Posted by Dan Schulte
The U.S. healthcare system’s recent reform has driven dramatic change in cost-sharing. Whether through companies altering benefits to reduce their share of the burden, or through individuals burdened with higher-deductible plans, financial accountability has shifted significantly to consumers. Consequently, both patient liability and bad debt are on the rise, and healthcare providers are experiencing financial pressures. Hospitals increasingly need to provide consumers with access to payment capabilities at point of service.
With this significant financial accountability shift to consumers, now is a good time to highlight the key drivers behind this growth, and to discuss good strategies for managing the patient Accounts Receivable. The intent of good receivables management is, of course, to accelerate cash recoveries, and to minimize the bad debt expense that can occur due to mismanaged accounts. This puts the onus on providers to be sure they are prepared for the new self-pay landscape.
First let’s understand two important marketplace changes that drive defaults and increase bad debt for providers:
- Size of the self-pay accounts—The sheer dollars involved in each account have more than doubled in the past eight years. According to research, the average deductible in 2014 was about $1,200. In 2006, the average deductible was less than $600. Keep in mind that those are average numbers; the size of deductibles range from $0 to over $10,000 for some plans. The result is that the portion coming from the patient is at its highest since the institution of healthcare insurance in the United States.
- Number of insurance accounts—The accounts for which patients owe a remainder balance has doubled, as well, according to research. In 2006, about 45% of insured workers did not have a deductible. In 2014, that number fell by more than half—only 20% of insured workers have no deductibles this year. So, over the past eight years, the number of workers with deductibles has doubled, and 80% of those workers have high-deductible policies.
Here’s a quick snapshot of Affordable Care Act plans and their deductibles, according to an article written by Kevin Coleman of HealthPocket in December 2013:
The key element here? It’s not so much that the plans have deductibles, but that the economic pressures on the patient are such that they will buy the cheaper plans (bronze and silver) and incur the larger out-of-pocket deductibles, causing the self-pay bubble to grow ever larger.
Self-Pay Action Planning
With marketplace changes related to size and volume of accounts, there a notable shift to self-pay. So what should a leading-edge patient access manager do? These areas of focus are more critical than ever:
- Prepare for the patient’s visit. You have taken the time to get the correct information relating to benefits and coverage. Now you need to:
- Call your insurance companies. OK, you should only make this call if that’s the only way to approach the issue. Validate coverage, validate benefits for the service in question, and be sure to validate patient liabilities—unmet deductibles, and copays and coinsurance.
- Call your patients. Take control of your payment process. Today’s financial clearance solutions enable tracking of potential vs. actual payment. By talking to patients regarding visits, you can validate demographics and insurance coverage specific to the visit in question. This is the key moment to assess payment process flow and identify any outlier issues—non-covered treatment or specific deductibles for unique treatments. This is also the right time to determine whether “new” payers are primary—workers’ compensation and liability insurance, for example. This is a customer-focused step that ensures patient commitment by enabling financial transparency and planning.
- Call your doctors. Now more than ever, it’s essential to coordinate with your physicians to identify in advance as many patients as possible who are coming to your facility for some kind of treatment—whether as a referral to your specialty office, or as an outpatient for diagnostic testing, or as an inpatient referral.
- Identify all current patient liability—copays, estimated coinsurance, and deductible balances; open past due amounts on the provider A/R; and any amounts currently in bad debt.
- Identify any accessible sources for patient income and asset information, and prepare to have a well-prepared conversation with patients about their ability to pay.
- Define policies about managing hardship cases; ask yourself what your mission, vision, and values direct you to do with patient balance collections. Consider limiting the monthly percent of discretionary money that the patient must assign to the payment plan, and consider limiting the overall length of the payment plan. An example: The monthly payment should be no more than 15% of the discretionary income after normal expenses (rent, heat, transportation, food, clothing), and should not exceed 12 months in duration.
- Develop a written letter outlining the patient’s total (even if estimated) liability with the provider, likely payment sources, alternatives to payment (all in accord with your own Financial Assistance Policies), and proposed payment arrangement.
- For the many unexpected guests arriving at the Emergency Department, carefully follow the rules of engagement outlined in EMTALA. That’s an important topic for another day!
- Meet with the patient. The high-performing registration team has been trained in collection techniques and overcoming a long list of denials from patients regarding balances they owe, in the same way the business office works on denials from the insurance company regarding coverage being withheld for many reasons. Likewise, registrars need a comprehensive Financial Assistance Policy (see IRS 501r discussions elsewhere) to help those patients who do not have the ability to pay their balances.
- Have clearly defined payment protocols in place. Cash, check, money order, credit cards, and e-checks should all be available to the patient, and the process should be secure (good internal process controls) and simple for patients and registrars to follow. Ultimately, provide patients every opportunity to pay, whether that means collecting money upfront, check-in kiosks, online payments, or payments by phone, all supported by solutions like automated billing. Also, stay current with what vendors are doing. As solutions experts, they are on track with innovation and solutions to make your self-pay collections more efficient.
A well-executed POS collection process will reduce patient anxiety about financial issues and improve patient satisfaction levels. Good POS policies will dramatically improve cash collections, especially if the provider improves overall preparation by identifying ways to gather and validate the information, as well as preparing the “patient estimation” portion of the process. The need to focus on this previously neglected portion of the revenue cycle has never been greater. And there’s nothing on the horizon to suggest that this patient balance collection problem will do anything except grow in importance.
- “Patient Collections: Business Critical for Today’s Medical Practices,” Woodcock, Elizabeth, Navicure, 2014.