Sutter Health Approach
Accounting Concepts for Health Care Professionals
April 26, 2010
Sutter Health is a non- for-profit community based healthcare and hospital system based in Sacramento, CA. This system serves patients and their families in more than 100 Northern California cities and towns, Sutter Health doctors, hospitals and other health care service providers join resources and share expertise to advance health care quality and access. The organization takes its name from California pioneer John Sutter whose namesake fort was one of Sacramento’s original European settlements. In response to the influenza epidemic of 1918, community leaders constructed the first Sutter Hospital in the vicinity of the fort, replacing an old adobe house that had previously served as a makeshift hospital. Sutter Medical Center, Sacramento occupies this site today. Other Sutter Health-affiliated hospitals date back to the 1800s and were some of Northern California’s earliest health care providers. In 1866, the predecessor of today’s Sutter Medical Center of Santa Rosa opened its doors to residents of Sonoma County. Today in the United States there are nearly 47 million Americans uninsured and 80 percent of that comes from working families. The article by Souza and McCarty, “From Bottom to Top: How One Provider Retooled its Collections,” covers how one of Northern California’s largest providers, Sutter Health, approached implementing a new strategy to increase collections. In collecting payments from new patients, services provided, comes from the need to implement new strategies on how and when to collect the payments. Sutter Health have made a successful new program to implement and defined most problems within their A/R department, developed solutions to their problems and have recognized the need to ensure the program is continuously effective. (Souza) Sutter Health began committing itself to improving patient collections in 2006. They began the task with their patient account representatives, collectors and other members of the central business office of its Sacramento/Sierra region. They are in due course to working their way forward with the registration staff, which will eventually be in charge of for many of the functions that the back-end collections that team is responsible for. Within the first three months of the project, the company reduced the number of accounts receivable days for the nine hospitals in the region from 65 to 59. Each one of the A/R days equals $13 million, which in turn means that Sutter Health collected an additional $78 million (Souza). Before beginning the project, Sutter Health identified several areas in which the project needed to focus. There are three identified problems that would result in the staff of Sutter Health being unable to work efficiently. First, the patient financial services Staff or PFS could not access real-time information on key financial and operational indicators such as A/R days and cash collections. To manage this problem they needed to be able to track progress or make important decisions, managers and staff had to wait until the end of the month to do so. Next issue that they acknowledged was the hospital’s accounting system did not allow managers to isolate and analyze select data or generate reports on demand to the level of detail required. Fixing this resulted in the region having to rely on specially trained programmers to develop the reports, which would be costly and cause delays in indentifying and correcting the problems. The third problem identified was the central business office (CBO) staff also suffered from the lack of real-time information. The CBO was only able to enter accounts where they were assigned, with an outstanding balance. This made an issue to where the account representatives were unable to effectively prioritize or monitor their progress (Souza). Sutter Health began their journey...