Published on 22-Feb-2013
"We looked for an organization that not only had the skill set but also had systems and industry knowledge. We chose IBM because they provided the full solution." - Kathleen Kalinowski, director of patient services, Animas Corporation
It’s a diagnosis that no parent or patient wants to hear. Type 1 diabetes is an insidious disease that requires a person to continuously monitor and maintain appropriate insulin, diet and exercise levels and manage additional health-related challenges. West Chester, Pennsylvania-based Animas Corporation, a division of the Johnson & Johnson Family of Companies, is a medical device provider for people with diabetes.
Animas Corporation sought a solution to improve its low cash collection rates and high bad debt allocations, increase business intelligence and eliminate process roadblocks impeding its revenue cycle.
IBM finance and accounting order-to-cash experts reengineered the company’s revenue cycle management process incorporating analytics tools that optimized collections activities.
The analytics-driven solution reduced the company’s days sales outstanding (DSO) by 65 percent, uncovered USD1.5 million in revenue opportunities and significantly improved working capital.
It’s a diagnosis that no parent or patient wants to hear. Type 1 diabetes is an insidious disease that requires a person to continuously monitor and maintain appropriate insulin, diet and exercise levels and manage additional health-related challenges. West Chester, Pennsylvania-based Animas Corporation, a division of the Johnson & Johnson Family of Companies, is a medical device provider for people with diabetes. In the competitive world of diabetes treatment, where approximately 300,000 to 400,000 individuals are diagnosed per year, Animas strives to deliver superior insulin-monitoring and delivery systems and efficient, high quality, patient-centric service.
Searching for a cure for revenue cycle challenges
Animas Corporation’s commitment to patient education and billing assistance support requires an extremely resource-intensive business environment. Jeff Pearson, the worldwide finance director at Animas, describes, “It’s a very challenging space in which to do business because it is extremely people-intensive.” When a period of unfavorable collection trends was observed, Pearson reevaluated Animas’ revenue cycle processes and systems. The study revealed that Animas Corporation’s claim processing and cash collection cycles were lengthening, and bad debt reserves were increasing, affecting the company’s working capital levels. Its systems and processes lacked the flexibility and intelligence to adjust to the company’s challenges. Pearson recalls: “We sought a partner with a proven ability to provide lower costs, better service and transaction abilities and had the experience to grow with us.” Kathleen Kalinowski, director of patient services at Animas, expounded: “We looked for an organization that not only had the skill set but had systems and industry knowledge. We chose IBM because they provided the full solution.”
Applying an analytics-based approach for systemwide efficiencies
To evaluate the current environment and determine revenue cycle process needs, the IBM Global Process Services (GPS) team conducted workshops with the Animas team. The company’s key performance indicators (KPIs) such as cash collection rates, days sales outstanding (DSO), numbers of claims processed per day per practitioner, payors’ average response times, and reserves required for bad debt were compared against both industry and internal IBM benchmarks. IBM consultants applied the principles of the GPS Enterprise Process Innovation Continuum (EPIC) methodology, a comprehensive measurement, monitoring and management approach that integrates analytics, technology and process expertise to drive end-to-end process improvement. The EPIC approach is designed to provide operational cost savings and enterprise business benefits, accelerate finance transformation and deliver lasting performance benefits that help drive process optimization. Using the proven methodology, the GPS team tailored a solution to reengineer and migrate revenue collection activities to an IBM global service delivery center to meet both the business and revenue cycle management needs of Animas Corporation
Claim processing and revenue collection were improved using a time, amount, frequency and response (TAFR) analytics model designed by IBM. The GPS team ranks and monitors insurance companies’ payment patterns and adjusts collections strategies for the timely receipt of payments. IBM also developed intelligent claim sheets that evaluate insurance claims against insurer-specific criteria to systematically check the documentation for potential areas of concern. Data obtained, such as the frequency of follow-up and denial analysis, helps the IBM team identify process improvement opportunities. The business analytics tools also provide streamlined reporting capabilities, including a dashboard view that allows Animas managers to track and evaluate data across the spectrum of revenue-collection activities.
Reaching remarkable heights in cash collections
Since the service delivery migration, Animas has experienced significant order-to-cash and revenue cycle management improvements. The procedures and processes implemented resulted in a consistent collections rate of over 90 percent within 90 days, improving the company’s DSO by 65 percent. Prior to the reengineering and migration process, it took an average of 18 months to collect 85 percent of its revenue. The company’s billing and cash posting processing times decreased from 24 to 12 hours. The combination of an agile electronic billing system and the dedication of highly skilled resources, the number of claims processed has doubled. “We can process anywhere from 50 to 65 [electronic] claims per rep a day,” reported Kalinowski. The IBM service delivery team also addressed an untapped source of revenue, the pursuit of patient co-pay collections. “By instituting a new department to make outbound [collections] calls, we were able to amass USD1.5 million in revenue,” Kalinowski stated. The sizeable recoveries and claim-processing efficiencies helped Animas cut its provision for bad debt from 15 percent to 5 percent of sales, significantly improving its working capital.
Sustaining the common quest for continuous improvement
Despite its remarkable success, the Animas claims processing and patient services teams continue to search for additional patient support efficiencies. The company depends on IBM to compare its performance with both industry and internal IBM benchmarks and maintain a culture of continuous process improvement for its company and customers. Pearson sums up the experience: “I greatly appreciated the approach that IBM has taken. …It’s really about making sure that everybody’s on the same page, and I think we work very well together.”
Products and services used
IBM products and services that were used in this case study.
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