Host of Payment Matters
On today’s episode, Jeff speaks with Abilene Diagnostic Clinic CFO, Andrew Kouba. They discuss how changes to revenue cycle strategy for a healthcare organization that engages patients can yield impressive financial results.
Listen to the full episode now or read the full transcript below. Tune in to hear the latest episode of Payment Matters weekdays at 4:30 AM, 12:30 PM and 8:30 PM ET on healthcarenowradio.com.
Jeff Lin: On today’s episode, we’ll be talking about improving patient engagement in the billing and payments process. I’m joined today by Andrew Kouba, CFO of Abilene Diagnostic Clinic. Andrew, thank you so much for joining us on today’s podcast. Could you do a brief introduction about yourself and what brought you into healthcare?
Andrew Kouba: Thanks, Jeff. I appreciate you letting me be on the podcast. It’s a pretty unique opportunity, so I’m always happy to jump into anything like that. The road to Abilene Diagnostic – I started my career in public accounting and it was a good prepping ground for gaining knowledge. I believe accounting is the core backbone of the business world. And so, it was a great training ground. Ever since I was a child, and really my whole life, my ambition was always playing the game of business. And so, I didn’t feel that public accounting offered that arena for me. It was more helping and assisting, but I wanted to be in the game. I lucked out and landed my first job in healthcare in a unique space in home care and hospice. Some people might think, oh, that’s mom and pop, but we were a pretty good size outfit. We did about $100 million in net revenue a year. It was a good area to learn how to drive the car in a finance role.
You hear the phrase, cash is king and, even as an accountant or just a business person, you think, oh, yeah, that sounds cute. That’s a nice thing. But when you’re in a healthcare leadership role in finance, you truly know what cash is king is. So, it was a really good testing ground to learn that aspect. As I got more familiar with the industry, I identified the three core areas as hospitals, insurance companies and physicians. Those are the three core elements of healthcare that I saw as the main players. Two years ago, an opportunity opened up as a CFO position at Abilene Diagnostic, we’re a physician group, and I jumped into it.
Jeff Lin: That’s great. With your role as the CFO, and entering into Abilene Diagnostic, can you describe what kind of challenges you faced or identified when you got there in 2016?
Andrew Kouba: Yeah, sure. Going into the job, I knew a little bit about what their struggles were, just independently through the interview process. I knew cash was going to be very important. And then the other side that maybe we didn’t talk about as much in the interview process, but I knew coming from the healthcare home care space and where bundled payments were headed and ACOs, as these things started to develop, I knew that the one-clinic mindset was going to be very important.
Those were the two areas that coming into it I knew I needed to focus on. How do we get this clinic to operate in one mindset? And then also, how do we tackle the A/R problem that we had?
Jeff Lin: When you talk about one clinic, and that’s an interesting concept, you also mentioned that hospitals, insurance and physicians are all part of that. Can you describe a little bit more about the one-clinic concept and explain what you saw before and what was the vision and goal after that?
Andrew Kouba: Yeah, so we are a multi-specialty, independent physician group. That’s much different than a hospital-based physician group where the health system can dictate or set parameters on how they operate. We were different in the spectrum. The selling point of the independent group is you can have the autonomy to run your practice as a whole, set your schedule, pay people how you want to pay people and it’s more of a shared service model.
Although that’s our selling point when recruiting physicians, and really, attracting talent is saying hey, you can be independent and autonomous in a lot of your things, I knew that financially speaking, we had to figure out how to streamline some areas so we could pick up, with 60 providers, roughly $30 million. How do we come up with that and pick the economy of scale as well? I laid out ways of how we could do that.
Jeff Lin: That’s great. You talk about economies of scale, and really, there are a lot of financial aspects tied to that. You mentioned early on that one of the initiatives was tied to A/R. Can you expand on the challenges that you faced, related to A/R?
