The health insurance landscape is changing dramatically. Hospitals are consequently dealing with lower reimbursements and some patients who simply are unable to pay for their care, which leads to bad debt. A recent TransUnion Healthcare survey showed that more than 16 percent of hospital systems think more than 7 percent of their net revenue in 2010 was lost to bad debt. Eliminating these revenue eaters is no easy task, and five healthcare experts offer their opinions on how a hospital CFO can reduce an organization's bad debt.
Irene Barron, COO of nTelagent: In order to immediately reduce bad debt, a hospital CFO must change the processes beginning prior to or at the point of service. Due to healthcare reform, the economy and public awareness, processes that worked 10 to 15 years ago no longer keep accounts receivable under control. Developing a "retail-like" environment (service is rendered and an expectation of payment exists) from the first patient encounter begins the process of controlling and reducing bad debt.
Insurance verification must be completed and easily communicated to the patient by the registrar. An average of 10 percent of all claims filed is denied due to incomplete or inaccurate information. Proper insurance verification eliminates this denial rate, which reduces A/R aging.
Today's patient expects to know what his or her portion-due will be, or at a minimum an estimate. Most facilities have no way of estimating or collecting deductibles, co-pays or co-insurance. Yet, these patient-due amounts have become larger many times than the amount due from the insurance payor.
Collections must become a normal part of pre-registration and registration. Failure to do so results in larger patient-due amounts aging to bad debt, without proper communication ever taking place with the patient. Simply moving accounts to an early-out vendor is no longer the answer to controlling bad debt. Implementation of an upfront collections policy, even in the emergency room after medical screening, is an urgent necessity. Collecting patient-due amounts when services are rendered increases cash on hand and reduces bad debt.
In summary, to reduce bad debt immediately, upfront processes must be evaluated and steps taken to control A/R beginning at the point of service. In the current economy and healthcare environment, failure to change old, outdated policies and processes will continue to increase bad debt.
Ulrich Brechbühl, CEO of Chamberlin Edmonds: While there aren't any easy ways for CFOs to reduce bad debt, addressing certain problem areas within the hospital revenue cycle can result in dramatic improvement. For example, with nearly 50 million Americans uninsured, hospitals will likely see 10 percent or more of their patients presenting without insurance. Often, the uninsured come to hospitals without the resources to pay for badly needed care. Providers care for these individuals regardless of their ability to pay, and, as a result, hospitals are often left carrying a load of bad debt.
Many uninsured patients are not aware that they may, in fact, qualify for some form of government health coverage, such as Medicaid, Supplemental Security Income or Social Security Disability Insurance. The application process for these programs can be difficult and intimidating for an individual to navigate on their own. As a service to patients — as well as to an organization's bottom line — forward-thinking hospitals implement programs to screen the uninsured and help to enroll and secure this coverage. The most successful eligibility and enrollment initiatives combine face-to-face advocacy with technology-enabled processes for an efficient, patient-friendly process.
Often, programs such as Medicaid will cover services provided to newly enrolled patients retroactively. This is a win-win situation for both parties: Patients receive needed coverage, and hospitals receive reimbursement for care. We've seen hospitals experience reductions in self-pay bad debt of up to 40 percent by implementing an optimal eligibility and enrollment program.
Steve Levin, CEO and co-founder of Connance: One approach is to better distinguish patients that would be qualified for presumptive charity as opposed to declared bad debt using a predictive analytic. Many patients who may qualify for charity classification are not always classified as such. A significant portion of people living in poverty will not participate in financial counseling and will be missed despite investments by hospitals in new charity policies, financial counselors and eligibility teams. In traditional processes as much as 30 percent of bad debt may more appropriately be classified as charity. A predictive analytic used on unresolved accounts prior to bad debt assignment is a great approach to finding the missed charity and reducing bad debt. A related opportunity is to use the same analytic to look at existing bad debt accounts and reclassify those that, had they been scored previously, would have qualified. Hospitals can then take a one-time restatement. Better predictive analytics will be calibrated to the hospital policy and market and have comprehensive coverage. Before this approach can be taken, however, hospitals need to make sure their charity policies include the use of an analytic and the audit team is supportive. This approach can also enhance Form 990 submissions.
