Billing visionary Carmen Davies convinced DependiCare president Roger Miller that a stand-alone billing center was the solution to his DSO and staffing problems.

In business, growth brings new challenges. DependiCare, one of the leading HME providers in the Midwest, was experiencing pain in an area where it can hurt any business the most: billing operations.

Serving the Chicago area from three locations, including headquarters in the west Chicago suburb of Broadview, Ill, DependiCare turns 20 next year and will earn about $16 million in revenue this year. But in the mid 1990s, the company faced a major problem that threatened future growth plans. Collection rates lagged far behind HME industry averages, and staff turnover in the billing department was disastrously high, making any effort to forge a turnaround all but impossible.

DependiCare management clearly understood that it had to upgrade its billing and reimbursement functions. What it did not realize but would soon recognize was that in order to improve its billing, it had to move its billing.

Making Change
“Our billing operation was not as productive and efficient as we wanted it to be,” says DependiCare president Roger Miller. “We were underperforming and having a real difficulty with staffing. We would train people for 4 or 5 months, and for 50 cents an hour more, they would leave and go down the street to another office.”

At the time, DependiCare hoped the antidote might be a seasoned manager with strong leadership skills. “The first thing we needed to do was get a leader, somebody who had managed the accounts receivable function at a larger company,” Miller says. The company hired Carmen Davies, who brought with her more than 15 years of experience as a reimbursement manager at larger home care companies. Davies immediately began dissecting the billing department, identifying problem areas and possible solutions. But she was not interested in tinkering. About 6 months into the new position, she proposed a bold concept: establishing a separate facility for billing and reimbursement.

Management, including Miller, was not immediately sold on Davies’ idea, however. “I tended to see more of the negatives than the positives,” Miller recalls. “The ability to communicate easily back and forth is critical for billing in our industry. If you get bad information on a patient and enter it into your database, you are going to get denials on claims and it will drive your DSO (days sales outstanding) up. By moving this function off-site, I thought it would be more difficult to manage and communicate.”

Davies persisted, emphasizing the two potentially huge benefits she envisioned from a stand-alone billing center. For one, a separate facility would create a business-minded focus on accounts receivable—much-needed attention that the billing area was missing in an operating environment focused, rightly so, on patient service. Second, DependiCare would be able to locate its billing center where the labor pool offered greater opportunity to build and retain highly qualified staff.

After a few months of discussion, management agreed that Davies’ pros outweighed the cons. All they had to lose, after all, was more revenue from the denied claims and late payments that plagued the company. With management convinced, planning began. After a search for an available, skilled labor pool, DependiCare identified the town of South Beloit in the Rockford, Ill, area. Then the company linked its computer system at its operating locations with the new billing center.

“We did all that work up front before we put the people there,” Miller says. With the information technology in place, DependiCare began hiring a core of experienced billing and collection professionals. In May 1997, the billing center opened in a 3,500-square-foot facility with 14 employees and 135 years of collective billing experience.

The Payoff
The billing department’s change of scenery—coupled with work schedule flexibility—did wonders for the turnover problem. Because the staff included women with families, DependiCare allowed employees to shape their hours to fit family needs. They could choose to arrive and leave earlier in order to be home when their kids returned from school, or opt for later hours in order to see their kids off to school in the morning.

“For the first 4 or 5 years, we virtually had zero turnover, which is incredible,” Miller says. Today, 12 of the original 14 people hired to launch the billing center remain, and combined collection experience has surpassed 210 years, with 20 total staff members.

The value of an experienced billing team cannot be overstated, according to Miller. “You need to know the rules and the rules are complicated,” he explains. “That was the biggest problem in training people who would leave—it would take 6 months to teach them all the rules, and you just do not get the payback when they leave 2 months later.”

DependiCare’s billing center does it all, from Certificates of Medical Necessity (CMN) processing and insurance qualifications to billing submissions and collections to cash posting and internal auditing. But no single staff member is expected to cover it all. Each member of the team focuses on specific reimbursement areas, including Medicare, Medicaid, and commercial insurance.

The result has been a considerable improvement in expertise and efficiency, with cash collections and accounts receivable performance consistently above most industry comparisons, Miller says. Looking at hard numbers, DSO now stands at 59 days for billed accounts, down dramatically from more than 100 days back in 1995 before the creation of the billing center. Collection rates exceed 97% of revenue, well above industry averages, according to Miller.   

But possibly the center’s biggest pay-off can be found back at the HME operating locations, though it is a benefit that is not as readily quantified. “Separating the billing function created an area of focus that allowed us to improve the ability of the operating locations to serve the patient,” Miller says. “Looking back, the creation of the billing center has been one of the most effective decisions we have made at DependiCare.”

Internal Outsource
Since the formation of the billing center, DependiCare has completed three acquisitions of HME companies. And in measuring each deal’s potential value, the billing center has been an ace in the hole for DependiCare. In one instance, the acquired operation was merged into headquarters; in the other two deals, the locations continued to serve patients, while billing operations were converted and integrated into the center. In all cases, DependiCare was able to realize significant cost savings, including staff reduction, as a result of synergies offered by its billing center.

“When we do an acquisition, our goal is to get all the people at the location focused on the customer and take the administrative functions out of the environment,” Miller says. “We can pretty well identify the cost saving that we will get out of an individual acquisition opportunity because of all the functions we can extract and get settled out at the billing center. It is an internal outsource.”

But despite distinct advantages, a remote billing operation is not for every company in the HME industry, Miller says. “The $2-3 million company that serves a focused market is not a great candidate,” he says. “But for the larger company that serves an expansive market or has multiple locations and needs to duplicate certain staffing functions at each of the locations, this model provides an opportunity for it to focus some of its activities at one site and, in effect, create some management focus that you wouldn’t have if they were decentralized at the various locations.

“It makes sense to companies when they get to a certain scale. I don’t know how large you have to be. I would think that it would be more based on how your business was distributed geographically than it necessarily is related to size.”

Aaron R. Smith is a contributing writer for Dealer/Provider.