Automating unapplied cash reconciliation: 3 case studies

Tracey Coyne, Eric Proctor, Matt Swafford

Streamlined processes combined with automation yield impressive outcomes.

Reconciling unapplied cash is a time-consuming, resource-intensive process for many healthcare organizations. Yet it remains critical for making sure patient and nonpatient revenue, as well as patient accounts receivable, are accurately recorded in the accounting records and that revenue is not lost.

To improve the reconciliation process, organizations need streamlined approaches and innovative solutions. The following case studies highlight how three healthcare organizations made improvements to their unapplied cash reconciliation processes. Chief among their enhancements was to infuse programs with automation, which created efficiencies and resulted in other impressive outcomes.

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Case study 1

Challenges

A large health system with an academic medical center and more than $5 billion in annual net revenue faced significant challenges with its unapplied cash reconciliation process, including:

A negative audit adjustment for its medical group
Frequent knowledge loss on internal processes and solutions due to a high staff turnover rate
Transition to a new patient accounting system

Solutions

To address these issues, the health system worked with unapplied cash reconciliation specialists with deep industry knowledge to implement leading practices and an innovative technology solution. After the specialists conducted an evaluation of current performance and processes, enhancements were made across the health system’s hospitals, medical group, and hospice, including:

Introduction of numerous process improvements
Implementation of project management solutions
Development of unique payment identifier procedures
Changes to daily and monthly account reconciliation processes
Automation of daily and monthly unapplied cash reconciliation methods with customized workflow

Outcomes

These improvements were designed to save time and resources and enabled the health system to:

Reduce the number of full-time equivalents needed to focus on unapplied cash reconciliation from six to one and a half
Stabilize and clarify unapplied cash balance fluctuations
Achieve deposit match rates of:
- 92% for automated clearing house and electronic funds transfer payments
- 95% for lockbox payments
- 96% for payment processors
- 99% for credit cards

Case study 2

Challenges

Despite building its own internal unapplied cash reconciliation solution, a large, five-hospital health system faced difficulty completing accurate and timely reconciliation of its unapplied cash accounts. The system, which also includes clinics, medical centers, a home-based care agency, and several urgent care and specialty clinics, often took months to complete a single month’s reconciliation of its unapplied cash account. This lag resulted in a lack of proper support for the finance department during month-end close. In addition, the internal reconciliation solution was able to match only 40% to 50% of transactions.

Solutions

Working with unapplied cash reconciliation specialists, the health system implemented several solutions, such as using advanced technology to automate the unapplied cash reconciliation. The solutions implemented also included:

Enhancements to project management, including the development of implementation plans, the addition of weekly status meetings, and the identification of risks
Development of unique payment identifier processes by transaction type
Changes to daily and monthly account reconciliation processes
Automation of daily and monthly unapplied cash reconciliation processes

Outcomes

The new solutions resulted in several successful outcomes. To date, the health system has achieved:

Completion of general ledger reconciliations within close period
Implementation of an automated daily and monthly unapplied cash account reconciliation process
95.55% of all transactions reconciled through automated matching
A reallocation of work hours for members of the patient financial services and accounting reconciliation teams, allowing them to spend more time exploring and implementing new systemwide process improvement initiatives

Case study 3

Challenges

A pediatric hospital partnered with unapplied cash reconciliation specialists to evaluate an anomalous debit balance in its unapplied cash general ledger account. The hospital faced several challenges with the debit balance and needed help:

Completing a detailed unapplied cash rollforward of unapplied cash balance and transaction activity
Analyzing historical unapplied cash balance and activity to make adjustments
Performing a detailed reconciliation of three months’ worth of unapplied cash activity
Aligning unapplied cash reconciliation policies and procedures with leading industry practices

Solutions

After analyzing the pediatric hospital’s historical transaction activity and debit balances associated with the activity, performance, and processes, the unapplied cash reconciliation specialists then:

Identified anomalous activity and recommended adjustments
Revealed gaps in existing processes
Made policy and procedure updates, including the implementation of an automated solution to align with industry best practices

Outcomes

After identifying the cause of the anomalous debit balance and correcting the unapplied cash balances, the hospital has experienced several positive results, including:

Establishment of a more reliable unapplied cash reconciliation process that includes performing a three-way match reconciliation to the general ledger
Development of an expectation of what the unapplied cash balance should be resulting from cash posting activity and a comparison to general ledger activity and balances
Increased communication between the hospital’s revenue cycle and finance functions related to unapplied cash
Implementation of an automated reconciliation tool to align with leading industry practices

Automation is key

A common thread in these organizations’ successful outcomes is automation. Applying automation to the unapplied cash reconciliation process can help organizations work faster, more efficiently, and more accurately. For example, implementing an automated reconciliation solution that performs a three-way match between an organization’s bank transaction activity, patient accounting system payment postings, and general ledger account activity can help meet several reporting needs at month-end, such as:

Identifying specific unposted patient cash deposits, including any impacts from provider-level balance activity that remain either partially or fully unposted at month-end
Identifying nonpatient portions of cash that need to be entered into the general ledger
Identifying patient accounting system payment postings not matched to a deposit
Producing monthly reporting reflecting:
- Matching activity
- Detailed activity of nonpatient portions of patient cash deposits
- Activity to assist the finance team with the unapplied cash reconciliation between the bank, the patient accounting system, and the general ledger

Say goodbye to pain points

Improvements to an organization’s unapplied cash reconciliation processes, including implementing an automated three-way match solution, can go a long way to relieve many of the pain points that make this necessary task so onerous.

Contact us

Tracey Coyne

Vice President, Finance and Reimbursement, Kodiak Solutions

+1 312 899 4496

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Eric Proctor

Kodiak Solutions

+1 502 420 4548

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Matt Swafford

+1 615 360 5568

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