As more people choose high-deductible health insurance or drop coverage altogether, hospitals are under pressure to improve their collection efforts with patients, says Jim Bohnsack, vice president of the healthcare group at TransUnion, the credit-reporting agency.
"There has been a shifting of responsibility from the payor to the patient," Mr. Bohnsack says. "Balances owed by patients are increasing significantly."
One key way to streamline collections, he says, is to identify a "tipping point," a level of family income below which many patients are less likely to pay large bills and later reduce collection activities for low-income patients who are below that threshold. The hospital can also use the family income information to identify charity patients at time of admission and skip collection efforts, Mr. Bohnsack adds.
Q: How does a hospital identify the "tipping point"?
Jim Bohnsack: TransUnion used its credit and income information to help North Shore LIJ Health System in New York identify people who are unlikely to pay their bills. We surveyed 43,600 self-pay and insured patient accounts with outstanding balances greater than $50 at discharge and found that when the total amount billed to the patient reached 3.5 percent of the family's gross income, the likelihood of paying the bill dropped dramatically. The formal name for the tipping point is the healthcare financial hardship limit.
Q: What can a hospital or health system do with this insight?
JB: When hospitals have up-to-date information on a patient's ability to pay, unreimbursed costs do not have to move through the entire revenue cycle before being reclassified as unpayable. If you know the bill is probably not going to be paid, you don't have to send out as many collection letters or make as many phone calls.
You can also use information on family income to identify up-front patients who qualify for charity care. This can be an even greater source of savings than applying the healthcare financial hardship limit.
Q: How is patient information used to determine the charity status?
JB: To be a presumptive charity case, the patient has to meet guidelines relative to IRS Form 990, which hospitals must file to declare charity status. If the patient's income level meets the level of the hospital's current charity care policy, the balance is forgiven. Once charity care patients are identified, the collections process does not need to go forward, which can produce substantial savings. When a patient's status can be identified on admission, no collection letters have to be sent out.
Q: Getting back to the tipping point, could other hospitals apply the 3.2 percent figure?
JB: The healthcare financial hardship limit revealed in our study with North Shore could be a helpful benchmark for other hospitals. But it is important for individual hospitals to mine their own patient data and work with partners to define a healthcare financial hardship limit that is truly reflective of their own patient population's ability to pay for healthcare services.
Q: What information does a hospital need to identify its own tipping point?
JB: Many hospitals have systems in place to identify at the point-of-service the patient's likelihood to pay. This calculation is based on the patient’s insurance information, estimated annual gross income, historical payment data and credit score or report. TransUnion can provide much of this information if the hospital does not have it.
Q: How does the hospital use information on the tipping point in its collections process?
JB: If the patient does not qualify for charity, the hospital has to start the collections process. Under Medicare rules, the hospital has to put generally the same amount of effort into pursuing payments for patients, regardless of payor type.
Q: How does the hospital satisfy the Medicare rule?
JB: Hospitals generally can work non-Medicare and Medicare accounts in the same way, by delineating accounts by balance. The Medicare deductible amount for 2011 is $1,132, but hospitals for the most part are not working self-pay balances this small. Therefore, Medicare and non-Medicare accounts with a balance of $1,132 or less would receive the same effort. For that bucket of smaller balance accounts, all accounts should have received the three letters and 120-day collection effort in the active A/R status, which meets the regulatory guideline.
Learn more about TransUnion Healthcare.
"There has been a shifting of responsibility from the payor to the patient," Mr. Bohnsack says. "Balances owed by patients are increasing significantly."
One key way to streamline collections, he says, is to identify a "tipping point," a level of family income below which many patients are less likely to pay large bills and later reduce collection activities for low-income patients who are below that threshold. The hospital can also use the family income information to identify charity patients at time of admission and skip collection efforts, Mr. Bohnsack adds.
Q: How does a hospital identify the "tipping point"?
Jim Bohnsack: TransUnion used its credit and income information to help North Shore LIJ Health System in New York identify people who are unlikely to pay their bills. We surveyed 43,600 self-pay and insured patient accounts with outstanding balances greater than $50 at discharge and found that when the total amount billed to the patient reached 3.5 percent of the family's gross income, the likelihood of paying the bill dropped dramatically. The formal name for the tipping point is the healthcare financial hardship limit.
Q: What can a hospital or health system do with this insight?
JB: When hospitals have up-to-date information on a patient's ability to pay, unreimbursed costs do not have to move through the entire revenue cycle before being reclassified as unpayable. If you know the bill is probably not going to be paid, you don't have to send out as many collection letters or make as many phone calls.
You can also use information on family income to identify up-front patients who qualify for charity care. This can be an even greater source of savings than applying the healthcare financial hardship limit.
Q: How is patient information used to determine the charity status?
JB: To be a presumptive charity case, the patient has to meet guidelines relative to IRS Form 990, which hospitals must file to declare charity status. If the patient's income level meets the level of the hospital's current charity care policy, the balance is forgiven. Once charity care patients are identified, the collections process does not need to go forward, which can produce substantial savings. When a patient's status can be identified on admission, no collection letters have to be sent out.
Q: Getting back to the tipping point, could other hospitals apply the 3.2 percent figure?
JB: The healthcare financial hardship limit revealed in our study with North Shore could be a helpful benchmark for other hospitals. But it is important for individual hospitals to mine their own patient data and work with partners to define a healthcare financial hardship limit that is truly reflective of their own patient population's ability to pay for healthcare services.
Q: What information does a hospital need to identify its own tipping point?
JB: Many hospitals have systems in place to identify at the point-of-service the patient's likelihood to pay. This calculation is based on the patient’s insurance information, estimated annual gross income, historical payment data and credit score or report. TransUnion can provide much of this information if the hospital does not have it.
Q: How does the hospital use information on the tipping point in its collections process?
JB: If the patient does not qualify for charity, the hospital has to start the collections process. Under Medicare rules, the hospital has to put generally the same amount of effort into pursuing payments for patients, regardless of payor type.
Q: How does the hospital satisfy the Medicare rule?
JB: Hospitals generally can work non-Medicare and Medicare accounts in the same way, by delineating accounts by balance. The Medicare deductible amount for 2011 is $1,132, but hospitals for the most part are not working self-pay balances this small. Therefore, Medicare and non-Medicare accounts with a balance of $1,132 or less would receive the same effort. For that bucket of smaller balance accounts, all accounts should have received the three letters and 120-day collection effort in the active A/R status, which meets the regulatory guideline.
Learn more about TransUnion Healthcare.