MURRAY — Utah's largest employer and health care provider announced last month that it will outsource billing and collections to a company that has been accused of deceptive and bullying tactics, of losing patient data and scheming to boost hospital revenues.
Under another name, the company made headlines when it was said to pester patients as they were treated for conditions like kidney stones or strokes, lie about the urgency of payments and conspire with hospital administrators to bilk federal insurers.
That company, Chicago-based R1 RCM, is one of the nation's largest providers of medical billing and collections. Late last month, Intermountain announced that it will transfer 2,300 billing-related employees to R1. Intermountain says that will result in $70 million in savings it can pass on to patients over the next three years.
The 10-year deal includes a guarantee that the Intermountain employees will transfer to R1 at their current pay rate. Intermountain also bought equity in the firm and a seat on its board of directors, and received a pledge from R1 that it will bring hundreds of new jobs to the state.
The news met with unease and frustration from some employees, one of whom told the Deseret News that morale was “at an all-time low” amid systemwide fears of outsourcing. Others have posted unflattering reviews on the job site Glassdoor, where Intermountain rated a 3.8-star employer late last year and has received an average score of 2.5 stars since the R1 announcement.
A one-star post titled “A kick in the teeth” accused Intermountain of trying to “sugarcoat” “the ruination of lives.” Another post said R1 “will likely not go the extra mile to do what is right for our patients and the community,” while another pointed out that R1 — under its former name, Accretive Health — was barred from operating in Minnesota.
In a review titled “Betrayed,” a poster wrote that they would soon go “from being the employee of the greatest company around to being dumped … into one of the worst reputed companies in our industry.”
Rob Allen, Intermountain's chief operating officer, said he expected people to have some doubts: "Until people have clarity in their mind," he said, "then at times they fear the worst."
Intermountain, which employs 39,000 and operates 22 hospitals and 180 clinics, saw the R1 arrangement as a best-case scenario that will help it cut costs and collect payment more efficiently, all while offering employees a soft landing.
And as for the once-beleaguered R1, it has already been working with Intermountain in a lesser role, and Allen says it has always played by Intermountain's rules.
A troubled history
First, a brief explanation of revenue cycle management — the “RCM” in R1. That’s industry jargon for all the nonclinical staff that make sure a hospital gets paid, from registration to claim submissions to patient collections.
Inpatient admissions and the average length of stay in hospitals have declined nationwide over the past two decades while health care costs have skyrocketed, raising the pressure on hospitals to capture what’s owed by insurers and patients.
And while fewer patients are uninsured thanks to federal health care reforms, dramatically more patients now have high-deductible plans that call upon them to foot a larger share of their bill.
Utahns also tend to pay more out of pocket per year than most Americans. Although an often-cited Health Affairs study of 2014 health care costs found that Utah, as a state, spends less on health care per capita than any other, at under $6,000 per year, a September 2017 JP Morgan Chase study found that the average Utahn's annual out-of-pocket spending was second only to Colorado’s, at over $900.
“The numbers are pretty staggering,” Allen said. Intermountain had $243 million in unpaid bills in 2016 out of $4.4 billion in net patient revenues, Allen said, “by people or organizations that we believe can and should pay us.” And even the cost to send those bills can add up: Each year, Intermountain mails about 6 million bills at a cost of about $6 each, or $36 million in all.
While RCM improvements are unlikely to factor into the plot of your favorite network hospital drama, they’re a big part of the conversation as hospital administrators try to wrangle costs.
R1 works with nearly 300 hospitals and already had about 30 employees that embedded with Intermountain at the time of the January announcement. Its website touts reductions of up to 25 percent in so-called “bad debt expenses,” as well as up to a 5 percent increase in net revenues.
But the Chicago-based company is most widely known outside of medical administrator circles for the negative headlines it made as Accretive Health, a name it held until January 2017.
• In 2012, R1/Accretive paid $2.5 million to the state of Minnesota and was banned from operating there for two to six years after the state's attorney general sued it for losing an unencrypted laptop with data for 23,500 patients, and then accused the company of shakedown-style collection methods.
According to the AG’s complaint, patients were asked to pay their bills from their bedside as they endured strokes and kidney stones, or “while hemorrhaging blood.” Some patients were badgered by collectors as they were hooked to morphine drips or had tubes down their throat, and another as he lay undressed on a gurney. Some, the state alleged, were confronted in the emergency room about their need to pay before seeing a doctor.
• A judge threw out a similar complaint by Illinois regulators, but in Michigan, R1/Accretive paid $1.3 million in October 2017 to settle a lawsuit over deceptive collection practices carried out between 2014-15. According to that complaint, R1/Accretive “willfully, knowingly and falsely [stated] that debts are due and payable that are not due and payable, debts are due and payable in amounts that are not due and payable, and debts are in default that are not in default.”
• And R1/Accretive faces an ongoing Illinois lawsuit in which a former employee of Washington, D.C.’s MedStar Washington Hospital Center alleges that between mid-2012 and October 2013, she observed an R1/Accretive “scheme” to inflate revenues. When physicians ordered observational stays of under 48 hours, she says, Accretive employees conspired with administrators to blindly upgrade them to inpatient admissions, in order to receive more lucrative payouts from federal insurers.
