Unapplied cash reconciliation remains a challenging area for healthcare organizations. In practice, the use of manual processes, minimal technology, and departments focused solely on their own individual tasks are common pitfalls that can lead to an ineffective and inefficient unapplied cash reconciliation process. The increase in health system mergers and acquisitions and consolidated billing only adds to these challenges.
To achieve best-practice unapplied cash reconciliation results, today’s organizations should look for indications that their processes could use some updating, collaborate across the affected departments, establish trusted processes, and maximize technology tools to manage unapplied cash reconciliation more effectively.
What are examples of warning signs that indicate unapplied cash reconciliation processes should be reengineered?
Departments involved in unapplied cash reconciliation processes do not meet and collaborate regularly.
Good communication among all departments involved in the unapplied cash reconciliation process is vital to managing and reconciling unapplied cash successfully. A lack of communication could indicate that significant gaps in the organization’s unapplied cash reconciliation processes are not identified.
Unapplied cash reconciliations are not performed promptly.
Due to the nature of unapplied cash reconciliations, it is vital that they are performed shortly after month-end. This will help the health system identify and resolve errors and assist the functional departments in resolving unapplied cash reconciling items in a timely manner.
Fluctuations in unapplied cash balances cannot be explained, or unapplied cash reconciling items cannot be identified effectively and efficiently.
Unapplied cash balances can fluctuate significantly within a health system. Unexplained fluctuations in unapplied cash or unidentified reconciling items demonstrate that controls surrounding the unapplied cash reconciliation process might not be aligned with best practices.
The organization struggles to reconcile deposits that post across hospital billing and physician billing instances in the patient accounting system.
Increased use of consolidated billing in today’s organizations has meant increased challenges when reconciling certain incoming patient deposits. It is common to have a hospital payment and a physician payment within the same deposit. For example, a physician billing deposit might appear in a bank account that typically handles only hospital billing deposits. To prevent inefficiencies with the reconciliation, organizations need an effective reconciliation process and tools that give staff members the ability to either hand off the deposit to the appropriate person or complete the reconciliation of that deposit themselves. This process typically is manual and offers limited visibility to the reconciliation.
The organization’s general accounting department isn’t monitoring the patient accounting department’s use of, and age of, items that are posted to dummy/clearing patient accounts. Or, general accounting does not even have access to this information.
Staff members in these departments need access to help make sure items posted to dummy/clearing accounts are being reversed appropriately and on a timely basis at month-end. If the organization begins seeing these accounts age out (especially more than 30 days), a best practice would be to revisit or clean up any open clearing accounts in the patient accounting system at least monthly.
Try these best-in-class practices for unapplied cash reconciliation
If an organization identifies any warning signs in its unapplied cash reconciliation processes, it should consider collaborating to improve processes, adopting better reporting practices, and optimizing the use of automation to better manage and communicate about the unapplied cash reconciliation process. Some leading practices to consider include these:
Create an interdisciplinary steering committee. Breaking down historical operating silos is essential to improving communication about unapplied cash reconciliation. Creating a committee of essential stakeholders in the unapplied cash reconciliation process is one way to achieve this. The committee should comprise individuals from the organization’s finance, revenue cycle, treasury, and information systems departments.
Evaluate options for improvement. Organizations should assess their current cash reconciliation processes in three areas:
- Business operations. Determine if any front-end processes can be corrected to improve reconciliation on the back end, identify current manual processes that can be eliminated, and pinpoint bottlenecks or issues with existing processes that decrease effectiveness.
- Tools and systems. Determine if the organization is using existing technology tools effectively, and consider whether the organization could benefit from new workflow and automation technologies.
- Human capital. Evaluate whether the right individuals are in the right positions to support existing or desired processes.
Consider using an automated three-way match reconciliation solution. A tool that performs an automated three-way match among an organization’s bank, patient accounting system, and general ledger can help the organization achieve a more efficient and accurate accounting of the items being reconciled in unapplied cash. Some benefits of this solution include real-time status information about cash deposit postings, deposits sitting in unapplied cash, segregation between nonpatient and patient cash deposits, and identification of patient accounting system postings that are not matched to a deposit.
Apply automation and technology
An organization can elevate its cash reconciliation processes even further by applying technology and automation in addition to implementation of a three-way match reconciliation solution. These are some options:
Automated cash posting tools. These tools can automatically post 835 remittance advices into the patient accounting system, which can eliminate slower, less efficient manual processes.
Manufactured 835 solutions. If an organization conducts business with payors that do not provide electronic or automated 835s, it could be beneficial to hire a vendor that is able to convert paper 835s into automated 835s. Many banking and revenue cycle companies offer this solution.
Alternative payment and deposit strategies. These strategies, which can help on the front end to automate and speed up the cash reconciliation process, include using patient portals to collect copayments in advance of appointments, implementing automated lockboxes to collect and segregate payments, and considering going cashless as an organization.
Specialists can help
By applying leading practices and making use of technology tools and automation, healthcare providers can have better oversight of – and feel like they have more control over – their unapplied cash reconciliation processes. For even more insights and assistance in this area, they should consider reaching out to unapplied cash reconciliation specialists.