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Managing an Effective Bad Debt Collection ProcessFor leaders at hospitals and health systems, bad debt collection is a difficult process, evi-denced by self-pay collection rates that are often below 8%. With the rise in the self-pay population over the past decade, healthcare organizations have made a concerted effort to minimize the accounts sent to bad debt by expanding payment programs, eligibility assistance programs, and other processes that make it easier for patients to pay their medical bills.

In spite of these efforts, hospitals and health systems continue to deal with a significant portion of outstanding self-pay accounts in their accounts receivable (A/R). Academy research indicates that on average, almost 45% of an organiza-tion’s self-pay A/R is aged over 90 days from discharge. As such, bad debt col-lection still plays a significant role in the overall financial performance of a health-care organization.

Building a successful bad debt collection process—one that maximizes revenue while minimizing patient complaints—is not an easy task. To learn more about one organization’s model for developing an effec-tive bad debt collection process, The Academy spoke with Christopher Voss, the Interim Manager of Revenue Cycle, Patient Financial Services, at the University of Iowa Hospitals and Clinics (UIHC).

Challenge

In 2009, UIHC’s contracts with its two existing collection agencies had expired. Based on the experiences with these two agencies over the previous few years, the healthcare orga-nization was not satisfied with the results. “The previous agencies had a lot of complaints and their performance had slacked,” Voss explains. “They were done with their contract and they had been here for so many years that they had gotten lax in their efforts, they were on cruise control.”

With the decline in performance, UIHC initiated an RFP process to evaluate new options. During the RFP process there were two major factors that the healthcare organization considered. “Through this RFP process we were looking for somebody that could really improve on what we thought was below industry averages for ROI on our collection accounts,” Voss says. While financial performance is the main measure for successful collections, UIHC also wanted to reduce the patient complaints it was receiving from its previous agencies. “We wanted to make sure that the agencies we went with had proven performance in providing top-tier customer service; we didn’t want to have agencies out there representing us in a negative way.”

Solution

In November 2009, UIHC decided to partner with J.C. Christensen and Associates (JCC) along with two other agencies and the hospital made its expectations clear from the

Profile

•University of Iowa Hospitals and Clinics (UIHC)

•711-bed hospital

•Approximately $1 billion net patient revenue

•Over 32,000 patients admitted in 2012

Challenges

•Contracts for UIHC’s two collection agencies were expiring

•The performance of the two agen-cies was not meeting expectations

•The amount of patient com-plaints about these agencies was increasing

Solution

•UIHC partnered with JCC and two other collection agencies

•Placements were initially split evenly among the three agencies to foster competition

•The competition allowed UIHC to award more accounts to the better performing agency

Results

•JCC outperformed the competition and is now responsible for 71% of UIHC’s bad debt accounts

•JCC has achieved a 9.46% gross liquidation rate over the past 25 months

•Patient complaints have decreased and UIHC has built an effective part-nership with JCC

Highlights

%ofSelf-PayA/ROver90DaysfromDischargeSource: Academy Research

Top Quartile

39.7%

Average

44.6%

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beginning. “We actually had all three of our agencies here in the

same room and we had a big conference on what we expected

from them,” Voss explains. During this meeting, UIHC outlined

its process for account placements, its customer service expecta-

tions, its requirements with regards to payment files and reports,

as well as liquidation goals for various aging stages through the

life cycle of the placements.

To manage the collection process and maximize the results, UIHC

established a competitive model with its three agencies. “At first

we started with three agencies and it was a pure alpha split and

each agency got a third,” Voss says. “It was open competition, we

let them know every month via a performance scorecard how each

was doing on liquidating placements we gave them.” To ensure the

process provided an accurate representation of each agency’s per-

formance, the placement’s alpha splits were created as equal as

possible with regards to dollar amount and number of accounts.

Results

While the process began as an equal split, over the first year JCC

began to outperform the other agencies. “Through the competi-

tive model, scoring each agency, we came to a point where we

took business away from [one of the other agencies] and awarded

it to JCC.” As JCC continued to outperform the other two agencies,

UIHC shifted a greater percentage of its accounts to JCC.

Currently, JCC handles 71% of the healthcare organization’s bad

debt placements and continues to outperform the other agency—

UIHC decided to completely end its relationship with the third

agency. Over the past 25 months JCC has a cumulative gross liq-

uidation rate of 9.46%, compared to the other agency which has a

liquidation rate of 8.90%.

Voss attributes JCC’s success to its attention to detail when work-

ing UIHC’s accounts. “We are not just a mix in there with a bunch

of different hospitals that they put on a dialer and try to collect

for whatever hospital pulls up, they have dedicated staff” he says.

When the healthcare organization sends accounts to JCC, they are

scrubbed the same day and sent to the dedicated collection team

for follow-up as soon as possible. JCC also uses tools—propen-

sity-to-pay scoring and skip tracing—that UIHC does not have in

place with its internal follow-up procedures, allowing JCC to focus

attention on accounts that are more likely to pay.

With the nature of bad debt collections, there are likely to be

complaints even when using best practices, but JCC has helped

minimize the complaints and has been responsive whenever

assistance is needed. UIHC requires JCC to record every call,

and if an issue ever arises, the healthcare organization will first

review the call internally and then set up a meeting with JCC if

a process needs to be reviewed or corrected. “In regards to JCC,

they have been very timely to any and all requests we make,” Voss notes. “JCC is very responsive to emails we send … they pay great attention to detail on the things we require from them.”

Overall Voss attributes the success of the relationship to the part-nership that they have been able to build with JCC, “Our group—our staff and their staff—really clicked from the beginning. That really helped them develop their unit to fit us and then allowed us to develop our process to really work with them as a partner.”

About JCC

•JCC has helped hundreds of healthcare clients improve debt recovery rates and optimize cash flow while reducing costs with their successful accounts receivable management programs.

•JCC is a private, wholly-owned business unit of Array Services Group, Inc.

•Their programs are designed to give clients a voice in their account management, full access to account reviews at any time, and ample opportunities to ask questions and make suggestions to improve performance.

•For more information, please visit: arraysg.com

UniversityofIowaHospitalsandClinics’BadDebtCollectionStrategy

Equal split fosters competition

JCC33%

CompetitorA33%

CompetitorB33%

Account Placements November 2009

JCC outperformed competition and is rewarded with more accounts

Initial Gross Monthly Collections

$150K

$120K

$90K

$60K

$30K

11/09 12/09 01/10 02/10 03/10

JCC Competitor A Competitor B

Cumulative Gross Liquidation

Current Account Placements

CompetitorA29%

JCC71%

7.08%6.31%

9.46% 8.90%

13 Complete Months

25 Complete Months

JCC Competitor A