Financial pains of patient accounting systems felt most in the first three months: 7 findings

Hospitals planning to adopt a patient accounting system should expect to see disruption to their revenue cycle, according to a study from Crowe Horwath.

PAS software maintains the patient information record, creates billing forms and tracks patient payment history. As many healthcare organizations have pursued PAS software to drive billing efficiency, hospitals are realizing the unintended effects of PAS conversion on revenue cycle metrics.

For the study, Crowe analyzed the effects of a PAS conversion on cash collections and related key performance indicators at 32 acute care hospitals that implemented PAS within the past three years. Hospitals managed an average of 227 beds.

Each hospital was evaluated in three phases: the pre-conversion baseline assessment, the conversion period lasting three months after PAS implementation, and the post-conversion period stretching nine months after implementation.

Below are seven findings from the report.

1. The study showed most hospitals experienced the most significant disruption to their revenue cycle metrics and to cash flows during the first three months following PAS implementation.

2. On average, participating hospitals experienced an aggregated cash shortfall of $162 million within the first three months of PAS conversion.

3. On average, accounts receivable days increased from 52 days to more than 62 days at participating hospitals during the first three months.

4. Discharged-not-final-billed days increased 86 percent in the first three months following PAS implementation, and late charges rose by more than 600 percent at participating hospitals.

5. Between three months and nine months after PAS implementation, hospital collection shortfalls slowed to $6 million, on average. Hospital cash collections generally returned to normal nine months after PAS implementation, the study found.  

6. Hospitals with a well-planned implementation strategy for PAS secured cash surpluses equal to 112 percent of baseline collections within nine months of implementation. Hospitals that performed the worst following PAS experienced aggregated cash shortfalls equal to 195 percent below baseline collections.

7. "Although the long-term benefits of system conversion might outweigh the short-term challenges of implementation, the additional costs associated with the implementations can be substantial if they are not tightly managed," said Brian Sanderson, managing principal of Crowe healthcare services. "To lessen the financial and operational risks of a PAS conversion, hospitals should not consider this to be only a technology implementation, but rather an operational and financial implementation that includes stakeholders from key clinical departments as well as finance leadership."  

The full report can be accessed here.

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