A Large Single-State HMO

A Large Single-State HMO

Customized Review of HMO Revenue Processing

Our client for this project was a staff model HMO associated with a nationally known teaching hospital. The Plan has a national reputation for consistently high levels of member satisfaction and unusually low administrative expenses. The Plan has enjoyed both consistent profitability and growth. The Plan has nearly 200,000 members and 1,800 employer groups.


Our client wanted to improve the timeliness of their employer and member bills and to assure the quality of their balance sheet. They hired the Robert E. Nolan Company to review and redesign their processes for bill generation and presentment, payment processing and accounts receivable management.

Challenges in Bill Processing

We found a relatively low rate of bill compliance (i.e., paid-as-billed ratio) and higher-than-normal rates of both late payments and retroactive adjustments. These issues were interrelated and driven by two primary elements—the information communicated on the bill and the timing of the billing cycle.

Customers did not have enough time to process their bills and return their payment before the due date. These late payments caused an increase in the number of retroactive transactions, which in turn resulted in a more complicated bill and more time required for processing. This problem circled back to more late payments and started the cycle all over again.

The high percentage of late payments also contributed to higher-than-normal accounts receivable balances. Finally, because of a lack of effective performance metrics, these problems were difficult to monitor and manage.

Improving the Monthly Billing Cycle

The redesign team reviewed key processes and the monthly billing cycle. Direct feedback from the HMO’s customers about the billing and payment processes was gathered by phone interviews.

The redesign team made these core recommendations:

  • Modify the current billing cycle to increase the amount of time available to customers to process their bill and return payment.
  • Eliminate unnecessary reviews and reconciliations.
  • Perform additional transactions in the billing unit rather than transfer work to other units.
  • Improve the accounts receivable report and management process.
  • Develop a set of objective performance measures for the department and use it as a fundamental management tool.

The executive team approved the recommendations. The core recommendations and more than 25 supporting recommendations were implemented, or are being phased in as contracts renew.


The project successfully delivered the results the client wanted. The results of the project are:

  • Faster billing, including bill generation and delivery, payment processing and member maintenance.
  • Fewer late payments.
  • Fewer retroactive adjustments.
  • Less manual reconciliation for both the Plan and its customers.
  • Reduced aged accounts receivables.
  • Fewer write-offs of premiums due to retroactive terminations.
  • Improved quality of the balance sheet.

The project was successful because it had clear objectives, a thorough discovery process, and a high degree of cooperation between the HMO executives and staff and the Nolan consultant.

Today our client is well-positioned to deliver excellent revenue processing and service to their customers. The Plan’s customers benefit from bills that are understandable, timely and accurate. The Plan’s financial officer is assured that the revenue processes, management reporting and the financials are timely and accurate.