Sutter Health Case Study

Sutter Health Case Study

ACC 281 Week 5 Final Paper

Write an eight- to ten-page case analysis of the following article (which can be found in the Ashford Online ProQuest database):

Souza, M. & McCarty, B. (2007). From bottom to top: How one provider retooled its collections [Electronic version]. Healthcare Financial Management, 61(9), 67-73.

Article Abstract
In its effort to increase point-of-service collections and improve the overall revenue cycle, Sutter Health took steps to: Measure performance using a handful of specific, primary benchmarks. Empower PFS staff to assume responsibility for every individual account they handle. Ensure each registration is analyzed using a rules engine to identify problems before patients leave the registration desk. Ensure PFS staff receive appropriate comprehensive training to excel under the new system. (From PubMed)

Include the following:

Complete a summary of the case study that identifies the key problems and issues, provides background information, relevant facts, the solution employed, and the results achieved.
Identify and explain the accounting practices California Sutter Health used in defining and solving its collection problems.
Develop an alternative solution based on your own research using three to five academic sources from journals, professional organizations, and websites.
State your informed opinion of the approach used by California Sutter Health, and provide support using concepts from your research and personal experience.

ACC 281 Week 5 Final Paper Example: Sutter Health Case Study

Sutter Health is a foremost not-for-profit healthcare network that comprises award-winning physician firms, birth centers, medical research units, imaging, home care, acute care hospitals, surgery centers, long-term healthcare and other specialty services. The integrated network delivers accessible, life-saving, high-quality, affordable, and innovative healthcare services. In 2006, California’s Sutter Health undertook several steps to augment point-of-service cash collections and enhance the aggregate revenue cycle. First, performance measures were determined using certain specific and primary benchmarks. Secondly, the patient financial services staff were also empowered to assume full responsibility for all individual accounts and ensure all registrations were analyzed using the rules engine for identifying key problems before a patient left the registration desk. Finally, the PFS staff were offered suitable comprehensive training under the new collection system. This paper is a summary of the Sutter Health case study, which ascertains the background information, core problems, pertinent facts, the solutions employed, and results. Specifically, the article identifies and explains California Sutter Health’s accounting practices to define and solve its upfront collection problems along with alternative solutions.

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Background Information

Sutter Health focuses on the not-for-profit mission of serving patients and local communities via the reinvestment in programs that are beneficial to the most vulnerable populations in Northern California. The integrated care network aids in fulfilling the changing needs of diverse communities through the simplification and coordination of the delivery of high-quality and compassionate care. This enhances the efficiency of healthcare and decreases aggregate healthcare costs. More importantly, an essential strategy for the optimization of margins during the era of high-deductible health plans coupled with higher copayments was identified as increased cash collections from patients, comprising self-pay patients. A large number of patients who visit healthcare units have ample resources for paying for either full or part of their health care needs. However, this can only happen if someone requests them to pay.

In the healthcare setting, patient financial services staff members offer financial advice and support to patients concerning medical bills and requests for cash payment. The staff require accurate, comprehensive, and well-timed information coupled with appropriate skillset and confidence to frame their questions in a manner that elicits the most positive responses from the patients. These new system was applicable mostly to registration staff because the best time for collection of payments is before the delivery of health care services. Nonetheless, these staff are often alien to requesting for cash. Consequently, the critical responsibility will be transferred from back-end personnel based in the central office and other collectors into front-end employees who managed cash collections in an organized manner. Sutter Health is fully committed to providing its front and back end PFS staff the vital tools for improving collections from self-paying patients and the bottom line of the health system. The improved cash collection system was launched in 2006 among account representatives, debt collectors, as well as other members of the Sutter Health’s CBO within the Sacramento/ Sierra area. Ultimately, the improved system was forwarded to registration personnel with the primary goal of transferring most of the back-end functions to front end and normalizing point-of-service cash collections.

Relevant Facts

The absence of healthcare coverage has always been a persistent concern. But, the enactment of the Affordable Care Act intended to narrow the gaps within the healthcare coverage system. The 2010 ACA Act made historic gains by extending Medicaid coverage to the majority of the low-income individuals and subsidies for persons lower than 400 percent of the poverty line. In 2007, approximately 47 million Americans were uninsured by either private or public healthcare insurance coverage (Souza & McCarty, 2007). The United States Census Bureau report revealed 8.50% of people amounting to 27.50 million lacked healthcare insurance. The uninsured rate and amount of uninsured persons grew from 7.90% or 25.60 million from the preceding year (Berchick et al., 2019. Simultaneously, the percentage of persons with public coverage lessened by 0.40%, while the rate of persons with private insurance coverage did not change. In fiscal year 2018, private coverage had a greater prevalence than public coverage, covering 67.30% and 34.40% of the U.S population. There are underlying invalid assumptions that none of the uninsured persons can have the funds for their health care payments. More than 80.0 percent of uninsured patients come from working family settings. Thus, the majority have financial resources to offset their health care needs partly or wholly, but only if they are asked.

