ACC 281: Accounting Concepts for Health Care Professionals
May 21st, 2011
Sutter Health Care Case Analysis
With the current recession, health care organizations have seen in increase in the inability to collect debt from self-pay, uninsured, and underinsured patients. This has caused a struggle on the organization to meet operational margins, and profits. There are a number of reasons for this new increase in patient debts, the more common are, poor accounting practices, lack of patient information and correct patient demographics. Obtaining the correct patient information plays a large part on non collectable debt because patients are not able to be reached. Even though there are uninsured individuals, “more than 80 percent of uninsured people come from working families (Souza, 2007)”. Many of theses people have the means to pay for hospital services but are not requested to pay out the funds. This paper will discuss how one health care organization, California’s Sutter Health, has taken steps to correct this issue. It will analyze the accounting practices put into place by Sutter Health and the financial achievement the facility has created. This author will also discuss a different solution to the issue of debt collection for self-pay patients as well as an opinion concerning the actions taken by Sutter Health. Sutter Health is a not-for-profit health system that provides health care to over 100 Northern California cities and towns (Souza & McCarty, 2007). Sutter Health is composed of hospitals, physician organizations and other health care service providers that share resources and expertise to advance health care quality. They have grown from a small independent health care facility in Sacramento to one of the largest health care providers today. Due to the increase in costs and the inability to collect payments, there have been many attempts to repair the budgeting and patient collections. As a result, they have been working on transforming and redesigning all of their management and account processes and approaches while striving to keep the health care consistently affordable for their patients. Sutter Health has focused on affordability, that in 2009 over 100 million dollars was eliminated from its cost to help reduce health insurance premium increase (sutterhealth.org). Along with this reduction, Sutter health provided 104 million dollars in charity health care to patients with the inability to pay. Even though they are considered one of the top health care providers in Northern California, they had there share of negative publicity. Sutter Health had a class action lawsuit filed against them regarding pricing and collection practices for the uninsured patients at their facilities. This lawsuit was part of several hospital systems that were accused of charging uninsured patients more than the Medicare rates (Colliver, 2008). Sutter Health organizations agreed for three years, to maintain discounted pricing polices for uninsured individuals, develop more compassionate collection policies to protect those individuals who fall behind on payments, and assure that the discounted prices are fair (Lawrx.com). The value of the settlement was never determined, but Sutter health “believed very little money will actually change hands (Kasler, 2006)”.
During those three years of developing collection policies, Sutter Health revamped its entire patient collections department to create an up front collections department. They began this process in 2006 with the patient account representatives, collectors and employees of the central business office. Eventually they made their way to the registration staff to “ultimately transfer, many of the back-end functions to the front end (Souza & McCarty, 2007).” They reduced their accounts receivable cycle by six days and increased their revenue by an additional 78 million (Medassets.com). Sutter...