Wednesday, March 26, 2014

Article in Fort Drum Mountaneer about the change to CHCS II

Artist's rendering of newly expanded Guthrie area.Back in 2005 I was the Chief of Patient Administration. The Department of Defense mandated that each of the Army Medical Facilities update to their Composite Healthcare System II also known as CHCS II. Link to the article here. This has been an interesting point of learning I did not know at the time how beneficial my experience with this process would be. Now not only is the Electronic Health Record (EHR) a huge savings when it comes to billing and accounts receivable but, I am happy to have taken part of this process back in 2004/2005.

I think that when it comes to the high prices in health care and technology. I would usually guess that technology lowers the prices for some services. Through efficiency, technology has made significant strides in how we interface with healthcare. One huge example is the EHR or electronic health record.

The process used to be that a doctor would usually fill out the paperwork or dictate the notes and send the information to transcription where a person would then type the notes and then the information would be presented to the physician for approval. Then at some point the information would then go to the coder. Then the physician would possibly review the coding statements or perhaps a staff member would review the information for accuracy. After the internal work was done the information would then be sent to the payer for the services if it is a private insurance company a copy of the information would go to billing and then the insurance people are going to evaluate the situate for accuracy in care making sure the right procedures have been taking place. I am not sure how long this would take but what happens could take a matter of weeks to get things resolved. See the example below for cost savings.

EHR will take the time out of processing these claims and I imagine if a finance person would look at how many days these outstanding payments take to process.  If the hospital then has to take out loans to cover the cost of doing business there are significant savings opportunities for these organizations just from one form of technology. I also imagine that there is more friction in  the paperwork process than an electronic process. Currently as these Hospitals switch to the new coding procedures they should be able to push the savings further through the accuracy of coding.

There is also a push for Accountable Care Organizations in the Affordable Care Act where groups of providers are linked together to provide a streamlined continuity of services. In that setting the patient has the ability to contain cost by choosing between a variety of services and the service organizations benefit by having a more efficient services as well as if they want to specialize in a specific service there is another opportunity. As these services segregate this could allow for the insurance persons to measure their risk more accurately.

XYZ Inc. has $1,000,000 annually in credit sales and an average DSO of 90 days. Let’s say the interest rate is 3.25%*. Using the below equation, you can see how much XYZ Inc. spends in interest a year:
 [ (Total Receivables x Interest) / 365 days ] x DSO
 [ (1,000,000 x 3.25%) / 365 ] x 90 = $8,013.70
As you can see, XYZ Inc. spends approximately $8,013.70 in interest per year just to extend their customers credit.
So, consider this: if you reduce your DSO, you will actually be putting cash back into your business. For example:
If XYZ Inc. can reduce their DSO by just 20 days, that’s approximately $1,729.17 they’re saving on interest fees:
 [ (Total Receivables x Interest) / 365 days ] x DSO
 [ (1,000,000 x 3.25%) / 365 ] x 70 = $6,284.53

For every day that XYZ Inc. can reduce their DSO, they will be saving more and more money.
http://www.sageworks.com/blog/post/2013/07/13/Working-to-reduce-your-days-sales-outstanding.aspx

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