COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Health System

DATE:

April 26, 2010

BOARD MEETING DATE:

May 25, 2010

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Jean S. Fraser, Chief, Health System
Susan Ehrlich, MD, MPP, Chief Executive Officer
San Mateo Medical Center

SUBJECT:

Agreement with Perot Systems Revenue Cycle Solutions, Inc.

RECOMMENDATION:

Adopt a Resolution:

1.

Waiving the Request for Proposals process; and

2.

Authorizing the President of the Board to execute an Agreement with Perot Systems Revenue Cycle Solutions, Inc. to perform billing and collections for aged receivables at San Mateo Medical Center for the term June 28, 2010 through June 27, 2012, for a maximum amount of $2,375,000; and

3.

Authorizing the Chief of the Health System or designee to execute contract amendments which modify the County’s maximum fiscal obligation by no more than $25,000 (in aggregate), and/or modify the contract term and/or services so long as the modified term or services is/are within the current or revised fiscal provisions.

BACKGROUND:

The San Mateo Medical Center (SMMC) Accounts Receivable are significantly below the standards or benchmarks for similar hospitals. Specifically: there is a 34% error rate in claims submission while the industry standard is about 5%; a 31% denial rate in comparison to 5% in the industry; and a receivables average of 90 days while the industry benchmark is 60 days. In addition, a small balance write-off threshold of $25 reduces collections of deductible, co-pays and co-insurance amounts. Accounts Receivable continue to grow or are written off because of SMMC’s inability to maintain the volume of collection with the limited technology currently in place.

DISCUSSION:

SMMC's Finance Department is committed to improving the accounts receivable process.  Finance leadership has already taken a number of steps in this regard.  However, SMMC is facing an unprecedented financial crunch due to the County and state budget situations.  Accordingly, while the SMMC Finance Team is working full-tilt to improve the existing processes, the Finance Team needs help to get through the next two financial years.

Perot Systems Revenue Cycle Solution, Inc. (Perot) proposes to perform billing and collections for the aged receivables, allowing SMMC staff to focus on current receivables. This will result in an overall increase in collections and allow SMMC to decrease days in Accounts Receivables, ultimately reaching SMMC’s goal of 60 days or less for Accounts Receivable. In addition to working the aged receivables, Perot will assist in identifying ways to improve Patient Access, Health Information Management (HIM) and Charge Description Master (CDM), to assist SMMC in achieving its goal of 98.5% clean claims, with minimal denials.

This contract provides that Perot Systems will get paid for working aged accounts if, and only if, Perot Systems is able to collect on those accounts.  By hiring a firm to assist the Finance Team for a limited period, SMMC will obtain much-needed additional revenue -- revenue that SMMC has counted on to close its $10.7 million budget gap for FY 2010-11.  In addition, SMMC Finance Staff will be freed up to work on new accounts and to do the training and other work to improve the processes.  It is not realistic to expect the staff to learn new processes, work on new accounts, and work old accounts all at the same time.

Longer-term, the County Manager’s Office has committed to assisting all county departments, including the Health System and SMMC, to look at ways to improve collections processes.  The goal is to find ways to improve the efficiency overall of SMMC collection processes such that SMMC will not need an outside contractor by the end of FY 2011-12.

A waiver of the Request for Proposals (RFP) process is requested because Perot is an Amerinet (Group Purchasing Organization –GPO) vendor; your Board approved an agreement with Amerinet, Resolution 069871, which waives all Amerinet vendors from the RFP process. The County Manager has approved a waiver for Equal Benefits, Non-discrimination and Employee Jury Service for Amerinet vendors.

The Agreement has been reviewed and approved by Risk Management. The Resolution and Agreement have been reviewed and approved by County Counsel as to form.

Approval of this Agreement contributes to the Shared Vision 2025 outcome of a Healthy Community by improving fiscal accountability used in support of the care giving activities of SMMC. It is anticipated that accounts receivable days will decrease to 60 days; that there will be an increase in annual cash received by SMMC of $7,600,000; that the clean claims ratio will increase to 95%; and the denial ratio will decrease to 5%.

Performance Measure(s):

Measure

FY 2009-10
Estimate

FY 2010-11
Projected

Improve clean claims ratio

66%

95%

FISCAL IMPACT:

The term of the Agreement is June 28, 2010 through June 27, 2012. The maximum fiscal obligation under this Agreement is $2,375,000. Funds in the amount of $1,600,000 are included in the SMMC FY 2010-11 Adopted Budget. Funds in the amount $775,000 will be included in the SMMC FY 2011-12 Recommended Budget.

Expenses at SMMC are covered by fees for services or third-party payors whenever possible. The portion of expenses for services provided to the medically indigent or to those covered by programs that do not meet the full costs of care are covered by the County’s General Fund contribution to SMMC.