Overview
System conversions necessitate extensive planning, design, resource commitment, and resource alignment. One of the key components of a successful conversion that sometimes gets underestimated or overlooked is the strategy for the legacy system accounts receivable (AR).
One of the first decisions likely to be considered when evaluating your legacy AR is the idea of conversion vs. pursuing an AR rundown strategy. This decision is likely evaluated around the criteria of legacy process and data quality, transition complexity, and continuity considerations both historical and operational. Due to data migration issues, loss of historic data reporting, and the cost of additional build and conversion time, often we find those evaluating these criteria conclude that the most desirable pathway is to pursue a legacy AR rundown strategy.
Once chosen, there are several key elements that position the organization for a successful AR rundown project. The collection of these elements creates and culminates to a comprehensive AR Rundown Strategy. The elements of the AR Rundown Strategy including the following:
- Comprehensive AR analysis and stratification
- Evaluation of resource allocation to stratified account populations
- Establish a structured rundown schedule and plan
- Establish Vendor Partnerships for flexible and dynamic resource support
- Prioritize reporting to support strategy and plan execution
Crafting a timely and detailed plan which considers each of the elements above will help minimize financial instability and maintain cash flow through the conversion process. This type of planning allows for consideration of the resources required for legacy AR while balancing limited resources that will be required for the appropriate attention, troubleshooting, and refinement of the new system. Below we will expand on each element of the AR Rundown Strategy.
Comprehensive AR analysis and stratification
Stratifying hospital Accounts Receivable for cash collection involves categorizing outstanding balances by age, payer mix, service lines, and denial trends. Prioritizing aged balances, high-value accounts, and accounts with a history of denials ensures efficient and effective collection efforts. In addition, low-balance insurance AR and self-pay balances after insurance may require unique follow-up and resource allocation strategies. By segmenting AR and tailoring collection strategies accordingly, the organization can assure effective resource allocation and optimize cash flow, reduce outstanding balances, and assure an effective rundown plan. It is critical to leverage workdrivers to hardwire these priorities and that they support the overall follow-up strategy. This will ensure that you are getting the best possible productivity from your resources against the plan. For more information on AR analysis see Do You Really Know Your AR? – Pinnacle Healthcare Advisors.
Evaluation of resource allocation to stratified account populations
Once the Accounts Receivable is stratified, effective resource allocation can be assured by implementing a systematic approach for all of your receivables. However, knowing that resources are constrained, it will likely make sense to allocate resources based on the priority of each AR segment, focusing on areas with the highest potential for collection. This may involve assigning more staff or specialized teams to handle high-value or high-risk accounts, complementing existing staff with vendor support, deploying reporting and automation tools to streamline processes, and providing ongoing feedback to staff to improve efficiency and effectiveness. Regular monitoring of resource utilization and AR performance metrics allows for adjustments to be made as needed, ensuring that resources are allocated optimally to maximize cash collection and reduce outstanding balances across all segments. If you need more information on vendor support see Why Accounts Receivable Outsourcing Fails & How to Avoid Common Pitfalls – Pinnacle Healthcare Advisors.
Establish a structured rundown schedule and plan
Establishing an Accounts Receivable rundown schedule and plan involves strategically orchestrating the conversion of AR to cash over a defined timeframe while efficiently utilizing both constrained internal and external resources. Initially, internal resources, if available, such as dedicated collection teams and revenue cycle management software, may be heavily utilized to address immediate outstanding balances and prioritize high-value accounts. As the rundown progresses, external resources such as vendor partners, agencies, or legal services may be engaged to pursue more challenging collections. The plan should include timelines for shifting resource needs, ensuring that staffing levels and technology investments align with the evolving demands of the AR rundown process. By carefully orchestrating the timing and allocation of resources, organizations can optimize cash flow, minimize outstanding AR, and streamline the transition to a healthier financial position. In many cases, it is advantageous to begin vendor placements prior to the new system go-live and ramp up gradually throughout the implementation period. Creating a dedicated schedule with set criteria (consider aging/balance tiers) will allow vendors to adequately staff to and anticipate placement volumes. This will also help create internal ramp-down of core staff and management plans as you gradually transition core resources to the new system’s AR.
