IOWA CITY — University of Iowa Health Care is reviewing suggestions on how to collect more of the money it’s owed, and on Friday it asked for help in getting that done.
The suggestions came from Deloitte Consulting, hired last fall for $145,000 after income projections tanked for the state’s largest health care system.
That drop followed a spike in denials from Medicaid insurers and a corresponding drop in the hospitals’ collection rate.
In a new request for proposals, UI Health Care on Friday asked for help in implementing the suggestions from Deloitte.
“The awarded firm will take the recommended initiatives of the initial assessment of the revenue cycle … and create a plan for design, implementation and performance monitoring,” according to the new request.
Recommended initiatives — based on Deloitte’s assessment — include creating:
• A “financial clearing center” that brings together functions to ensure patients are financially cleared before service.
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• A denials management strategy that identifies root causes for denials and increases recovery.
• A process to leverage robotics and automation to “increase efficiency, quality, and reduce cost.”
The $1.4 billion hospital system publicly aired concerns over collection rates and managed care denials during a Board of Regents meeting in April 2017, when former UIHC Vice President for Medical Affairs Jean Robillard said the hospital’s collection percentage had fallen from 33.9 percent to 31.3 percent in just two months.
Because each collection percentage point represented $3.8 million less in net revenue per month, “this is serious,” Robillard said at the time.
The drop prompted the hospital system to adjust its operating income margin projections from 3.5 percent to 1.6 percent — downgrading its 2017 operating income projections from $52.2 million to $23.9 million.
The system’s operating income in 2016 was $101.2 million, or 6.9 percent. Robillard said the hospital isn’t comfortable with an operating margin under 3 percent.
In September, when reporting on the full 2017 budget year that ended June 30, Robillard confirmed for the board the system’s operating income was down nearly 50 percent from its budget and more than 72 percent from the previous year.
The first month of the new budget year — July — saw a similar pattern, with operating income showing a deficit of nearly $7.2 million, compared to a budget of $1 million in the positive and more than $3.8 million at the same point last year.
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Robillard, at the time, cited numerous reasons for the slide, including a payer mix shift to more Medicare and Medicaid, with collection rates slipping; tightening Medicare reimbursement policies; increasing denials and aging accounts; and state budget cuts.
Hospital executives in response initiated an $86 million cost-cutting and revenue-enhancing initiative, which UIHC Chief Executive Officer Ken Kates in April said has realized $41.4 million in savings to date. Of the goal, $46 million was tied to reduced labor expenses, with most through attrition.
The Gazette requested a copy of the Deloitte contract, signed in November, but the UI redacted most of its contents — including its compensation, payment and expense terms and the majority of its scope of services, responsibilities and deliverables.
The university redacted that information “per the request of Deloitte,” asserting the information qualifies as “trade secrets,” which can be withheld, according to the university’s interpretation of a recent Court of Appeals decision.
The university did not respond to a request Friday for the total it has paid Deloitte for the work to date.
Last year, the university paid a consulting firm — Dixon Hughes Goodman, of Atlanta — more than $150,000 to model financial scenarios for a potential UIHC partnership with a larger regional system. The firm was charged with assessing the pros and cons of a partnership or remaining the state’s only academic medical center.
Results from that study have not been made public.
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