Purpose

To determine whether the Upstate Medical University’s (Upstate) billing practices are adequate to ensure that insurance carriers are billed timely and that services being provided meet carrier’s “medical necessity” requirements. Our audit scope covers the period July 1, 2014 through June 30, 2016.

Background

Upstate Medical University (Upstate), central New York’s only academic medical center, specializes in research and treatment of the most prevalent human diseases, such as cancer, diabetes, and heart disease. Its overarching mission is to improve the health of the communities it serves through education, biomedical research, and health care. Upstate employs 9,640 employees at its numerous facilities, including its downtown campus location in Syracuse and over 100 specialty clinics. Upstate serves health care services to approximately 1.8 million patients annually, and works with over 30 insurance carriers to provide health care for their insured members.

All hospitals operate knowing that some claims will be denied, and payments might not be obtained for services. Insurance carriers may deny payment for a variety of reasons (e.g., service deemed not a medical necessity based on Medicare and other evidence-based criteria, or claim not submitted within the carrier’s specified timeframe after the date of service). For the two fiscal years ended June 30, 2016, Upstate billed 31 insurance carriers for services totaling nearly $7.1 billion and had net patient revenue of approximately $1.4 billion for the same period. In 2013, Upstate hired a consultant to help strengthen its billing processes in an effort to improve its performance in collecting accounts receivable and minimize write-offs.

Key Findings

• For the two fiscal years under our review, Upstate wrote off nearly $17.4 million in insurance denials. Records we tested showed the causes for the write offs were isolated in nature and largely attributable to human error (e.g., data entry) or changes to the EPIC billing system, and thus not reflective of a systematic weakness in Upstate’s billing process. In addition, the amounts written off represents about 1 percent of the net patient revenue, an amount well within the industry standard of 1–2 percent set by the Healthcare Financial Management Association.
• In recent years, Upstate has taken appropriate steps to manage its accounts receivable and bad debt write-offs, including hiring a consultant to re-engineer its billing systems and establish process improvements, and moving to a new billing system (EPIC). Further, we found that Upstate has taken appropriate steps to follow through on these improvements and made significant progress toward these ends. Our review found average monthly write-offs of bad debts have declined significantly as these improvements have been put in place.

Other Related Audit/Report of Interest

Office of the Attorney General: Accounts Receivable Collections (2011-S-25)