The December Cash and Year-End Results Conversation Starts in July

By Michael Berger, former senior level Revenue Cycle Officer and healthcare finance consultant.

When your CFO asks in December how we can improve year-end cash performance, there’s a good chance the window to influence results has already narrowed significantly—if not closed altogether.

The organizations that consistently improve year-end cash flow are often the ones that began preparing for that question six months earlier. Six months allows a reasonable cushion for the lead time necessary to see tangible results from operational initiatives and corrective actions.

As a marathon runner, while I ran year-round, I always followed a structured training plan well before race day. Carrying that same philosophy into revenue cycle management, beginning six months before year-end allows leaders to answer the CFO’s question with a detailed list of actions taken, results achieved, and opportunities still available before year-end.

In my experience, the most successful year-end cash improvement efforts tend to come from a handful of areas that are often overlooked until it is too late. The following four initiatives routinely produced meaningful opportunities to improve cash flow performance before year-end.

1. Accounts Receivable Aging Reduction – Focusing on Quality and Efficacy of Effort

Increased focus on efficacy of effort asks a simple but important question: is each follow-up action moving the adjudication process forward?

The goal is to reduce the number of “touches” required to adjudicate the accounts receivable file, resulting in a reduction in days in accounts receivable, productivity and quality improvement, and associated increased cash flow.

To facilitate this, for the period of July through August, the follow-up staff, instead of using online worklists, were issued paper lists and asked to document both on the account file and manually on the paper lists. Supervisors were instructed to review each list weekly for quality, assessing levels of escalation and department compliance with departmental protocols, and providing immediate feedback to each staff member.

Potential Impact: Improved fourth-quarter cash flow through reduced A/R aging, improved productivity, and more effective account resolution.

2. Quick Fix Denials/Omissions Reduction

Another area of focus is minimizing, and potentially eliminating, denials within areas directly inside the health system’s control.

These may include:

• Eligibility checking and coordination of benefit errors

• Missing authorizations or mismatches to services performed

• Coding errors or failure to comply with updates

• Failure to promptly respond to documentation requests

• Missing malnutrition diagnosis audits to identify accounts that could potentially be coded as such, significantly increasing reimbursement amounts

Potential Impact: Incremental cash flow improvement in the last quarter of the year by addressing preventable denials and omissions earlier in the process.

3. Case Mix/Severity Index Validation

Case mix and severity index validation should also be reviewed as part of a year-end cash planning process.

This includes:

• Reviewing trends over the last twelve months to identify patterns, including whether there has historically been an increase or decrease in Case Mix Index during the July through December period.

• Meeting with the Coding/CDI Manager to discuss the results of the review and develop a forecast for the rest of the year, including a CDI improvement plan.

Potential Impact: Improved visibility into expected fourth-quarter performance and identification of potential coding or documentation improvement opportunities.

4. Look Under the Covers for Overlooked Opportunities to Monetize or Accelerate Cash Flow

Some of the most meaningful year-end opportunities may come from areas that are routinely overlooked, under-resourced, or viewed as low expectation.

Low Expectation Payers: Monetize Outstanding Balances

These categories may include:

• Worker’s Compensation

• No-Fault/Automobile Liability

• Self-pay/payment plans

Worker’s Compensation and No-Fault/Automobile Liability balances are often resource “eaters” with a long payment tail and potentially low return per output. For this reason, I have generally favored outsourcing these areas with elevated levels of performance monitoring.

For Worker’s Compensation and No-Fault accounts, one year-end strategy is to offer vendors a bonus for collections in the last quarter that exceed their quarterly average.

Self-Pay and Payment Plans

Concerning management of payment plans, I was more comfortable with a recourse-structured vendor, bucking the industry trend, because I wanted to maximize the asset’s value while partnering with an organization whose income was based on optimized performance aligned with my operating and patient engagement philosophy.

In one instance, I monetized an existing portfolio of payment plans concurrent with contracting with a vendor. The vendor “white labeled” the existing portfolio as part of the implementation process, yielding a net of 75% on one million dollars in the fourth quarter. Additionally, the net yield year-over-year for the ongoing management of all payment plans was $820,000, a 94% collection rate compared to 60% when working them internally.

The broader point is that many organizations view payment plans strictly as an operational function when they may also represent a meaningful financial asset worthy of strategic review.

Zero Balance Third-Party Accounts

Underpayments or payment variance across the industry range from 1% to 7% of net revenue depending on payer mix and contract oversight. An organization may uncover a portion of the underpayment during routine account follow-up, but this is probably only a fraction of the lost net revenue.

Given the combination of stretched-thin staff and the scale and complexity of the department, I routinely outsourced this type of project.

340B Pharmacy Program

Managing the 340B program is both difficult and technically challenging. However, in my conversations with 340B consulting groups, they often point to closed-loop referral opportunities as fertile ground to increase savings.

Closed-loop referrals refer to captured prescriptions prescribed to your patients by referred specialists who are not part of your 340B network. These prescriptions are often not captured due to a lack of adequate process or staff in place. In some cases, reviewing closed-loop referral opportunities can identify additional savings that have gone unrealized due to process gaps, staffing limitations, or lack of visibility.

Potential Impact: Additional fourth-quarter cash flow or savings opportunities by evaluating overlooked revenue streams, underpayments, payment plan assets, and pharmacy program opportunities.

Final Thought

Year-end cash performance is rarely improved by scrambling in December. The organizations best positioned to answer the CFO’s year-end cash question are often the ones that started asking it in July.

By reviewing A/R aging, denials, case mix and severity opportunities, and overlooked areas to monetize or accelerate cash flow, revenue cycle leaders can move from reacting to year-end pressure to preparing for it with a focused plan.

About the Author

Michael Berger is a former senior level Revenue Cycle Officer and healthcare finance consultant with more than 35 years of experience in hospital operations and revenue cycle leadership. During his tenure at St. Peter’s Healthcare System, Berger led initiatives focused on improving patient financial engagement while strengthening collection performance and financial stability for the organization. Having worked directly with patient financing programs as both an operator and a client, he now shares insights on revenue cycle strategy, patient financial services, and the financial challenges facing rural hospitals.