A larger share of many hospitals' reimbursement now comes from patients rather than commercial payers. Yet many providers haven't updated their collection practices.
If common goods increased at the same inflationary rates as healthcare costs, one dozen eggs would cost about $55, said Johnathan Wiik, a principal at TransUnion Healthcare during a webinar sponsored by Becker's Hospital Review on July 25. A number of external market conditions have influenced the rise of healthcare costs, including technology, pharmaceuticals and chronic care populations that drive healthcare utilization.
As charge amounts on medical bills continue to rise, hospitals are increasingly challenged to defend their chargemaster and uphold the cost of their services. This has become more difficult as healthcare cost inflation outpaces both economic and wage inflation, according to a study by Deloitte. Patients are more conscious than ever of how much they spend on healthcare services as medical costs consume an increasingly large portion of their paychecks.
Ten years ago, high deductibles were an innovative way to reduce employer healthcare spending and encourage policyholders to shop and compare costs when choosing healthcare services. Now, the recent popularity of high-deductible health plans has caused many patients to experience difficulty paying medical bills, causing a significant consumer medical debt problem downstream, said Mr. Wiik. U.S. News & World found Americans' deductibles have more than doubled in the last 10 years, with more than 81 percent of employed workers having purchased a deductible plan in 2016. At the same time, premiums have also increased. From 1999 to 2013, employees' average annual premiums rose from $1,543 to $4,565, a nearly 300 percent increase, according to a 2016 TransUnion study.
The link between deductibles and bad debt
Medical bills are the highest cause of bankruptcy in America, said Mr. Wiik. Once patients accrue debt, many are driven to forego or delay medical treatment, putting their health in jeopardy. Kaiser Family Foundation and The New York Times found 20 percent of insured patients reported having difficulty paying for their medical care within the past year.
As patients bear an increasing portion of financial responsibility in cost-sharing plans, hospitals' debt portfolios have felt the effect. "Today's high deductibles are tomorrow's bad debt," said Mr. Wiik, suggesting that larger deductibles can reduce a patient's propensity or ability to pay. "Hospitals tell us a quarter of their bad debt comes from patients who are actually insured," said Mr. Wiik.
Costs to collect
Hospitals' efforts to collect on patient self-pay accounts can be exacerbated by the amount hospitals must spend in the process. To secure reimbursement from government and commercial payers, hospitals simply submit a digital claim, meaning the hospital uses few resources to collect. Patient collections processes involve more material costs, stamps, human labor and other expenses. As the account ages in A/R, the cost to collect increases and patient likelihood to pay decreases dramatically, said Mr. Wiik. The additional resources hospitals use to manage, track down and pursue patient accounts can significantly reduce the value of the account. That's why a strong point-of-service collections strategy can reduce costs and improve efficiency farther downstream in the revenue cycle, said Jason Lerch, principal of TransUnion Healthcare.
Patient self-pay accounts also pose a cash-flow issue, said Mr. Wiik. Medicare typically reimburses hospitals within 30 days. On average, patients take twice as long as payers to fulfill payments. When hospitals expenses are not reimbursed in a timely manner, the entire system's flow of resources can be disrupted.
Fortunately, there are fundamental debt management strategies hospitals can employ to improve self-pay collections.
3 best practices for hospitals
Rather than rebuild the revenue cycle from the ground up, hospitals can improve collection practices by expanding and enhancing programs and processes they already have in place. Mr. Wiik proposed the following best industry practices for hospitals working to reinforce their organization's collections practices.
1. Strengthen point-of-service collections. Hospitals can do a number of things to strengthen the effectiveness of their point-of-service collections. Components of a successful POS strategy include executive support and active participation by all levels of staff. Hospitals should also ensure they have a firm point of service policy and procedures in place, backed by patient education initiatives and consistent communication.
2. Capitalize on all contact opportunities. To prevent patients from getting surprised by unexpected medical bills after services are rendered, it is crucial for hospital staff to engage patients in financial conversations at every point of contact, including pre-registration, registration, arrival, pre-discharge and checkout. Many patients today who purchased health insurance for the first time on the Affordable Care Act marketplaces don't fully understand their benefits or health plan design. The responsibility falls on the front-end revenue cycle staff to educate patients.
3. Expand alternative payment options. Hospitals stand to benefit by expanding their patient financing programs for insured patients who struggle to afford healthcare treatment due to expensive deductibles. Alternative funding programs, such as zero-percent loan programs and long-term payment plans, can ease patients' financial anxiety and enable them to receive necessary care. Hospitals should consider establishing funding mechanisms prior to administering care to prevent patients from experiencing bankruptcy during a period of recovery.
Webinar slides can be accessed here.