Hospital Business Office Document Management System

A reprint of a proposal and ROI justification to implement a system to manage business office paper archives, written at the University of Massachusetts Medical Center.

Respectfully Submitted by:
Dianna Gubber
University of Massachusetts Medical Center
Group Practice Plan
Accounts Receivable Manager


I. Current Situation

The Accounting Office for the UMMC/Group Practice is unable to keep up with the pace of the increasing demands of its rapid growth. The office currently operates under a manual system of filing and retrieving documentation. The primary function of the file staff is to file and retrieve Explanations of Benefits, Charges and Operative Notes for a variety of Accounts Receivable functions.

There are five major areas in which the manual system affects costs:

  1. Slow retrieval time results in delayed or lost income.
  2. The system is labor and space intensive.
  3. The manual system produces a risk of missing files which causes lost income.
  4. There is a lack of confidentiality.
  5. No back up exists to support disaster recovery.

The volume of paper is one of the things that stands in the way of increasing productivity in our office. It is estimated that the Accounting Office will receive approximately 1,002,985 pieces of paper between Charge Documents, Remittance Advices and operative notes. This volume has increased approximately 15% over the past year. [A study was performed here at Group Practice to gather the data presented by an actual count of documents contained in a random sample of boxes and then an actual count of the number of boxes of paper.]

Document filing costs
Traditionally, documents have been stored in batches, then filed in file cabinets and boxes. A numerical system is then assigned. Specifically, a batch number assigned to organize the files. Operative notes are classified alphabetically.

Listed below are the cost elements in our paper based filing system:
Labor: Creating new files, labeling, applying batch header sheets to file into the system, collating and entering information into a batch log book. Pulling boxes to retrieve and refile batches. Copying requested documentation.
Supplies: File folders, dividers, folder labels, batch header sheets, requisition slips, file logs, and filing boxes.
Equipment: File cabinets and shelving units.

Document retrieval costs
Because batches are rarely cross-referenced, the staff might have to look under several headings to locate pertinent data. Even if the staff are conscientious about filing methods, locating documents is still a labor and cost intensive operation. In active file operations, the following functions are being performed for retrieval and filing:

  1. Receive a request;
  2. Travel to the file area (Current year files are located in 2 separate rooms, the past Fiscal Year documents are located in an additional location);
  3. Locate the appropriate section, identify and pull;
  4. Route file or document to the requisitioner (file is now unavailable to others) or
  5. Copy documentation requested and route to the requisitioner;
    After the document is used, follow-up steps are:
  6. Files returned and sorted in batch sequence order;
  7. Travel to file area;
  8. Locate section, identify where the batch was originally located;
  9. File any new documents associated with the batch;
  10. Refile in the folder/batch;
  11. Travel back to area.

There are potentially 11 steps involved in retrieving and refiling requested folders.

The labor involved in this process could be reduced by using an "open stacks" system where requisitioners are permitted direct access to the file storage rooms. But the number of lost documents would increase dramatically. Open rooms at other facilities have been measured at 35% of the folders not filed in the proper location. Of those, most were found by spending hours looking in likely misfile locations and on the users' desks. 10-20% of the misfiles were never located. [An accounting firm in Worcester, Ma. that has "open stacks" for the accountants to directly pull files reported these missing document statistics.]

Alternatively, we could use a formal secure document room where professional archivists are the only ones allowed in the room and all documents are signed out at a request window. This formal archive system would reduce misfiles to as little as 1%-3%. But the labor costs to operate such a room would be would be much higher. [Statistics are from a study of federal government files made by the National Archives. Also, an optical disk document conversion project at a major HMO in central Massachusetts measured 2% of the paper documents were filed in the wrong box. In both of these cases, document access was restricted to full time records staff.]

File personnel increased 25% from 120 -160 hours (1 Full-Time-Equivalent) over a one year period and will continue to increase as volume increases. Accounts Receivable staff will continue to be utilized to retrieve documentation. Their time could be better spent in Accounts Receivable Management. Approximately 40 - 80 hours per week (1-2 FTE's) is currently being used to retrieve and copy documents. The value of their time (burdened) that will be freed up by using an imaging system is $52,000 per year.

Value of missing information
A study performed by a bank in Los Angeles calculated a cost of $60.00 each to replace a missing file. [Bank Systems Equipment, August 1989.] Combined with the typical lost document statistics reviewed above, one could estimate the industry average cost of not having the documents' information when needed. But to obtain first hand actual data for a Medical Center environment, The Medical Center decided to measure the actual dollar value of lost information.