Despite not being licensed to practice medicine — and having never met or examined the patients — R1/Accretive employees were said to recommend changes to a medical diagnosis to help the hospitals make more money. In one example, a physician recommended observation for a Medicare patient with lower back pain and an inability to walk, and an R1/Accretive employee said the patient was “at immediate risk for traumatic fall injuries,” and thus ought to be classified as an inpatient admission.
Michael Duke, a principal of advisory firm Baker Tilly who specializes in revenue cycle management, said that as Accretive, R1 was “known to be aggressive on the collection front,” but that “I’m not trying to imply that that’s even wrong.” For hospitals, “getting paid what you’re due is almost impossible,” he said.
Some of the tactics alleged by Minnesota’s AG, like soliciting fees from a patient at the time of service, are considered best practices within the industry, and would raise few eyebrows in other industries (where customers aren’t on morphine drips).
Amid those 2012 allegations, Accretive tapped former Utah Governor and U.S. Health and Human Services Secretary Michael Leavitt as chairman of a group that created “national standards” for customer interactions. Among them: No financial discussions before a patient is screened and stabilized. Since 2013, R1/Accretive has also been certified by a leading data security company.
(Leavitt’s Salt Lake City firm, Leavitt Partners, declined comment for this story.)
And while it hasn’t all been smooth sailing — the company has had four CEOs since April 2013 — R1/Accretive has continued to grow its business. The nation’s largest not-for-profit health system, Ascension, hired R1/Accretive as its exclusive revenue cycle manager in 2015. Today, R1 employs over 10,000 people in the U.S. and India (though the company said in a statement that the “vast majority” of its employees are based in the U.S.)
Allen said that R1/Accretive has always worked within Intermountain’s guidelines for patient interactions, and with the full suite of R1 tools and expertise now at Intermountain’s disposal, patients will note an improved experience, if anything.
What happens to all those Intermountain employees, though?
Those reacting to last month’s announcement expressed a range of frustrations. One employee told the Deseret News at the time that some were upset to have received a “vague” email about the partnership. Others posted on Glassdoor and Twitter that it was unseemly for Intermountain CEO Marc Harrison to attend the World Economic Forum in Davos, Switzerland, as he outsourced 6 percent of his workforce.
Mostly, they wondered what the future at R1 will hold for affected employees, and how much of the $70 million in savings expected in the next three years will result from slashing their benefits, if not their jobs.
Allen said at the time of the announcement that R1’s benefits package was “generous.” But two major differences are clear: 1. R1, unlike Intermountain, doesn’t offer a pension — though Allen asked to clarify that Intermountain employees will keep the vested balance in their Intermountain pensions. And 2. While Intermountain employees need only work 24 hours a week for benefits, the threshold is 30 hours at R1. Allen said R1 has promised to add hours for those employees who are short of 30.
Certified health care consultant Jackie Coult has worked in health care consulting in Utah for nearly three decades and questioned whether much savings would result from R1’s processes: “For them to tout that kind of savings, it would have to be on the burden of the employee.”
Both Coult and Duke said that health care systems have often been disappointed with the outcomes of outsourcing billing-related jobs, and some have later brought those jobs back in-house.
“It just seems like when the whole revenue cycle is outsourced, it doesn’t seem to stick,” Duke said.
R1’s likely strategy, Duke said, is “I’m going to take those 2,300 employees, and eventually I’m going to do it with 1,500, and I’m going to shift those other employees to another hospital or another client.”
Said R1, in a statement: "Over time, we anticipate employees currently working for Intermountain may begin working for other R1 clients as we continue to grow our customer base. We do not have definitive plans around how and when that transition may occur at the present time."
R1 also said that it recently transitioned about 5,000 employees from Ascension and that 98 percent accepted their offer to join R1 in their local markets. All of Intermountain’s employees will be able to stay in Utah, it said, and they won’t be made to re-apply for their positions.
Allen said that many Intermountain employees have displayed a “cautious optimism” since the announcement, but he conceded that the reaction has been “mixed.”
“It can be a hard message for folks to hear, take some time for them to process,” Allen said. “Many of our employees have a strong emotional connection to Intermountain. It is a great place to work.”
Both R1 and Intermountain also vowed last month to create an “innovation and development center” in Salt Lake City that would bring even more jobs to the state. It’s not the first time they’ve done so: In November 2011, they announced the same thing, and it never came to be. But Allen said Intermountain is now “very confident” about the prospects, and that Intermountain’s seat on R1’s board brings “more assurity of jobs in Utah.”63 comments on this story
Still, other employees will wonder about the assurity of jobs at Intermountain, where efforts at "disruption" include an investment in creating generic drugs. Late last year, Intermountain eliminated administrative positions when it restructured its management structure, going from four regional areas to two main reporting chains.
And Allen said Intermountain’s IT employees have been told that theirs is another “area that could have some opportunity” as Intermountain tries to control health care costs, though “decisions have not been made in terms of [non-billing] services.”