US Labs

Under new CEO Judd Jessup and CFO Steve Pierce, the venture-backed cancer diagnostic testing laboratory underwent a fifteen-month overhaul of billing processes and workflows, resulting in an annual 20 percent growth rate and gross revenues of 74 million by early 2005.

In 2002, Irvine California-based US Labs was endemic of the struggle that all independent labs go through to reach the destination of accurate revenue recognition, compliance and increased valuation. A trailing 12-month revenue in the millions, EBITDA in the negative millions and two successive years of write downs for overstated revenues were all severe roadblocks. This was capped off by an OIG investigation of billing practices that was eventually dropped, but still cost the company hundreds of thousands in legal fees.

Unfortunately, the dramatic growth brought a steep increase in late billing submittals and errors. The specific cause was that the legacy billing/AR system's manual process gaps made it difficult for staff and infrastructure to accurately track retail verses contractual rate for hundreds of payers.

Consequently, the lab was unable to obtain definitive net revenue. Further scrutiny revealed that the inaccurate contractual allowances had been misclassified as bad debt. "It was obvious that we had exceeded the abilities of our legacy proprietary billing system and had to find an adaptable long-term solution to get back on track financially," said Pierce.

Solution

Almost overnight, Pierce was dealing with a legacy billing/AR system unable to adapt to volume, eliminate manual errors and effectively meet compliance needs. He first consulted counterparts at four similar labs to assess their billing systems and look for recommendations. All four labs were utilizing billing/AR modules that were part of an established manufacturer's LIS. They each expressed dissatisfaction with manual revenue cycle processes, yet none had found a suitable replacement. "One of the four however, had investigated XIFIN, a Software as a Service (SaaS) billing/AR solution, and recommended it to me," said Pierce.

At first, Pierce had significant concerns with a SaaS model where part of the billing operations would be located off site. Concrete examples of success with other labs and Pierce's prior knowledge of Lale White's (XIFIN's CEO) longstanding immersion in the lab billing /AR world sealed the deal for him and Jessup. "Because of Lale's experience, I had much greater confidence in XIFIN's ability to assure compliance on our behalf than any of their competitors," said Jessup

Implementation & Rollout

The implementation process began with appointing the billing director as project manager and the lab's VP of IT as collaborator. A billing staff task group worked with XIFIN to reload all contracts and billing information. The four-month process and the solution's maximized automation allowed the lab to reevaluate all of the contracts to define actual contractual rates. "The process gave us the personal assurance that we were getting good data in and out of the system with correct bills, codes and a definitive trust in the net revenue number," said Jessup.

During the process, IT leadership made several trips to XIFIN's San Diego facility to assess XIFIN's operations and work out technical issues during the transition.

XIFIN made personnel available for issues resolution through all transition phases. Reports from IT leadership provided Pierce with the assurance of the stability, safety and integrity of utilizing a SaaS solution. "I was glad that IT was excited about the technology and was able to assure me there were no concerns with a vital part of our daily operations sitting on a remote server," said Pierce.

Results

Unlike the lab's previous billing/AR system, the XIFIN solution had the capability of providing detailed reports on all aspects of the revenue cycle at any interval desired. Pierce compiled a list of report needs including valid revenue recognition, submitted but unpaid bills, payment intervals per provider and those indicating any problems with billing. "Very shortly after giving the billing director the criteria, he quickly returned with a list of several reports that I began receiving daily, weekly and monthly as needed," said Pierce.

Over the next year, overall cash collections increased 8 percent while billing-related IT investments and expense were reduced by over 90 percent. At the time of the transition, billing FTEs numbered 27 with a pre-XIFIN forecast of an additional 10 FTEs over the next year to handle the projected growth. "We ultimately didn't have to add a single FTE, which is a testament to XIFIN's level of automation and workflow streamlining," said Pierce.