The contemporary health care system faces numerous problems, among which the rising health care costs and the lack of financial resources to fund the health care system are the major problems. At the same time, often health care organizations have to solve their problems on their own being deprived of the assistance from the part of the state or other organizations. In such a situation, many hospitals and other health care organizations have to look for possible solutions to their problems. In this respect, it is possible to refer to the experience of the Sutter Hospital, which faces the same problem as many other health care organizations do, but the Sutter Hospital attempts to solve its problems through the development of new, effective accounting policies and strategies and effective cost management along with the provision of health care services to clients of the high quality and in time. In such a way, the Sutter Hospital attempts to find the balance between the high costs of health care services and the high quality of health care services delivered to customers. At the same time, the Sutter Hospital attempts to make health care services available to clients and to deliver them in time to all patients, who need them, whereas the optimization of the accounting system and effective cost management helps the hospital to maintain a positive organizational and financial performance.
On analyzing the development of the Sutter Hospital and its current position, it is important to place emphasis on the fact that the Sutter Hospital has an extensive experience of operations but still the hospital faced a number of problems. In this regard, one of the main questions the Sutter Hospital’s managers have to respond was the question on how the hospital should go about increasing its upfront collections from self-pay patients. In this regard, it is worth mentioning the fact that the hospital suffer from the problem of the low collections from self-pay patients. As a result, the pressure on insured patients and, therefore, insurance companies, increased that increased the costs of health care insurance. Consequently, as health care insurance increased, insurance companies had to increase the price their clients had to pay for the health care insurance. Hence, the costs of health care services became unaffordable for many clients because they could not afford paying the high price for the health care insurance and they could not afford covering their health care costs on their own.
In such a situation, many self-pay patients faced a problem of the inability to cover their health care costs, whereas the Sutter Hospital attempted to collect the money and to increase the collection of money from self-pay patients. Therefore, the Sutter Hospital faced the problem of the widening gap between its efforts to maximize upfront collection of money from self-pay patients, on the one hand, and their inability to cover their health care services on the other. The development of the economic recession and rising costs of health care services aggravated the problem and the Sutter Hospital and its patients faced a sort of vicious circle for, on the one hand, the Sutter Hospital attempted to maximize upfront collection of money from self-pay patients, whereas, on the other hand, self-pay patients could not always afford covering their health care costs.
In this respect, the Sutter Hospital paid a particular attention to patient financial services (PFS) staff members. To put it more precisely, the hospital attempted to optimize the collection of costs from patients financial services staff members, i.e. professionals working within the hospital should cover their health care costs respectively to the contract and they should pay in time. The Sutter Hospital put the end to the practice, when the hospital allowed its staff members to postpone paying for health care services they received in the hospital. This step was supposed to bring positive effects on the accounting of the hospital and on its financial performance because health care costs increased, whereas delays in paying for health care services had a negative impact on the financial position of the hospital and its accounting.
However, the aforementioned measure was not enough to improve the financial performance of the Sutter Hospital. Consequently, the hospital focused on the elaboration of the marketing strategy that could improve its financial performance consistently and accelerate the development of the hospital along with the provision of health care services of the high quality for patients. In this regard, the Sutter Hospital has implemented the strategy for increasing collections and reducing A/R days, which focused on empowering individual PFS staff members to assume responsibility for each account they deal with. Basically, this strategy was effective and contributed to the consistent improvement of the organizational performance along with the optimization of the financial performance and accounting of the Sutter Hospital. At the same time, this strategy increased the responsibility of the PFS staff members for their accounts and they were obliged to pay in time and to cover their health care costs. Therefore, they had no opportunity to postpone or avoid paying for health care services they received in the hospital.
However, the implementation of the aforementioned strategy did not occur in a day. Instead, the Sutter Hospital had to overcome some problems, which prevented the hospital from the successful implementation of its strategy. Before implementing its strategy, the Sutter Hospital had to solve three major problems. First, PFS staff could not access real-time information on key financial and operational indicators such as A/R days and cash collections. As a result, managers and staff often had to wait until the end of the month to set benchmarks, track progress, or make important business decisions. Obviously, this problem prevented the Sutter Hospital from the successful implementation of the change. The Sutter Hospital could not operate effectively, if its manager and staff had to wait until the end of the month to set benchmarks, or make important business decisions. In such a way, the hospital had to speed up its decision making process and accelerate internal business processes.