Another approach to reduce bad debt is to cash forward from bad debt by being more proactive in the business office. Many business office processes are passive in the first 120 days after patient bill drop, sending bills and waiting for people to pay. Many patients are aided by an outbound phone call from the business office. By engaging this segment of patients, business offices can improve cash recovery and reduce bad debt. A predictive analytic is part of the process to identify those accounts meriting a call and those that don't. Some solutions can offer detailed segmentations, including timing and message recommendations.
Jim O'Keefe, partner at Tatum: The easiest way to reduce bad debts is to identify likely bad debts when they first appear and begin the interception activity immediately. With the preregistration systems available today, it is possible to be confident about the coverage of well over 90 percent of the elective inpatients that appear. Implement a well-organized program of dealing with deductibles and co-pays as well as self-pay amounts (counseling, discounts, charitable care applications). A major key is to collect the cash up front, and in the case of elective admissions, reschedule them if patients do not arrive with the required deposit. It's tough but necessary.
For non-scheduled inpatients and emergency department patients, there are three keys: Require upfront payment of deductibles at registration (most have a credit card and an insurance card with them); patients judged non-emergent that cannot pay should be referred for a regular doctor's appointment to the nearest federally qualified health clinic or rural health clinic (arrange for a direct phone connection to the nearest ones); if the patient is admitted, complete both a charity care and a Medicaid application within 24 hours, and for routine outpatient visits, act like a physician's office in terms of insisting on upfront collections.
Ben Tobin, management consultant at Beacon Partners: The major reason for bad debt is directly related to the failure of the insurance benefit verification process within an organization. Examination of accounts receivable data across the country points out the largest denial for healthcare organizations has to do with incorrect patient insurance information. The old adage of "garbage in, garbage out" certainly applies to the ability to collect money owed for services rendered.
Another direct correlation to bad debt is the lack of an effective A/R follow-up process. Organizations have invested an enormous amount of capital implementing the state-of-art A/R systems without a thorough, ongoing assessment of operational functions. Without an A/R process that is timely and decisive, aged accounts will die a slow, often overlooked, death only to be resurrected as bad debt much later on in the cycle.
There are many tools available today, automated and effective manual processes, that can drastically reduce the level of denials associated with inaccurate insurance information being submitted on claims. Resources expended to improve the insurance benefit verification process will likely reduce the efforts needed to follow-up on accounts.
With the proliferation of large deductible health insurance plans, there has been increased pressure on the level of self-pay receivables languishing on an organization's financial reports. Again, without an effective follow-up process and establishment of financial policies that a patient can understand upfront, the receivable that should be recognized as an asset will be resolved as a bad debt expense that is written down or off.
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Irene Barron, COO of nTelagent: In order to immediately reduce bad debt, a hospital CFO must change the processes beginning prior to or at the point of service. Due to healthcare reform, the economy and public awareness, processes that worked 10 to 15 years ago no longer keep accounts receivable under control. Developing a "retail-like" environment (service is rendered and an expectation of payment exists) from the first patient encounter begins the process of controlling and reducing bad debt.
Insurance verification must be completed and easily communicated to the patient by the registrar. An average of 10 percent of all claims filed is denied due to incomplete or inaccurate information. Proper insurance verification eliminates this denial rate, which reduces A/R aging.
Today's patient expects to know what his or her portion-due will be, or at a minimum an estimate. Most facilities have no way of estimating or collecting deductibles, co-pays or co-insurance. Yet, these patient-due amounts have become larger many times than the amount due from the insurance payor.
Collections must become a normal part of pre-registration and registration. Failure to do so results in larger patient-due amounts aging to bad debt, without proper communication ever taking place with the patient. Simply moving accounts to an early-out vendor is no longer the answer to controlling bad debt. Implementation of an upfront collections policy, even in the emergency room after medical screening, is an urgent necessity. Collecting patient-due amounts when services are rendered increases cash on hand and reduces bad debt.
In summary, to reduce bad debt immediately, upfront processes must be evaluated and steps taken to control A/R beginning at the point of service. In the current economy and healthcare environment, failure to change old, outdated policies and processes will continue to increase bad debt.
Ulrich Brechbühl, CEO of Chamberlin Edmonds: While there aren't any easy ways for CFOs to reduce bad debt, addressing certain problem areas within the hospital revenue cycle can result in dramatic improvement. For example, with nearly 50 million Americans uninsured, hospitals will likely see 10 percent or more of their patients presenting without insurance. Often, the uninsured come to hospitals without the resources to pay for badly needed care. Providers care for these individuals regardless of their ability to pay, and, as a result, hospitals are often left carrying a load of bad debt.
