Because of the Affordable Care Act, more patients than ever are covered by insurance. However, more patients than ever belong to plans that have high cost sharing, and many of them are unable to pay their bills.
According to a recent report, 28% of insured working-age adults in U.S. were underinsured, and more than half of those people had medical debt problems. The result is a growing number of self-pay accounts—the #1 contributor to bad debt for hospitals and health systems.
Collecting from self-pay patients becomes increasingly difficult when they receive a bill 30 days post-hospital stay or ED visit. Faced with a choice between paying for housing, utilities, and food for their families or paying a hospital bill for an event that occurred in the past, most people will choose the necessities of life.
Additionally, patients are unlikely to pay medical bills that are greater than 5 percent of household income, according to the Advisory Board Co., a consulting firm for hospitals. The median household income in the U.S. is about $53,000. This suggests that when out-of-pocket charges exceed $2,600, hospitals may be challenged with collecting the rest.
Discovering unknown coverage
Given these realities, a growing number of hospitals are using automated coverage detection technology, which finds insurance coverage that patients aren’t aware of or are unable to communicate to providers. When patients are brought to the hospital while unconscious, they’re hardly able to convey their levels of coverage. Some fully conscious patients may forget they have coverage, or provide information on secondary rather than primary insurance, or become confused about which carrier covers them. This isn’t uncommon with elderly patients.
Tracking down patients’ missing or unknown health insurance coverage is time-consuming, costly and can involve multiple functions in the revenue cycle. At the front end, patient access staff try to verify coverage before scheduled appointments. If they can’t, either the billing staff will write off the accounts, the A/R staff will start the collection process or the accounts will be outsourced to a collection firm. After all this, unfortunately, 49% of the total amount that patients are responsible for paying is written off as bad debt, negatively impacting cash flow, profit and patient relationships.
True self-pay patients generally pay about 6% of what they owe, compared to 15% for underinsured patients, whether the latter have high-deductible plans or switch to self-pay after their limited insurance runs out. If hospitals could find more sources of coverage for these groups in a cost-effective way, they could greatly reduce their bad debt.
This can be done in a way that respects the patient while protecting the hospital’s finances. The most feasible method is to pair automated coverage detection with automated eligibility verification, which is already in place at many hospitals. Coverage detection can also be an independent or standalone process. Either way, this technology can be used to check quickly with thousands of payers to determine whether they are the primary or secondary insurer for a given patient.
Revenue that’s just waiting to be recouped
By using the latest technologies, hospitals can increase the number of patients with billable insurance by up to 15 percent, which would recoup millions of dollars for many large hospital systems. By comparison, manual and legacy coverage detection increases the number of patients with insurance coverage by only one to 5 percent.
Much of the improvement in coverage detection can be ascribed to business intelligence engines that can parse huge data sets encompassing billions of health insurance transactions. As these insights are tested against a pre-identified set of payers, algorithms can match the key data attributes that confirm coverage and the information needed to file the claim.
Finding coverage for more people would reduce collections activity—a boon for patients who are struggling to pay their bills. Despite industry jargon that describes these patients as “empowered consumers,” the reality is that they rely on hospitals and other healthcare providers to help them navigate the unfamiliar terrain of health insurance. But to do that properly, hospitals must be fully informed about all of a patient’s sources of payment, including whatever commercial insurance or government programs might cover them.
Hospitals should treat all patients, regardless of their coverage or lack of coverage. But their ability to do so is greatly enhanced when hospitals can identify all sources of payment.
By Crystal Ewing, Manager of Data Integrity at ZirMed
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