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.
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