Tar­get­ing bad debt

Hos­pi­tals get­ting proac­tive on billing

Modern Healthcare - - FINANCE -

As pa­tients are forced to pay a big­ger share of their med­i­cal bills, bad debt will re­main a con­cern for providers—even as more Amer­i­cans gain in­sur­ance cov­er­age un­der health­care re­form. Hos­pi­tals are real­iz­ing they need to be on the front­lines in coun­sel­ing pa­tients at the point of ser­vice, as­sess­ing their fi­nan­cial ca­pac­ity and find­ing creative ways to help them pay.

Hos­pi­tal lead­ers in­creas­ingly rec­og­nize that the old way of billing pa­tients isn’t go­ing to cut it when pa­tients are be­com­ing re­spon­si­ble for much higher per­cent­ages of their bills out-of-pocket. A June re­port from Citi En­ter­prise Pay­ments, part of fi­nan­cial ser­vices gi­ant Cit­i­group, found that pa­tient fi­nan­cial re­spon­si­bil­ity un­der their health plans is now ap­proach­ing the 15% to 20% range, when it was pre­vi­ously in the 6% to 10% range.

With bil­lions of dollars at stake, providers also are in­vest­ing in new tools to sim­plify bills with the aim of speed­ing up and max­i­miz­ing pay­ments at the point of ser­vice.

“We’ve got­ten creative in the past cou­ple of years,” says Michelle Fox, di­rec­tor of rev­enue op­er­a­tions and pa­tient ac­cess at Health First, a four-hos­pi­tal sys­tem in Rock­ledge, Fla. “We were miss­ing a lot of money and leav­ing it on the ta­ble. As (pa­tients’) de­ductibles in­crease, they’re go­ing to owe more of that coin­sur­ance piece.”

Many hos­pi­tals are still us­ing the old sys­tem of billing pa­tients af­ter ser­vices are pro­vided and hop­ing the checks come in. But savvy med­i­cal cen- ters are tak­ing a more proac­tive ap­proach: call­ing pa­tients weeks in ad­vance of ser­vice, us­ing screen­ing tools to as­sess their abil­ity to pay and then set­ting them up with fi­nan­cial coun­selors to work out a pay­ment plan when nec­es­sary.

“There’s a lot of one-on-one in­ter­ac­tion that will be re­quired,” says Sheri Hughes, se­nior man­ager of health­care con­sult­ing at ac­count­ing firm Moss Adams.

But hos­pi­tals seek­ing to im­prove col­lec­tions have to be care­ful, as state reg­u­la­tors have pushed back against overly ag­gres­sive debt-col­lec­tion prac­tices—par­tic­u­larly in cases where treat­ment was de­layed or fam­ily mem­bers were de­nied ac­cess to a pa­tient un­til bills were paid.

The in­creased fi­nan­cial bur­den on pa­tients comes as the U.S. econ­omy is still mak­ing a halt­ing re­cov­ery from the re­ces­sion that econ­o­mists say of­fi­cially ended more than four years ago. An anal­y­sis from Citi projects that bad debt could reach $200 bil­lion by 2019. The bank­ing gi­ant is one of the grow­ing num­ber of ven­dors tak­ing ad­van­tage of op­por­tu­ni­ties to help hos­pi­tals in­crease col­lec­tions by sim­pli­fy­ing the process.

“The econ­omy cer­tainly made a dra­matic im­pact on pa­tients’ abil­ity and will­ing­ness to pay,” Hughes says.

The num­ber of pa­tients en­rolled in high-de­ductible health plans has been in­creas­ing since 2005, but has ac­cel­er­ated over the past two years. At a grow­ing num­ber of com­pa­nies, high-de­ductible plans are the only op­tion. A sur­vey from Aon He­witt found that 44% of the em­ploy­ers it sur­veyed showed they are in­creas­ing de­ductibles and/or co­pay­ments as a way to man­age their health­care costs. At $2,086, the aver­age de­ductible for a con­sumer-di­rected health plan was nearly dou­ble the aver­age an­nual de­ductible of $1,097 for all health plans in 2012, ac­cord­ing to the Kaiser Fam­ily Foun­da­tion.

