A stunningly fast shift from a time when direct patient payments were a miniscule source of income to today, when they make up more than a quarter of accounts receivable, has many community providers struggling to adjust.
Editor's note: This is the third of four articles exploring revenue cycle challenges affecting community and safety net providers. Part 1 provided an overview of the issue. Part 2 explored the implications of ICD-10 readiness. The final installment will cover revenue cycle readiness and when it makes sense to outsource.
With the move to high deductible health plans set to accelerate further in 2016, now is the time to adjust policies and processes to help patients navigate this new payment paradigm and create a context for them to pay as much of their bills as possible.
When it comes to healthcare's self-pay problem, the numbers tell a big part of the story:
- Nearly a third of large employers now offer only high-deductible plans — up from 22% in 2014, according to the National Business Group on Health.
- Employees now cover 43% of the total cost of care in employer-provided PPO insurance coverage, or $10,473 annually, according to the Milliman Medical Index, an estimate of the total annual cost of healthcare for a typical family of four. Out-of-pocket expenses incurred at the point of care averaged $4,065, Milliman says.
- Bronze health plans, the most frequently purchased plan sold without federal subsidies under Obamacare in 2015, averaged a $5,181 deductible for individuals, reports HealthPocket, a firm that publishes health insurance market analyses.
- Nearly 20% of consumers have unpaid healthcare bills, the Consumer Financial Protection Bureau reported last year.
A recent report by InstaMed, a healthcare payment processing firm, shows how little prepared many in healthcare are for this new reality. The Trends in Healthcare Payments Fifth Annual Report found that in 2014, 39% of providers did not know the amount of consumer responsibility during the consumer visit, and 72% said that it took more than one month to collect from a consumer.
Not surprisingly, a majority of providers said that their primary revenue cycle concern was related to consumer collections.
Meanwhile, the Advisory Board reports that health systems and hospitals increased their annual revenue from point-of-service collections more than twice over in the last four fiscal years, in what experts said was largely a reaction to increasing numbers of patients receiving increased financial responsibility for their care.
"This move to collecting payment at or before the point-of-service reflects the industry's experience that as more time passes after care is delivered, a patient's propensity to pay decreases substantially," said Christopher Kerns, managing director of research and insights at the Advisory Board.
At UK HealthCare, the clinical health system and academic medical center at the University of Kentucky based in Lexington, the advent of Affordable Care Act health plans, with co-pays and deductibles in the range of $5,000 to $7,000, have been a substantial issue. Most people who signed up for those plans didn't understand the out-of-pocket cost. Many of them get care before they've understood their policy and all of a sudden they have large payments due, which creates a problem for them and for the health system, which must walk a fine line between working to collect what's rightfully owed and helping patients access care without sliding into economic distress.
UK has a very structured approach on financial support and counseling. It identifies patients with large co-pays and tries to inform them on what that means at the front end. It has a policy that if a patient is below a certain level of ability to pay, the bill gets reduced accordingly. Staff works to structure approaches such as a monthly payment that is fair to everyone. There are, unfortunately, people of all levels of income who simply have no intention to pay, and UK does have a collection agency for those situations.
Surprisingly, UK HealthCare has not seen problems with its patient satisfaction scores as a result of these frustrations. There is anger at payers and employers, as well as disappointment when people begin to realize they have very large co-pays and deductibles. They've sort of come to understand that UK is sort of caught in the middle with them and tries to work with them to get through their payments in a reasonable manner.
UK is reasonably successful for an organization that's large enough to have the resources and sophistication to be able to carry out these policies. But it is time and people expensive. That process of saving money is very inefficient, and most community hospitals don't have those resources. It is why many of these processes are often outsourced to third-party vendors.
When it comes to patient financial issues, point of service best practices are evolving rapidly. There is growing evidence that a point of service focus can reduce the time and cost of collecting patient-owed bills and increase total self-pay collections. Some keys to the process include:
- You need to work through all of the opportunities to financially evaluate all patients, hopefully in a pre-access workup.
- You need to check for Medicaid eligibility, maybe as a secondary plan. If someone has a high out-of-pocket maximum, they may qualify as medically indigent. This could include children's, federal or state assistance.
- Efforts should be made to identify deductibles or co-pay amounts, inform the patient, and collect these amounts prior to discharge or release from service.
- If possible, invest in revenue cycle software with components that quickly assess insurance eligibility and benefits such as remaining deductible and out-of-pocket spend, and payment estimators that calculate the patient's total bill. Also, providers need to quickly establish whether a patient is in network or out of network, as today many insurance carriers might not pay any of the costs for an out of network provider.
Whether or not you are a community provider and have or have not implemented some of these best practices, you are probably still struggling to collect a significant portion of self-pay dollars. Patients of all stripes don't follow through on payment plans or simply refuse to pay all or a portion of their co-pays. Estimates of patient responsibilities are not always precise.
If a balance remains, providers can choose traditional outsourced collection agencies – risking negative publicity for heavy-handed tactics – or adopt one of a plethora of new products that have come to market in recent years to aid in the process of recovering a significant portion of out-of-pocket costs. These patient-friendly applications range from interest-free payment plans to the use of social psychology to motivate payment on small balance receivables by a date certain.
Many new solutions are needed as healthcare grapples with the self-pay challenge, fast becoming one of the biggest financial issues faced by patients and providers today. It is only by working together that they may solve it.
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