Andrew Kouba: Yeah, sure. The Abilene Diagnostic story, since I’ve been there, is two stories from the revenue cycle perspective. And, first off, before we dive into the story, I want to emphasize the importance of people, people, people. I have a parallel with the consumer experience and tackling the A/R process. We had some unbelievable leaders within the CBO that had the talent and the ability. Maybe the only thing lacking was direction on where to focus. There were a lot of other aspects involved in that, but going into it, our A/R was very heavily weighted. When I look at the quality of A/R, and you can measure it multiple ways such as days in A/R, etcetera, to me, the quality is what’s our plus 90 days. Once something hits 90 days or greater, the likelihood of collecting it and liquidating into cash is less likely.
So, our first goal in our approach was to focus on our 90 days plus A/R. Let’s get that in shape. When I got there, it was about $1.4 million. To give you a perspective, about 25% of our total A/R was older than 90 days.
We very simply broke it up into small bits. Every hundred thousand dollars that they reduced in that A/R, either we collected it or wrote it off, we would give them a bonus incentive for it. We did this project from July until December and the team reduced the A/R from $1.4 million to about $600,000. So, going from about 25% of the A/R to 15% of the A/R. We recovered about $500,000 during this process. This was a huge win, just personally. It was a complete team effort.
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They all just bogged down and got after it, and we worked through a lot of specific areas to get it. The takeaway, and this is kind of a parallel and I’ll bring this up later down the road, but the takeaway is that if you provide clarity, and you make it simple, which in our case in the CBO was the A/R, it creates a sense of ownership. That ownership creates trust. Long term, once trust was created, which was lacking in the prior leadership, we yielded results. The results were half a million bucks, they got bonuses and everybody was happy. That is the initial A/R story.
Jeff Lin: That’s a great story there. It’s really focusing on the people and the process to get down your A/R from 25% down to 15%. Is that correct?
Andrew Kouba: Yeah. Absolutely. I think in business it’s about people and relationships and then having a systematic approach of running that thing. I hate to simplify to that, but those are the areas that we really changed.
Jeff Lin: Great. Was there anything that you did specifically when engaging with your patients? When you brought it down from 25% to 15%?
Andrew Kouba: Yeah. Let me talk about this first part from a macro perspective. When we first got there, about 85% of our revenues come from insurance and 15% from patients. It was almost like attack the fire of A/R. It was mostly insurance. It wasn’t the patient side. But before I got into the job, I knew the delta from research and watching these industries. And being a patient myself. I knew the delta was in cash collections of patients. I knew they weren’t doing a good job at it, just from looking at the information, looking at the A/R and so on, so forth. When we first got there, that rebuild was a bigger project. This was a very simple way of building small wins and momentum, which I think has paid dividends now where we’re at today.
Jeff Lin: How is your A/R today? Sounds like you went through a major transformation, from 25% to 15%. How is that looking today?
Andrew Kouba: Talking macro perspective, our days in A/R is about 27 days, or 27 days is what are outstanding. Let’s see, the 90 plus days is 9.29%, and that’s December’s numbers.
We shifted our focus. We made this big project of cleaning up the A/R, and then the next piece of it was shifting from, I call it flipping the script or whatever, flipping from a reactive company to a proactive. This is where we got to rebuild the Patient Responsibility Platform, but when we made that change, initially we were giving goals on increments of dollars. Every hundred thousand dollars is worth 100 bucks or 200 bucks, or whatever per team member.
Then the shift was, now that we’ve cleaned up the A/R, we’ve gone from 33 days to 25 days in A/R, how do we maintain that? What we did is we introduced ongoing goals. The three measuring areas that we focused on are days in A/R, which our goal is 25 days, percentage of A/R older than 90 days, we want it to be less than 10%, and the last thing, which is kind of unique to our group, is cash collections to net revenue. We want it to be 100% or greater. We want to make sure that the net revenue we’re booking is agreeing to the cash that we’re collecting.
Jeff Lin: This is an amazing story. You mentioned earlier about this Patient Responsibility program that you instituted at Abilene. Can you talk a little bit more about what that is and what was the journey you had with that?
