5 Best Practices for Healthcare Cash Balance Reconciliation

By Tracey L. Coyne, CPA, CHFP; Jay Sutton, FACHE, CNRA; and Matthew J. Swafford, CPA, CNRA
| 10/23/2018
5 Best Practices for Healthcare Cash Balance Reconciliation
Today’s hospitals and healthcare systems spend a significant amount of time performing routine manual reconciliation of cash coming into the bank with what is posted in their patient accounting systems (PAS) and their general ledgers. Identifying nonpatient cash deposits from areas such as Medicare interest, off-site clinics, parking, and gift shops and holding them for posting to the general ledger is an inherently complex process. Additional complexities in the posting processes related to patient reimbursement make large, unapplied cash balances a common – and constant – pain point and risk area for healthcare organizations.

Adding to the pain is that in order to keep cash reconciliations from lagging behind a routine performance schedule, organizations often have reconciliations performed by experienced – and expensive – accountants, whose time could be better spent elsewhere. This means organizations working to reconcile cash on a regular basis are spending a lot of time, resources, and money. Combine these challenges with a constantly evolving healthcare environment affecting many finance and revenue cycle processes and creating effective cash reconciliation processes becomes even more urgent.

To help address this common challenge, leading healthcare organizations are employing several best practices to streamline and automate their cash reconciliation processes and reduce risk.

Best practice 1: Create an interdisciplinary steering committee

Organizations should assemble a cross-organizational steering committee to address cash balance reconciliation. This committee should be made up of representatives from the following areas:
  • Finance and accounting
  • Revenue cycle
  • Treasury
  • Information systems
  • Internal audit (from internal control and process change perspectives)
Such steering committees can help break down many of the historical operating silos that may exist in hospitals and healthcare systems. They also encourage better communication and collaboration among various organizational departments about improving processes to resolve unreconciled cash balances.

Best practice 2: Streamline cash and banking structure

Organizations are faced with a confusing and unwieldly web of data created from cash deposits being made from numerous sources, including multiple bank accounts, lockbox structures, and merchant processors. Such a large amount of data can be difficult to manage, which further complicates cash reconciliation.

The more streamlined and standardized an organization’s cash and banking structure, the easier it is for the organization to reconcile cash on a routine basis. Organizations should consider moving all bank accounts to a single depository account held by one bank. In addition, they should organize all lockboxes by patient (insurance versus self-pay) or nonpatient categories to further streamline and categorize deposits.

Best practice 3: Eliminate paper and evaluate technology options

One of the most important steps a healthcare organization can take to improve cash balance reconciliation processes is to cease using paper and, instead, take advantage of several technology options.

One such option is using automated banking feeds offered by the organization’s banking provider. These feeds provide bank administration institute codes that can help hospitals and health systems identify payments by deposit type.

Organizations also can consider adopting alternative payment strategies that may help reduce cash use. Such strategies worth exploring include collecting copayments in advance of patient appointments, implementing patient payment portals within an electronic health record system, and going completely cashless.

For hospitals and healthcare systems working with payers that still submit 835 remittance advices on paper, multiple types of banking and revenue cycle providers can create a manufactured 835 solution. These solutions convert paper remittances to an electronic format and assist in performing a two-way match between the hospital or healthcare system’s PAS and its bank. What can elevate this solution even further is a technology option that performs a three-way match among the hospital or healthcare system’s PAS, its bank, and its general ledger. Organizations should seek out assistance from a third-party vendor to implement such a solution.

Best practice 4: Perform a daily reconciliation

After eliminating paper and streamlining as much of the cash reconciliation process as possible, hospitals and healthcare systems should create a process for performing daily reconciliation. Given the large volumes of payment transactions going through hospitals and healthcare systems today, this is truly one of the only ways to control unapplied cash balances.

A daily cash reconciliation process should be as automated as possible. Automation features should be exception based, meaning they flag all out-of-the-ordinary transactions. The daily cash reconciliation process also should be integrated with workflow, with staff members given daily assignments to resolve in real time.

Best practice 5: Create a performance improvement culture

One aspect of successful implementation of any significant process or solution within a healthcare organization is creating a performance improvement culture that embraces the changes. Organizations that do well at this have:
  • Senior management supporting the performance improvement initiative, driving change from the top down
  • A centralized governance structure combined with decentralized implementation of the process improvement initiative
  • Engaged employees throughout the performance improvement journey
  • Transparent communication with all team members about new initiatives and performance
  • Periodic reporting on key performance metrics and intangible measures such as daily unreconciled cash or the growth of or decline in unapplied cash

Manage and maintain the changes

Keeping track of nonpatient and off-site clinic cash is a complex, time-consuming, and potentially costly process for healthcare organizations. To save staff time on this task and reduce organizational risk, hospitals and healthcare systems should consider implementing best practices for streamlining and automating their cash reconciliation processes.

After employing these best practices, organizations can consider working with a third-party consultant to help implement a software solution to manage – and maintain – their newly streamlined cash reconciliation systems.

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Tracey Coyne
Tracey Coyne
Partner, Healthcare Consulting
Jay Sutton - social
Jay Sutton
Matt Swafford