Process Improvement in Accounts Receivable
Client: Retail and Specialty Pharmacy
Industry: Retail
Service: Kaizen Event
Challenge:
This specialty pharmacy manages a complex process between patients, insurance providers, physicians and government agencies. Due to the complexity of the specialty pharmacy business, the process of receiving payment for specialty drugs was even more complex. Some of the challenges this pharmacy faced were:
- Increased accounts receivable and bad debt expense
- Pressure to maximize profits and reduce expenses
Solutions:
Guidon Performance Solutions helped the client identify:
- Five primary sources of their bad debt so a focused approach could be taken to reduce the bad debt
- Process improvement opportunities up-stream, well before getting to the point of becoming bad debt
- Accountability and ownership opportunities with front line associates so they can address issues early in the process
- Reductions in wasteful practices
Results:
The Kaizen team, led by Guidon consultants helped the company identify significant improvement opportunities including:
- An estimated $33 million in improvements in aged receivables
- Improved collection rates
- Reduced re-work
For this specialty pharmacy, the payment complexity between Physician diagnosis, acceptable payor requirements, benefits eligibility, patient financial responsibility and governmental or regulatory requirements either delayed or exasperated bad debt. Unable to control growing bad debt losses, senior leadership targeted a specific goal to reduce bad debt through the identification of bad debt root causes. Coupled with root cause identification was the need to review recommended “go forward” actions and sustainable counter measures. With the help of Guidon Performance Solutions, several key actions were taken towards identifying opportunities that the company could pursue.
First, the five primary bad debt reasons were identified, reflecting approximately 80% of all bad debt within the division. This provided a context from which a focused approach could be taken.
Next, a team of subject matter experts completed current and future state process maps on select processes. These maps provided a visualization of what key decision points, handoffs, and efforts were being made once a drug order was executed. This effort in itself led to other key process improvement recommendations. Guidon then conducted five single day Point Kaizen events with subject matter experts from business units impacting accounts receivable to come up with even more ideas for improvement.
The Team also mapped out a simple edit and logic improvements to their existing system that targeted more flexibility with processing orders. This minor technological improvement provided another countermeasure for reducing bad debt.
Finally, Guidon recommended that an End-to-End Value Stream owner for bad debt, including recommended accounts receivables metrics, be deployed across the organization. Guidon recommended that full ownership of this important process be moved from an isolated Collections area closer to where impacting processes reside.
This recommendation provided for greater End-to-End accountability for executing non-standard processes, decreasing Pharmacy exceptions, improving enrollment, benefit verification, and limiting outstanding accounts receivables thereby improving overall bad debt.
With Guidon’s leadership, the Point Kaizen teams used a Lean Six Sigma approach looking up-stream, identifying root causes, associated variables and process requirements. By mapping out existing processes, the Point Kaizen teams identified incremental future state design changes by identifying value add and non-value add process steps and routines.
Furthermore, Guidon illustrated how an environment filled with complexity (thousands of patients, payors, contractual requirements, physician orders and associated therapies) can deploy basic Lean Six Sigma tools to identify improvement opportunities and sustainable countermeasures for improving results.
Related Links
Guidon Business Process Management Services
Retail Industry Solutions
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Contact us or call us at 1.866.986.4414 or 480.986.4414 (for international callers) for more information regarding how a Guidon solution can help your organization.