About 15.5 mil­lion in­di­vid­u­als are now en­rolled in high-de­ductible plans, with an an­nual growth rate of about 15% over the past sev­eral years, ac­cord­ing to Amer­ica’s Health In­sur­ance Plans. The fastest grow­ing seg­ment is the large-group mar­ket (See chart).

In­di­vid­u­als and small busi­ness em­ploy­ees buy­ing cov­er­age through the new state in­sur­ance ex­changes start­ing in Jan­uary are likely to swell the to­tal num­ber of Amer­i­cans in plans with high cost-shar­ing. Health­care ex­ec­u­tives and pol­icy an­a­lysts are con­cerned that the peo­ple least able to af­ford their med­i­cal bills will be most likely to se­lect the cheaper “bronze” plans avail­able both in­side and out­side the ex­changes, which pay only 60% of costs. Those plans carry a steep out-of-pocket max­i­mum of $5,950 for in­di­vid­u­als or $11,900 for fam­i­lies, ac­cord­ing to Kaiser.

And that means hos­pi­tals are likely to face a sit­u­a­tion where more rev­enue is at risk—even as more peo­ple gain cov­er­age. A 2005 re­port by the Com­mon­wealth Fund cau­tioned that 54% of in­di­vid­u­als with a de­ductible greater than $1,000 had trou­ble pay­ing their med­i­cal bills, com­pared with just 24% of in­di­vid­u­als with no de­ductible.

The Amer­i­can Hos­pi­tal As­so­ci­a­tion es­ti­mates that health­care fa­cil­i­ties pro­vided $41.1 bil­lion in un­com­pen­sated care in 2011, rep­re­sent­ing 5.9% of their to­tal ex­penses. And at least some of it may be pre­ventable. Con­sult­ing firm McKin­sey & Co. es­ti­mates that 19% of pa­tients de­lay pay­ments be­cause of limited pay­ment op­tions and an­other 17% de­lay pay­ment be­cause of dis­crep­an­cies be­tween billing state­ments from providers.

But some hos­pi­tal sys­tems have got­ten more in­no­va­tive and proac­tive to ad­dress this prob­lem. In April 2011, Health First in­stalled Re­layHealth’s RevRun­ner, a tool that pro­vides au­to­mated fi­nan­cial screen­ing of pa­tients’ abil­ity to pay. Based on data pa­tients pro­vide at the time of sched­ul­ing, the pa­tients are given a “soft spend­ing score” of red, yel­low, blue or green. That score al­lows Health First to set up pay­ment plans or qual­ify pa­tients for Med­i­caid. For pa­tients who want to com­pare prices from dif­fer­ent lo­cal

providers, Health First has a 24-hour pric­ing hot line and keeps a data­base of its con­tracts with pay­ers and charge­mas­ter data, which al­lows it to pro­vide preser­vice es­ti­mates. “All the ex­pec­ta­tions are on the front end,” Fox says.

The re­sults are pay­ing off. Fox notes that aver­age point-of-ser­vice col­lec­tions in­creased 30%, or $246,000 per month, be­tween fis­cal 2011 and fis-

cal 2012, or nearly $3 mil­lion. In ad­di­tion, bad debt de­creased 41% dur­ing that time pe­riod and aver­age monthly char­ity qual­i­fi­ca­tions in­creased 36%, or $3.9 mil­lion.

Pa­tients at Mount Carmel Health Sys­tem in Colum­bus, Ohio, sim­i­larly can con­sult a price data­base to get in­for­ma­tion about their re­spon­si­bil­ity for pay­ments af­ter sched­ul­ing ad­vance ser­vices. The data­base com­bines in­for­ma­tion from the sys­tem’s payer con­tracts with its aver­age charges. Karen Geisler, vice pres­i­dent of fi­nan­cial ser­vices, says Mount Carmel be­gins the process of check­ing in­sur­ance cov­er­age as soon as pa­tients sched­ule treat­ment. “We start that con­ver­sa­tion when­ever pos­si­ble prior to ser­vice.”