Establish Vendor Partnerships for flexible and dynamic resource support
Knowing that resources will be constrained through the conversion process, you have to consider strategies to supplement your existing staff. Leveraging vendors partners can be very helpful through this process. Specialized partners for unique populations such as small-balance insurance, small-balance self-pay, and self-pay after insurance can be very effective.
Resource constraints will lead to other supplemental resource strategies, regardless, it should be noted that contracting, system access, workflows, training, quality assurance (QA), and other vendor setup items can take longer than expected. Ensure you have a well-established outsourcing relationship in place prior to go-live. This will help avoid distractions during go-live/transition, prevent creation of backlogs, and ensure continued resolution of legacy AR throughout implementation.
Once a vendor is in place, it is easy to get into the “set-it and forget” mindset and focus solely on the new system. Consider any legacy-related activities that will need to continue post go-live (e.g., specialized billing/AR management, cash posting, coding review, vendor communication/requests), and ensure there are dedicated resources allocated for these tasks. In some cases, a dedicated legacy AR manager or team should be considered. Managing this process very tightly will lead to better outcomes in conversion of AR to cash. Read more about Vendor Partnerships Kicking the Tires on Vendor Management: The Basic Questions to Ask – Pinnacle Healthcare Advisors.
Prioritize Reporting to support strategy and plan execution
Because there is heightened focus on financial performance during system conversations, it will be critical to maintain visibility into legacy AR performance pre and post go-live. Ensure that AR Reporting, KPIs, and rundown schedules are created and managed throughout conversion.
With the legacy AR prioritized and segmented, it is critical that reporting supports the AR strategy and that key indicators are developed, tracked, and projected to teams on a regular basis. Through strong reporting, it becomes easier to adhere and monitor the AR strategy and where the strategy is effective versus not.
Effective reporting will be the information driver of the entire AR rundown plan. Having effective reporting based on the AR analysis and stratification enables overall effectiveness of the plan. If you measure it, it will improve. If it does not improve, leaders can intervene and track the efficacy of interventions. Proactive measurement can enable this, whereas reactive measurement can make conversion management feel siloed and leave managers feel as if they are chasing confetti.
In addition, reporting allows you to understand whether you have effective resource allocation and whether you are meeting the objectives and timeliness of the structured schedule and plan. In addition, reporting will keep you apprised of your vendor performance enabling accountability from your vendor partners. Consider setting up dedicated performance meetings to review and evaluate legacy AR and cash performance; these meetings can serve as an effective mechanism for overall project management of the AR Rundown Strategy. Ultimately, the most effective enabler for making this a high-value activity is the effectiveness of your reporting capability. Additional articles about reporting Revenue Cycle Reporting – Refocusing on Quality Over Quantity – Pinnacle Healthcare Advisors. and Scorecards The Anatomy of a Revenue Cycle Scorecard – Pinnacle Healthcare Advisors.
Conclusion/Summary
In the realm of system conversions, meticulous planning and resource allocation are paramount. Among the crucial elements, the strategy for managing legacy Accounts Receivable stands out. Opting for an AR rundown strategy necessitates thorough analysis, stratification, and resource allocation. This involves prioritizing aged balances, high-value accounts, and those with a history of denials, while also considering unique follow-up approaches for low balance insurance AR and self-pay balances. Resource allocation must be systematic and dynamic, focusing on high-potential segments and leveraging both internal and external resources effectively. Establishing a structured rundown schedule and engaging vendor partnerships for flexible support are key strategies, alongside prioritizing robust reporting mechanisms. By carefully orchestrating these elements, organizations can streamline the transition process, minimize financial instability, and maintain optimal cash flow, ensuring a successful legacy AR management amid system conversions.
At PinnacleHCA, we work with our clients to plan, coordinate and execute Revenue Cycle matters during large and complex EHR implementations. If you would like to learn more about our client work and track record of success, please reach out to Jim Martin jmartin@pinnaclehca.com.