Second, the hospitals’ accounting system did not allow managers to isolate and analyze select data or generate reports on demand to the level of detail required. Instead, the region relied on a specially trained programmer to develop these reports, often leading to costly delays in identifying and correcting problems. The lack of detailed information naturally prevented the Sutter Hospital from obtaining accurate information and led to delays in payments and other transactions. Naturally, in such a situation, the Sutter Hospital should process the data effectively to increase the efficiency of its accounting system and to optimize its internal transactions and business processes.
Third, the central business office (CBO) staff also suffered from the lack of real-time information. With access to only a list of the outstanding accounts assigned to them, account representatives could not prioritize effectively or monitor their progress. Obviously, the lack of information prevented the Sutter Hospital from the accurate and adequate assessment of its current financial position and, what is more, prevented the hospital from the fast transactions and payments that slowed down the process of decision making and internal business processes. In this regard, the automation of the accounting system could have been a good solution but the hospital had to develop a brand new approach to improve its internal business operations and accounting consistently.
Until the introduction of the new strategy, the Sutter Hospital faced numerous problems. At this point, it is possible to refer to numerous examples of problems or errors that can be identified at this stage include the following: workers’ compensation or liability financial class lacks accident information; workers’ compensation is filed with an occurrence code other than 04; the patient’s guarantor is under 18 years old; the patient’s marital status is widowed, but the relative is listed as husband, wife, or spouse; the patient type is not valid for hospital service; the patient is age 65 or older, but the Medicare insurance plan is missing; the patient had Medicare in any plan code, but the Medicare secondary payer questionnaire is missing; the health insurance claim number or policy ID number is missing; the patient address includes errors in format, punctuation, and/or abbreviations; the patient has duplicate medical record numbers. It proves beyond a doubt that all these problems affected consistently the organizational and financial performance of the Sutter Hospital. To put it more precisely, the Sutter Hospital suffered from the poor internal business operations, ineffective decision making process, delays in transactions and other problems, which aggravated the position of the hospital, especially in the time of rising health care costs and economic recession. In such a situation, the hospital needed considerable changes.
In this regard, the Sutter Hospital developed several solutions to improve the situation. First of all, the hospital attempted to prioritize and automate account work lists. This step was effective in terms of the improvement of the organization and management of accounting system. At any rate, it was easier to manage account work lists. Second, the hospital focused on sorting accounts in various ways, such as by dollar amounts, oldest previous work date, and payer. In such a way, managers could access easier the information they need and the information may be processed faster and easier compared to the situation, before the hospital introduced the change. In addition, the Sutter Hospital attempted to improve the monitoring of internal business operations allowing managers to see at a glance their ranking within their work group and officewide, based on their performance as a percentage of the target achieved.
At the same time, the undertaken steps are not sufficient for the overall success of the new marketing strategy and accounting policy of the Sutton Hospital. To put it more precisely, the hospital should pay more attention to automation of its accounting system to minimize the interference of humans and human control over the accounting system. The automation of the accounting system could contribute to the change and improvement of internal business processes because the automation of the accounting system minimizes the time spent on transactions and facilitates access to the target information. In addition, the automation of the accounting system improves the exchange of information within the organization that also improves the organizational and financial performance and contributes to the better decision making process. The automation of the accounting system is an effective way to accelerate the development of the organization and facilitate internal operations.
On the other hand, the development of the new accounting system and its automation can cause certain problems, such as the protection of the private information. In other words, the information security becomes one of the primary concerns of the hospital, if it takes the decision to enhance the automation of its accounting system. At the same time, benefits of the automation of the accounting system outweigh its possible drawbacks. To put it more precisely, the high effectiveness and reliability along with the high speed of internal business operations and information exchange allow the Sutter Hospital to accelerate its development consistently and introduce new effective approaches to management.
In actuality, the Sutter Hospital faces problems which are common for many other hospitals nationwide and its experience to introduce changes and improve its accounting system and financial management may be very helpful. At this point, it is important to understand that the development of the modern health care system depends on the effective implementation of new approaches to accounting. In this regard, the experience of the Sutter Hospital proves that new approaches to accounting can help health care organizations to solve many problems and to improve their organizational and financial performance consistently. The latter is particularly important, taking into consideration growing health care costs and the negative impact of the economic recession on their performance as well as on the position of their clients. A large number of uninsured patients increases financial problems of health care organizations and aggravates the situation in the national health care system at large because health care organizations cannot afford providing health care services for free, whereas many patients cannot afford high health care costs. In such a situation, the optimization of internal business processes and the improvement of the accounting system can allow health care organization to save costs and to increase the effectiveness of their organizational performance. In this regard, the experience of the Sutter Hospital is useful but it can be improved even more, if the hospital focuses on the further automation of its accounting system.
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