Key Problems and Issues

Prior to 2006, the Sutter Health management identified three core problems in the analysis of the revenue management cycle. First, the patient financial service staff could not view real-time data on key operational and financial metrics: accounts receivable days and prompt cash collections. Thus, the management and other personnel had to wait till month end to review the primary benchmarks, monitor progress, and vital decisions. Secondly, the system used by the health care facility could not permit the management to separate and evaluate specific data and generate quality reports with the prerequisite details on demand. In its place, the Sacrament region depended on the specially trained programmers to generate the needed reports, which led to costly delays associated with detecting and rectifying problems. The final problem is the central business office staff lacked accessibility to real-time data. They were restricted to accessing the list of patient outstanding accounts, which had been allocated to them. As a result, the account representatives would not effectively prioritize or track progress.

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The Sutter Health management implemented a number of solutions to address the stated problems by expanding point-of-service cash collections, enhancing the aggregate revenue cycle, margins, and ultimately the bottom line. The chart below is a snapshot of the new system for increasing the upfront cash collections from self-pay patients

  1. Performance Measurement Benchmarks

The first solution was performance measurement using specific benchmarks, including gross accounts receivable days, unbilled accounts receivable days, billed accounts receivable days, percentage of accounts receivable days over 90, 180, and 360 days, major accounts receivable days, and cash collections. First, the accounts receivable days are an accounting measure that defines the length of time taken to clear all accounts receivables. The A/R days are a useful metric for determining the effectiveness of organizational credit and cash collection initiatives. It measures the overall efficiency of receiving the owed short-term payments, granting credit to only trustworthy customers, and promptly collecting cash. Another benchmark used for measurement of performance is categorizing the percentage of accounts receivable in every aging bucket, such as 0-30, 31-60, 61-90, and 91-20 days. The aging reports for every month show the outcomes of each of the measures that help in monitoring the performance. The table below is a sample executive analysis that constitutes the benchmarks for performance measurement used by General Memorial and Regional Medical Center PFS managers to assess the performance status based on the hospital-defined targets.

  1. Staff Empowerment

Secondly, all PFS staff were empowered to take responsibility for their individual accounts. The hospital’s strategy for increasing the cash collections and minimalizing the accounts receivable days underscored the empowerment of the PFS workforce to take full responsibility for every account. Thus, the central business office staff member had full ownership of his or her own business. They have a personalized dashboard for tracking their progress in achieving their personal and team targets. Besides, Sutter management also provided the PFS staff with numerous tools to manage their collections effectively. The new tools permitted them to automate and priorities the worklists of each account, rank accounts by dollar amounts, payer, and oldest work dates. They could readily view their rankings based on individual performance as a proportion of the achieved target within the workgroup and whole office at a glance. Accordingly, the PSF staff could track progress, identify areas for improvement, and ascertain the accounts that would have the highest effect on the organizational cash collection and accounts receivable days goals.

The management also had account receivables dashboards and tools. This permitted them to query all elements of the accounts receivables to analyze trends and identify the core problem areas. They could narrow down to the account level of every patient to monitor revenues, payments, accounts receivables, adjustments, and days from the preceding days and weeks to the past 18 months. The tools allowed the calculation of average daily and monthly revenues to measure the performance and estimate possible results at the close of the month. Lastly, they could view all accounts receivables and choose any segments for analysis and generate well-timed reports on demand, such as the A/R stratification, aging analysis, and the discharged not final billed analysis. In the summer of 2007, the denials management component was executed to complete the cycle as all sections, including the registration staff, could access data for producing clean claims.

The chart below demonstrates the graphical representation of Sutter’s sampled aged trial balance analysis, which presents the receivables stewardship trends in the bars. The longest bar for each staff would be the 0 to 30 days bar. A steep Mount Everest bar was expected to drop-off to nothing as fast as possible. After that, every bar should not exceed half the size of the bar positioned above it. The chart also reveals five aging classes that do not follow recommended patterns: 121to 150 days, 271 to 300 days, 301 to 330, days, 331 to 365 days, and 366+ days.

Sampled Aged Trial Balance Analysis

  1. Front-End Collections

Next, all registrations were analyzed using the new rules engine to ascertain any errors before the patient left the registration desk. 50 percent of the obligatory billing elements on the UB92/04 could be originated at the access point in the revenue cycle. This presented the highest opportunity to decrease claims denials and enhance optimal performance at the critical stage. The implementation of the new process at Sutter health required that all registrations be analyzed using the rules engine while at the registration desk to detect any possible problems. Some of the issues and errors that were identified include the lack of lacks accident information on the workers’ compensation and liability financial class and filing worker’s compensation with occurrence codes except 04.

Other problems include guarantors being below 18 years old, widowed, marital status. Yet, the relative has been listed as either is recorded as a wife, husband, or spouse, the type is not eligible for medical services, and the patient is aged 65 years or older with missing Medicare insurance plans. The final problems are missing questionnaires for the secondary payer, insurance claim numbers, policy ID numbers, or duplicated medical record numbers, or errors in format, punctuations, and abbreviations of the patient address. In summation, the editing of claims by front–end staff allowed the PFS personnel to detect problems, undertake remedial actions, and assess training needs. The computer interface allowed the hospital system to flag problematic accounts requiring specialized handling.

