How county hospital lost $10 million
Consultants find fiscally strapped medical center can't get insurance providers to pay the bills
By Rebecca Vesely, STAFF WRITER, Oakland Tribune
Article Last Updated: Sunday, March 28, 2004 - 3:35:13 AM PST

Alameda County's public hospitals are losing about $10 million a year because insurance providers aren't being billed, according to a new report that reveals an accounting system rife with inefficiencies that is squandering taxpayer dollars.

The report, conducted by Cambio Health Solutions -- a turnaround firm hired by the Alameda County Medical Center -- shows lax and archaic billing procedures and at least one violation of federal law.

For instance, nearly a quarter of billed accounts receivable have a lag of more than 180 days, according to the report.

The industry standard is four days.

"What this says is we can't get a bill out, frankly," said Sherry Guernsey, an associate vice president at Cambio, who presented the report to the medical center's Board of Trustees this week.

Cambio was hired by the troubled medical center on an 18-month contract of $3.2 million to identify problems and solve them.

The report focused mainly on inpatient billing at Highland Hospital in Oakland and Fairmont Hospital in San Leandro. These two hospitals, along with three clinics and John GeorgePsychiatric Pavilion, make up the medical center, which has a $73 million deficit.

Earlier this month, voters approved a countywide half-cent sales tax hike to underwrite the medical center to the tune of about $60 million a year.

The medical center primarily serves the poor, and spends about $30 million in charity care a year. And yet when the medical center does bill for services, many claims are rejected by Medi-Cal, Medicare, the Alameda Alliance for Health and other public health insurance programs.

About 48 percent of pharmacy claims billed to Medi-Cal are rejected -- meaning that almost one out of two claims coming through the medical center's pharmacy is denied.

Guernsey called this "a little frightening."

Patients covered by the Alameda Alliance for Health -- a program for 87,000 county residents -- are getting lab tests such as routine blood workups done at the medical center, yet the medical center doesn't have that contract. The Alliance's lab contract is with Unilab. So patients get a lab test at the medical center, the medical center bills the Alliance and the Alliance rejects the claim.

The end result: The medical center is stuck footing the bill.

Some of these problems could be solved through better billing software -- and put the medical center in compliance with federal law.

All health care providers that contract with Medicare must generate forms called Advance Beneficiary Notice, or ABNs, to Medicare patients for services not covered before they are rendered.

"We're not generating any ABNs and we don't have the software to generate claims," Guernsey said. "This is federal law, so we can't fool around with it."

In the past year, Medicare denied 1,300 of the medical center's service claims, adding up to $446,000 in lost revenue.

Better systems are needed, too, so billing officers can circle back and find out why a claim was denied -- something not possible today. Thirty different forms are used by the hospitals for charges.

These problems can't be attributed to understaffing. Cambio described the accounts office as "significantly overstaffed," with 74 full-time employees. No formal training programs exist for personnel, nor are there competency tests. Nine financial counselors are on extended leave out of a staff of 24.

"Some (financial counselors) have been out for multiple years now," Guernsey said.

Highland's emergency department is collecting only about $5,000 a month for its services. The ER is one of the busiest in the region, and will have about 80,000 patient visits this year.

Cambio is recommending the medical center outsource billing, and re-deploy financial counselors to the bedside to sign up patients for appropriate subsidized programs. The firm is also setting up an internal committee to address the root causes of denials and other sticky billing issues.

In addition, uninsured patients are now required to pay a deposit upfront for non-emergency services.

And instead of paying 37 cents to mail each bill, the medical center should get a bulk rate, Guernsey advised.

The medical center's Board of Trustees met the report with enthusiasm.

"Now we know where we are and where we need to go," said board president Ilene Weinreb.

Contact Rebecca Vesely at rvesely@angnewspapers.com.