Andrew Kouba: Sure. Again, coming into the job, I knew that three areas we’re going to get paid in are traditional reimbursement, which is going to be 80 to 85% of our total cash flow, this new thing bundled payment, which we still don’t know fully what that impact is going to be but, my guess is traditional reimbursement will be replaced with bundled payment. And the last aspect is patient payments. It’s 15-20% of our potential cash flow, and I think that before I go into the problems that we identified, one thing to take away is that the 80/20 rule applies here. And that’s how I viewed Abilene Diagnostic before I came, even though I had been there. The thought being that cash patient payments are maybe only 15-20% of our total collections, but when you look at the whole scope of things, if you don’t collect that 20%, you go from a company that’s maintaining and hopefully thriving to a company that will most likely fade away and fail.
One thing I knew, is that the patient experience, and figuring out how do we engage the patient, is key to our long-term success. Because I do believe that delta of 80/20 is going to continue to grow to 80/25, 80/30, and so on and so forth. That was how I knew we needed to rebuild this platform. Going into the platform again, some of the things that we identified early on were that we didn’t have a consolidated platform. We used Allscripts for an EHR. We used GE Centricity for our practice management. We had a different plugin vendor for statements. We had payment plans from another vendor that charged fees, and it was not a very user-friendly experience. And then we used our local bank for credit card payments.
That whole platform – there was a whole lot of work we had to do to get cash from a patient, and then apply it into our system and reconcile it to our accounts receivable. Not to mention our statement platform was broken. It wasn’t electronic; it was paper. A lot of different statements being sent out. There were just a lot of things broken. Going back to the revenue side, I thought, well, here’s an opportunity. Let’s build a platform and we’re just going to dub it some silly name, Patient Responsibility Platform, and that’s how we decided to head forward.
Jeff Lin: That’s interesting. It’s a clear problem being laid out here. What did you guys do? What was the approach in terms of addressing these issues?
Andrew Kouba: I came on and I got the team working on the A/R and they’re cranking the A/R. Right after that, I’m starting to focus on a platform, different vendors that we can work with, or solutions more than anything, that we can address and create this separate platform. I wanted it to be web-based. I wanted it to be something that the patients felt they had ownership with. We stumbled across this really unique process or concept of one bill. As I mentioned, every healthcare encounter at Abilene Diagnostic was treated as a different encounter or different visit. If a patient went to a lab, then to a primary care physician and then maybe went to one of our specialists – potentially all in one day – the patient was thinking that was one experience at Abilene Diagnostic. Well, the way we treated it in our system, and how it was set up in the statement process, was as three different encounters and three different statements were generated.
We stumbled across a product that really fit the need. What it did, is it standardized our data across all our locations. It delivered a consolidated statement that was not only consolidated, but offered both paper and electronic platforms. It also had a patient portal. Long term, we felt that the portal and the ownership aspect of that were going to be key. And so, we were able to start this process.
To give you an example of what one bill means, take that example that I talked about. You have a patient with lower back and right leg pain. He goes and sees an ADC physician, an internal medicine provider, he’s billed for an office visit. He then is referred to our Physical Medicine and Rehabilitation provider and he’s billed for a specialist visit during that same evaluation. They do x-rays, so he is billed for that radiology service, and then he’s referred to our physical therapist, who houses with our PMR, and he’s billed for each one of those encounters.
Historically, in that maybe one-to-two-day event, the patient would get four statements. Now, leveraging InstaMed’s One Bill solution, we were able to turn those four statements into one statement. So, a much better patient experience, a lower statement cost and a more seamless process.
Jeff Lin: Those are incredible results, again, Andrew. It’s almost like a unicorn here when you talk about the results, which is great. We like to see those results. In terms of this initiative and this platform that you put out, what kind of results did you see? Both from a financial perspective, and even your patient/consumer experience perspective, can you describe your experiences tied to that?
Andrew Kouba: Yeah, sure. I’m an accountant by heart, so I obviously lean towards data more than feel-good stories, though I hate to use that term. I’m a data guy, and I like to follow the data to support and evidence. Some of these statistics, when I put them together, I had to free analytically look at them over and over again because they’re almost too good to be true, but they are what they are.