Over a two week period, the file staff filled out a form for each request to retrieve a document from the storage rooms. The data collected documented the total number of files requested and the results of each request:

Number of Documents Requested (in 2 weeks) 716
Total Dollar Value Requested
Average files pulled per day (6 day work week)
Average lag time between request and pull
Average dollar value per day
Average dollar value per document
31 days
Number of batches in file
Number of batches not in file
Percentage of batches not in file
8 %
Number of EOB's in batch
Number of EOB's not found
Percentage of EOB's not found
11 %

11% missing documents

The current files average 11% of the documents missing. Based on the two week study resulting in 73 missing documents, there are currently 146 document requests each month that go unfilled due to lost documents. Also, disaster recovery should become more of a priority. Currently, there is no backup system in case of fire or other damage. Essentially all of our documentation could become missing in such a disaster.

The dollar value of each document shown in the table above is the amount charged on the claim that was not paid. The most common reasons for non-payment are co-insurance (especially spouse policies and automobile policies) and re-insurance. These non-payments are usually resolved in favor of The Medical Center once the proper documentation is sent to the correct third party payer. Procedure code disputes also occur and these often can be resolved in our favor. Overall, approximately 80% of the dollar value of each document can be collected.

The impact on the Medical Center for missing documents needed to resolve disputed non-payments is astounding. The data indicates that 146 documents per month are missing. Assuming the these missing documents average the same value as the found documents ($501 each), there is a probable loss of $58,517 per month (146 x $501 x 80%) or $702,000 annually using the current filing system!

Value of faster access to information
Cash flow is directly impacted. We currently average in a pre-appeal FSC $1,500,000 in receivables and process about $900,000 or 60% of the appeals each month. Many of these appeals are 5-6 months old due in part to the time wasted searching for missing Explanation of Benefits and that the file staff's significant and growing backlog. An additional 20%-25% of appeals could be processed each month presuming that the document retrieval backlog is eliminated and more staff time was available to clear up the FSC.

By simply eliminating the 31-day document retrieval lag, we will be able to generate appeals one month sooner than the current process. This should result in payments arriving one month earlier. At the current volumes, the $900,000 processed each month would arrive one month earlier. Assuming a conservative 6% per year long term interest rate, the earlier payment is worth 0.5%, or $4,500 per month. The total benefit of collecting more timely payments will be $54,000 in interest per year.

Cost of space
Additional office space will be required to maintain the current filing system. The files currently use about 800 sq ft, valued at $14 per sq ft. An imaging system with its optical cartridge storage will require less than 100 sq ft. The net savings is $9,800 per year.

II. Objectives For Improvement

Overall Goal: To effectively and efficiently install an automated file storage system in a cost justified manner, improve file retrieval time, reduce labor and associated costs, minimize missing or lost files.

Operational efficiencies

  1. To reduce document retrieval labor cost by 1-1. 5 FTE's or approximately $50,000 including benefits within 12 months of implementation.
  2. To reduce retrieval backlog from an average of 31 days to a 1-2 week backlog within 6 months of implementation.
  3. Provide a direct fax capability for Explanation of Benefits and Operative Notes.
  4. To reduce the floor space required for files used in the billing and collection process by 720 square feet currently being used.

Archiving documents

  1. To decrease the number of missing or lost files over a period of 7-12 months from 8%-11% to less than 1%.
  2. To improve the reproduction quality of requested documentation (currently undesirable due to poor photocopies).
  3. To improve confidentiality of files.
  4. To provide for a reliable backup of documents in case of fire or other disaster.

Proposed Strategy
Purchase a system to scan, store and retrieve documents pertaining to billing and collection processing. Documents will be available over the U Mass Medical Center DECNet or Banyan ethernet, protected by standard user name and password security.

III. Document Management System

The selected Document Management System is a fully automated, easy to use, paperless office system that dramatically reduces the time and space required to store and retrieve documents. With this system documents are filed merely by placing them into the scanner's automatic document feeder. Once the documents are electronically stored, they can be retrieved and viewed in seconds. By taking advantage of new breakthroughs in laser technology, we are able to store 17,000 pages of files on a single 5 1/4 inch optical disk. Approximately 60 disks per year will be utilized.

Not only will this system greatly improve our work flow and reduce manpower requirements, but it will also assure that files will easily be found.

The System will allow us to file, route and retrieve any file within seconds, all from one desktop, through an entire integrated network. The document management technology provides a platform for developing an office environment in which all personnel, from clerk to administration, have simultaneous and instant access to any office documents. Its flexibility eliminates the paperwork bottleneck and shrinks storage requirements, thus reducing operating costs. The system will allow us to plan the entire document retrieval needs at the start, but install only the basic network system and expand with a phased in approach.

The basic operations include the ability to scan documents, index each entry with key words and store all the information securely on optical disks. The system can then transmit any document in seconds to a high quality display workstation, PC, printer or fax machine.

