrated practice management system versus implementing a stand-alone billing system.

Inevitably, the ease of purchase and implementation associated with an integrated system will be offset by a downside of compromised functionality as one vendor rarely has the best solution across all your practice management requirements. This is an instance where a good consulting firm could aid proper system selection and integration. Regardless of which direction you choose, web-based systems that support mobile platforms are imperative for future customer experience, flexibility, and capacity.

It is also important to evaluate how you intend to perform the billing function. Is your IT department equipped to support billing 100 percent internally or do you need to look at outsourcing elements of the process to free up time for your staff or take advantage of external expertise?

Whatever the desired outcomes, it is of paramount importance they are clearly identified to establish the foundation of your business case before making the investment and ultimately achieving the desired results.

Selection Of A Billing Provider

Companies selling billing software and integrations will often lead customers to underestimate time and costs because it is in their best interest to get the project sold. There are two ways to verify a service provider’s performance. First, ask for (and actually check) references for both current and past customers. Talk with references about their experience and the vendor’s ability to deliver on-time and on-budget. Take the time to visit a vendor’s customers — site visits are rarely a waste of time, and may yield valuable insights beyond vendor assessment.

Second, use a third party to help you decide what vendor to select. A third party can help take the emotions out of the decision-making process and vet vendors on your behalf, and will bring industry experience to the table to help your organization gain clarity on what your needs are and ensure those needs match up with what you are buying. Also, an outside resource can assist with contracting to be sure the desired outcomes are in fact what is being purchased.

When you ask for a product demo, make sure all of your key stakeholders review the product — don’t sit with a committee of senior executives to make these choices; involve the people who will really use it and know what they will need out of it, such as finance and accounting people, and the IT team who will work with the system on a daily basis. This will also help build buy-in for the ultimate transition process.

As you discover the product’s capabilities, new questions and possibilities can arise. Provide access to your key people to allow the vendor to better identify and accommodate your needs. Use this collaboration in making your final selection. Last, look for dedicated support where your representative and support team will know and understand your operations and needs.

Collaborative Implementation

Just as you did with the selection of the billing provider, be sure to include the entire team of billing system stakeholders in the implementation. This will ensure crucial stakeholder engagement by extending internal reach to everyone needed to identify current and future state billing system or training needs. Get your user community involved in defining, documenting, and communicating the outcomes and success criteria for an effective system selection and implementation.

Also get the vendors involved. It is just as important to involve the vendor ecosystem in defining the outcomes, requirements, and integration points. It is unlikely your organization has internal expertise in selecting and implementing billing systems. Use the selection process to educate your team on best practice, change management, and the future of billing models and processes as you evaluate an investment you will live with for many years.

To ensure a smooth transition, it is important to identify, as early in the process as possible, employee training on the new system. The amount of training needed and the cost of training, in particular, are often overlooked. This causes even the most technically sound billing transition to hit significant speed bumps and wreak havoc on an organization's ability to bill and collect in a timely fashion during the transition.

Migration Strategy From Old To New

Once you’ve selected a new billing system, think about the workforce plan, define your criteria for success, and select a vendor. It is the migration from old systems to the new system where internal fortitude and a lot of planning are required. Ill-defined goals and outcomes, combined with a lack of focus and drive to complete the migration, are the most common causes of billing system migration failures. Make sure you own the data and know how to migrate off the new solution before you migrate to that solution.

A common approach is running the old and new systems in parallel to roll new clients into the new system and gradually migrate existing clients over. This approach works, but only if you transition quickly. Running two systems in parallel for too long will duplicate your team’s efforts and cause confusion between departments, not to mention the cost. Migration requires many temporary software, hardware, and process bridges between the two systems which increase cost and the likelihood of mistakes as time goes on.

Another danger of these temporary solutions is the short term solution turns into a long slog until the migration inevitably fails from cost and resource drain through staff augmentation, additional hardware, and software required, simply to get all the billing done from multiple systems which puts serious stress on profitability. To save time and money in the migration process, spend time working through a transition strategy for the billing system change before you start, and ensure that the team ruthlessly sticks to its timeline. It is better to fight through a difficult migration quickly than run numerous billing systems over the long term.

In Conclusion

It is crucial the project manager does not let the project drag out and get sucked into the vortex of scope creep and non-retired legacy systems. It will be the death of your migration, the left hook to your billing profits, and the career end of your CMIO or CTO. Identify a leader who will throw this project on his or her back and carry it across the finish line. If this person doesn’t exist within the organization already, find one before you begin.

A change of this magnitude to your billing system is never easy — or cheap. But it can be done with success through thoughtful planning and focus on the business case; early and often staff engagement; and possessing the focus and force of will to make it happen in the intended timeline.

About The Author

Nick Vennaro is Capto Consulting’s Executive Vice President and co-founder. Leveraging strategic IT initiatives within the health care industry is one of his specialties. Nick has led numerous enterprise-scale initiatives for payers, providers and physician practices. Reach him at nick.vennaro@capto.net.