The Pareto Principle – more commonly known as the 80/20 Rule – is a well-worn truism in the business world and has been applied to any number of data sets in order to help companies understand how to focus scarce time and resources for maximum gain.
So it seemed logical that this common statistical phenomenon was likely at work in the balance sheets of hospital and practice AR as well... But to our knowledge no one had yet analyzed payment data to verify this – and try to figure out how to optimize collections activities to fit how this statistical rule of thumb applies to patient balances owed to providers. So we decided to tackle it.
The basic idea, that around 80% of value is driven by only about 20% of activity, has been used by management consultants to identify which workers are the most productive, by fund managers to see which investments have the best returns and retailers to understand which customers drive the most revenue – and conversely which ones are the source of most complaints. Over many years, first as a payments executive at Emdeon and later as Parasail’s VP of Strategy, Chris Wyatt analyzed real payment data from hundreds of hospitals and had seen the tell-tale statistical distribution in the AR data across nearly all hospital patient balance sheets. As he and his team dug into additional payments data, it became clear that in nearly every typical hospital’s patient AR that we studied, a disproportionately large number of accounts had low dollar balances while a much smaller percentage were where the lionshare of patient debt lies – uncollected.
The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.