First off, patient collection improvement from 2016 to 2017. We rolled out this One Bill product in two phases. We rolled out the One Bill statement aspect on January 1, and then we rolled out each site onto the payment application from February through May. The payment solutions were rolled out staggered where One Bill happened all in one swoop.
Our patient collections have improved 24.19% from 2016 to 2017. We’ve seen a 39% reduction in statement costs. The cost per statement is not that different, but what we’re seeing is a whole lot less statements coming out. People are choosing the electronic format to pay, which is a positive. At the same time, our days in A/R are holding at 27 days and the A/R is still healthy, around 9.29%. But to me, the evidence that really shows the impact of One Bill is the consumers are embracing it. Again, not that I have a one-off story – when you have 150,000 encounters in a year, it’s hard to take one story and amplify it. But this really shows a picture.
I started in May, middle of May, 2016. On July 1, 2016, our total A/R, picture patient A/R, was 14% of our total A/R. That’s not great. It kind of flows with what our cash collections are, at 14%. In December of 2016, it was still 14%. So, after all that headway in cleaning up the A/R on that first leg of the journey, our percentage of patient A/R stayed the same, a static 14%. No change. The One Bill solution was introduced January 1, and these are quarterly, the numbers that go along and support that. We went from 14% in December 2016, then first quarter March 31, 2017, our patient A/R to total A/R was 8.5%. Follow that at the end of the second quarter, June 30, it dropped to 7%. Third quarter, September, it was 4%. And then, at the end of this year, December, 2017, our patient A/R, the total makeup of our A/R, was at 2%. The whole time, our days in A/R haven’t changed, staying around 25 to 27 days. But our patient A/R has declined from 14%, to 2%, almost nothing.
That’s a phenomenal data trend that helped me look at it from a macro perspective and say, wow, this is really working. I compare it to the Apple iTunes experience. Everybody used to use Napster and it was free – I loved it in high school, hopefully I don’t get arrested, but I used Napster and it was great. Then Apple introduces iTunes, and there were other products, Dell tried to do the same thing at the same time. But Apple, very seamlessly, and people would use the term beautifully, came up with this product to let people listen to music, and then all of a sudden people paid for music again. It was this phenomenon.
Here’s my parallel – people are people. So, people, people, people. The same thing with the CBO staff as the healthcare consumer. I think if you have a product, it provides clarity and understanding and simplifies their responsibility, the patient responsibility. You bring a patient portal in the picture, that’s a vehicle that provides some form of ownership. They understand the bill; they feel like they own it. That creates trust, and that trust yields results. I think the story of the success we’ve had on patient accounts receivable is very similar to the story we had in insurance A/R. Same thing. All we did was give clarity and understanding to the people that were part of it and responsible. They took ownership. And then they brought results. I hate to simplify it to that point, but that’s really how I view both avenues. I think patient experience matters just because of this.
Jeff Lin: Yeah. Those are, once again, great results. I liked how you bridged that with trust and the other technology companies that are out there. The question here is around these results that Abilene had. Do you think these are unique and specific to Abilene? Or do you think there is an opportunity to leverage the same process and technology solutions for other healthcare clients? I want to get your sense of whether this is unique to Abilene, or whether this is more widespread or whether there’s a need for these solutions elsewhere.
Andrew Kouba: I would say that while Abilene is a special place, I don’t think it’s any different than any other town in America. I’ll keep it niche to the physician side, because I’ve never walked the shoes of a hospital, so I don’t want to pretend to know what they deal with. I know their mixes are different. But in a physician office, and we’re not an exclusive boutique physician office. We take all payers; we’re just a community clinic. We’re not niche to just higher income or lower income.
I think that this story applies and, I always pick on dentists when I’m in these healthcare discussions, dentists are the greatest. They have figured out how cash is king. They collect everything upfront and you don’t get anything beforehand. In healthcare, or medical aspects of it, the physician side, we obviously can’t have the same rigidness that dentists have. And I would never want to have that. But I do think it’s about just simplifying the process. I think this would translate across all demographics, especially in the physician world, and probably in other spaces in healthcare. That’s my takeaway. I don’t think it’s exclusive to Abilene. Even though I’d love to think it is, it’s probably not.