Many uninsured patients are not aware that they may, in fact, qualify for some form of government health coverage, such as Medicaid, Supplemental Security Income or Social Security Disability Insurance. The application process for these programs can be difficult and intimidating for an individual to navigate on their own. As a service to patients — as well as to an organization's bottom line — forward-thinking hospitals implement programs to screen the uninsured and help to enroll and secure this coverage. The most successful eligibility and enrollment initiatives combine face-to-face advocacy with technology-enabled processes for an efficient, patient-friendly process.
Often, programs such as Medicaid will cover services provided to newly enrolled patients retroactively. This is a win-win situation for both parties: Patients receive needed coverage, and hospitals receive reimbursement for care. We've seen hospitals experience reductions in self-pay bad debt of up to 40 percent by implementing an optimal eligibility and enrollment program.
Steve Levin, CEO and co-founder of Connance: One approach is to better distinguish patients that would be qualified for presumptive charity as opposed to declared bad debt using a predictive analytic. Many patients who may qualify for charity classification are not always classified as such. A significant portion of people living in poverty will not participate in financial counseling and will be missed despite investments by hospitals in new charity policies, financial counselors and eligibility teams. In traditional processes as much as 30 percent of bad debt may more appropriately be classified as charity. A predictive analytic used on unresolved accounts prior to bad debt assignment is a great approach to finding the missed charity and reducing bad debt. A related opportunity is to use the same analytic to look at existing bad debt accounts and reclassify those that, had they been scored previously, would have qualified. Hospitals can then take a one-time restatement. Better predictive analytics will be calibrated to the hospital policy and market and have comprehensive coverage. Before this approach can be taken, however, hospitals need to make sure their charity policies include the use of an analytic and the audit team is supportive. This approach can also enhance Form 990 submissions.
Another approach to reduce bad debt is to cash forward from bad debt by being more proactive in the business office. Many business office processes are passive in the first 120 days after patient bill drop, sending bills and waiting for people to pay. Many patients are aided by an outbound phone call from the business office. By engaging this segment of patients, business offices can improve cash recovery and reduce bad debt. A predictive analytic is part of the process to identify those accounts meriting a call and those that don't. Some solutions can offer detailed segmentations, including timing and message recommendations.
Jim O'Keefe, partner at Tatum: The easiest way to reduce bad debts is to identify likely bad debts when they first appear and begin the interception activity immediately. With the preregistration systems available today, it is possible to be confident about the coverage of well over 90 percent of the elective inpatients that appear. Implement a well-organized program of dealing with deductibles and co-pays as well as self-pay amounts (counseling, discounts, charitable care applications). A major key is to collect the cash up front, and in the case of elective admissions, reschedule them if patients do not arrive with the required deposit. It's tough but necessary.
For non-scheduled inpatients and emergency department patients, there are three keys: Require upfront payment of deductibles at registration (most have a credit card and an insurance card with them); patients judged non-emergent that cannot pay should be referred for a regular doctor's appointment to the nearest federally qualified health clinic or rural health clinic (arrange for a direct phone connection to the nearest ones); if the patient is admitted, complete both a charity care and a Medicaid application within 24 hours, and for routine outpatient visits, act like a physician's office in terms of insisting on upfront collections.
Ben Tobin, management consultant at Beacon Partners: The major reason for bad debt is directly related to the failure of the insurance benefit verification process within an organization. Examination of accounts receivable data across the country points out the largest denial for healthcare organizations has to do with incorrect patient insurance information. The old adage of "garbage in, garbage out" certainly applies to the ability to collect money owed for services rendered.
Another direct correlation to bad debt is the lack of an effective A/R follow-up process. Organizations have invested an enormous amount of capital implementing the state-of-art A/R systems without a thorough, ongoing assessment of operational functions. Without an A/R process that is timely and decisive, aged accounts will die a slow, often overlooked, death only to be resurrected as bad debt much later on in the cycle.
There are many tools available today, automated and effective manual processes, that can drastically reduce the level of denials associated with inaccurate insurance information being submitted on claims. Resources expended to improve the insurance benefit verification process will likely reduce the efforts needed to follow-up on accounts.
With the proliferation of large deductible health insurance plans, there has been increased pressure on the level of self-pay receivables languishing on an organization's financial reports. Again, without an effective follow-up process and establishment of financial policies that a patient can understand upfront, the receivable that should be recognized as an asset will be resolved as a bad debt expense that is written down or off.
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