The sys­tem, which has a 729-bed flag­ship hos­pi­tal, also re­designed its billing state­ments to make them eas­ier to un­der­stand and added re­sources for ap­ply­ing for char­ity care. A pa­tient por­tal en­ables on­line bill pay­ment, and within the past 18 months, Mount Carmel added the abil­ity to make pay­ments with­out cre­at­ing an ac­count. In Fe­bru­ary, it also started of­fer­ing low-in­ter­est and Geisler says

loans, that ap­pli­ca­tions have in­creased as staff and pa­tients be­come more com­fort­able with the pro­gram.

“Health­care billing is com­plex and there are a lot of in­tri­ca­cies to the en­coun­ters,” says Ja­son Koma, a Mount Carmel spokesman. “We look at it as how can we best serve our pa­tients. It’s re­ally evolved on our end.”

Citi’s Money2 for Health tool is de­scribed as a health­care “wallet” that ag­gre­gates ex­pla­na­tions of ben­e­fits for pa­tients, and al­lows them to make on­line pay­ments to par­tic­i­pat­ing providers. Its char­ter mem­bers in­clude Par­al­lon Busi­ness So­lu­tions, the rev­enue-cy­cle man­age­ment arm of hos­pi­tal gi­ant HCA, which is pi­lot­ing the tech­nol­ogy in two mar­kets; and health in­surer Aetna.

Bap­tist Me­mo­rial Health Care Corp., Mem­phis, Tenn., has had an ePay por­tal in place for the past three years. But the 14-hos­pi­tal sys­tem re­cently en­hanced the tool, adding fu­ture pay­ment sched­ul­ing, mo­bile alerts and pay­ments, and en­hanced mes­sag­ing ser­vices.

The up­grade cor­re­sponded with new mar­ket­ing ma­te­ri­als, in­clud­ing in­serts in all pa­tient bills that pro­mote the ePay tool, says Bill Grif­fin, the sys­tem’s vice pres­i­dent of cor­po­rate fi­nance. About 15% of pa­tients are tak­ing ad­van­tage of ePay, at the low end of the 15% to 18% goal.

But Grif­fin says the num­bers are in­creas­ing ev­ery month, and Bap­tist be­lieves the tool will help in­crease pay­ments by adding con­ve­nience. The sys­tem first un­der­took a re­view of its elec­tronic and Web-based tools in 2004, when it added on­line regis­tra­tion and then an out-of-pocket pay­ment es­ti­ma­tor, which was search­able by pro­ce­dure.

“All of this re­volves around trans­parency so the pa­tient feels more in con­trol and has a greater un­der­stand­ing of their bill,” Grif­fin says. “We’ve had a very pos­i­tive re­sponse from pa­tients who’ve used our sys­tem.”

Grif­fin could not put a num­ber on how much rev­enue might be at stake for the sys­tem. But he ac­knowl­edges, “It’s cer­tainly af­fect­ing the strate­gic di­rec­tion of the sys­tem. We’ve all got to be able to adapt.”

But hos­pi­tals have to pro­ceed cau­tiously in the wake of stepped-up state scru­tiny of col­lec­tion prac­tices. Last year, the Min­nesota at­tor­ney gen­eral’s of­fice sued ven­dor Ac­cre­tive Health for al­leged vi­o­la­tions of pa­tient pri­vacy and con­sumer pro­tec­tion laws. A set­tle­ment agree­ment bars Ac­cre­tive from op­er­at­ing in the state for at least two years or no more than six.

While health­care ex­ec­u­tives in­ter­viewed de­nied that the case has caused them to re­think their own col­lec­tion prac­tices, Hughes says that there are lessons for hos­pi­tals about in­ter­act­ing more con­sid­er­ately with pa­tients on billing is­sues. Those lessons in­clude not call­ing anx­ious pa­tients about their bills the night be­fore surgery, or not talk­ing with a pa­tient about money when the pa­tient is in pain.

“I think what most peo­ple took away from Ac­cre­tive Health was: Look at how it plays on TV,” she says.

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