  1. Training

Finally, all PFS workforce received appropriate and training on the implementation of new system. It was designed to support both PFS and registration staff without recruiting a more educated workforce or increasing wages past the average hourly rates of $10.0 to $20. The system necessitated that the staff received comprehensive training. The registration staff received training on effective communication with their patients, including role-playing and rehearsals of scripts. The CBO personnel undertook training for taking stewardship of assigned accounts, learning the system’s tools and functions, as well as concepts of effective receivables management. After the preliminary educational sessions, the staff used a technological substitute for tutors to practice in testing system mode. They could refer to online users for a minimum of 30 minutes daily for up to one week and view the online manual anytime. The intuitive system allowed staff to work self-sufficiently with minimal assistance. The Sutter management used the surge in independence and effectiveness as ample reward for embracing the new system unreservedly. Finally, the staff survey and feedback emails revealed that the employees gained an improved sense of enthusiasm, ownership, and competitive spirit due to the new system.


In the initial three months of the project for augmenting Sutter Health’s point-of-service collections, the nine hospitals’ accounts receivable within the Sacramento region declined from 65 days to 59 days. Each A/R day was equivalent to $13.0 million. Hence, the six-day reduction led to cash collections of an additional $78 million for the health system. The outstanding receivables exceeding six months were below $1.3 million. The outstanding accounts receivable due in 0 to 30 days and 31- 60 days were $1.8 million and $1.4 billion, respectively. The total inpatient and total outpatient A/R days for the General Memorial and Regional Medical center were 41.80 days and 54.50 days, respectively.

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Alternative Solutions

The revenue cycle management is the effective management of administrative and clinical functions for capturing and collecting revenues or payment in exchange of provision of health services to patients (Grebner & Mattingly, 2017). The financial success of Sutter Health practice cannot be appraised using cash flows alone. There are other important factors that can be used to gain an in-depth understanding and measurement of the financial health of the integrated network. The metrics for revenue cycle management used by the management includes tracking claims using accounts receivable days. The management could also consider the adoption of two additional metrics namely adjusted collection rate and denial rate. First, the adjusted collection rate signifies the percentages of reimbursement that has been collected from the total sum allowed as per contracts and other forms of payments (Tolliver & Moheiser, 2019). The metric is used to ensure the receipts of payment by assessing actual collections versus what one could have collected. Besides, the metric demonstrates the amount of revenues lost owing to a myriad factors in the hospital’s revenue cycle like untimely filings, uncollectible bad debt, among other non-contractual alterations. Secondly, the denial rate symbolizes the percentages of claims that have been repudiated by payers in a specified period. The financial metric measures the effectiveness of the process of revenue cycle management. A lower denial rate designates healthy cash flows, and fewer members will be required to maintain the cash flows (Green & Diamond, 2019). The metric is a follow up on denied claims to maximize generation of revenues. By combining the three metrics, the management can ascertain whether all processes within the organization revenue management cycle are effective and efficient.


Sutter Health is one of the foremost not-for-profit medial network of community care providers that offers quality and affordable care in over 100 communities in Northern California. The case study above highlights four main problems that were experienced by the health organization’s revenue management cycle. First, the staff could not access to immediate data on key operational and financial indicators: accounts receivable days and prompt cash collections. The system could not allow the management to separate and analyze specific data and generate quality reports with the prerequisite detail level on demand, while the central business office staff could not access real-time data for prioritizing and tracking their progress effectively. The four solutions implemented by Sutter Health management to address the problems by enhancing the point-of-service collections and overall revenue cycle. They are performance measurement benchmarks, front-end collections, empowerment of PFS staff, registration and management, as well as comprehensive staff training. Following the successful implementation of the project, the accounts receivables of nine hospitals within the Sacramento region declined from 65 days to 59 days, which translates into cash collections of an extra $78 million. The total inpatient and total outpatient A/R days for the General Memorial and Regional Medical center were 41.8 days and 54. 5 days, respectively.  Lastly, the management could use the adjusted collection rate and denial rate to assess the revenue cycle and safeguard Sutter Health’ financial viability and stability in the long-run.


Berchick, E.R. Barnett, J.C. & Upton, R.D (November 08, 2019). Health Insurance Coverage in the United States: 2018. Report Number P60-267. United States Census Bureau. Retrieved from https://www.census.gov/library/publications/2019/demo/p60-267.html

Grebner, L. A., & Mattingly, R. (2017). Management of health information: Functions & applications. Boston, MA, USA : Cengage Learning.

Green, M. A., & Diamond, M. (2019). Workbook to accompany Understanding health insurance: A guide to billing and reimbursement. Boston, MA : Cengage,

Souza, M. & McCarty, B. (2007). From bottom to top: How one provider retooled its collections. Healthcare Financial Management, 61, 9, 67-73.

Tolliver, K., & Moheiser, S.(2019). Revenue cycle management: Don’t get lost in the financial maze. Englewood, Colorado: MGMA, Medical Group Management Association.

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