The system can grow from an economical two workstation solution to a multi-user networked environment including communications to additional locations. The modular approach of the system means multiple scanner, printer and retrieval workstations can be added as needs change and grow.

Why store the files optically?
It accomplishes all of our objectives and a few that were not originally sought.
The payback is less than one year.
Multiple users can access the system concurrently.
Not subject to inherent paper or film handling problems such as rips and tears, misfiles, smudges and deterioration of handled documents.

Why not use microfilm?
Immediate Availability. With microfilm, processing may take two weeks. Meanwhile, paper files must be maintained that we have paid to replace. Usually, the processing period is the busiest retrieval period. With optical filing, the document is stored immediately and ready for instant retrieval.
Security. With optical disk filing we never have to release our filing information to anyone.
Logical Storage. With optical disk filing systems, related documents can be stored in the same cartridge. With microfilm, related documents may be stored on different rolls of film requiring manual intervention.
Networking. With optical disk filing, each department can have its own workstation to scan, view and/or print documents.
Sorting Source Documents. In order to store related documents on one roll of film, the documents must be sorted prior to filing. This may require holding the documents to wait for a complete set. This need does not exist with an optical disk filing system.
Print Quality. Image quality with microfilm is poor, often the images are barely readable. With optical disk storage, images are high quality.
Microfilm Printing Expense. Printing from microfilm can be expensive. Documents printed on photo paper are expensive due to the cost of the paper. Printing microfilmed documents on regular paper requires additional equipment.
Image Management. With microfilm, we must wait until the film is processed to determine if the images are legible. If a bad image is found, we must film the entire roll or find the bad documents and send them in the next batch to be redone. This whole process requires work and management. With optical disk filing, images are inspected as they are scanned, insuring quality.
Off-Site Processing. Microfilm processing requires someone to pickup and deliver the film for processing. This requires the cost of a courier, mail, or someone's time. With optical disk filing, this is of no concern.
Facsimile. Optical based images can be directly transferred via facsimile without being handled. Microfilm images, however, must be printed and entered into a facsimile machine to be transmitted.
Durability and Backup. With microfilm, it is possible that an entire roll could be lost or damaged in processing. With optical disk filing, the entire disk can be backed up on a regular basis which makes lost files highly unlikely.
Easy to Use. Quality control steps with microfilm make the task labor intensive and time consuming. Optical disk filing is simple and easy.

Labor savings
Due to the increasing filing and retrieval requirements, staff has increased by 25% during the past year. The demands made by the collection process are requiring more complex file documentation handling. It has been necessary to utilize other staff members to accommodate the present demand. The present file area will not accommodate more personnel due to space limitations and the space requirements will continue to expand if a more automated system of storage is not implemented.

The manual file and retrieval system requires some file preparation at the time the files are first inserted into the file. It additionally requires extensive preparation time when the file is requested due to the nature and/or structure of the file. With the Document Management System, the files cannot only be retrieved faster and take less floor space, but also can be viewed page by page and only the required data needs to be duplicated or reprinted. When the file request is completed no additional work effort is required to re-prep the file and return it to the file.

The Document Management System will reduce labor requirements by 1 to 1.5 persons related to the file retrieval process. We can utilize this staff in billing and collection where they are most needed.

An additional benefit is the increased morale of file room personnel and the reduced training time needed for potential replacements to the file staff team. Discussions with the staff of existing installations of Acordex's imaging system indicate that the installation process was a pleasure and operators enjoy using the system. Like our staff, they hate the task of pulling and refiling paper documents.

IV. Acordex Imaging Systems Proposal

Five vendors were evaluated during our first RFP. The purchase was not awarded to the winning vendor due to an internal budget freeze and changes in department management.

The second RFP went to the winner of the first, plus two additional vendors. Both RFP processes resulted in the same selected vendor: Acordex Imaging Systems.

Acordex's Document Management System was chosen for:

  1. The cost of the system
  2. Availability of service
  3. Networking and expansion capabilities and
  4. Integration with our current systems.

In summary, given the following:

1. The Accounting Office operates under a totally manual system and will be unable to manage paper processing to expedite Accounts Receivables and other documents required;

2. Cash Flow is directly impacted as described on pages 4 and 5;
Value of missing information savings: $702 K
Value of faster access to information savings: $54 K

3. Labor costs are extremely high and will continue to increase;
Document retrieval cost savings: $52 K

4. Space utilization and disaster recovery, although placed as a low priority, are much improved;
Cost of space reduction: $9.8 K

It is recommended that the Accounting Office take steps toward purchasing Acordex's Safekeep Imaging System. A system such as this would decrease costs and improve document recovery, storage capacity, and capability. The items listed above will conservatively produce an ROI of a few months!

Dianna Gubber
Group Practice Plan
University of Massachusetts Medical Center
Worcester, Ma.