Discovering Opportunities for Keeping Bad Debt in Check

Keeping Bad Debt in Check The following is an important excerpt from the recent HFMA Educational Report: Strategies for Reducing Bad Debt.

If the state of affairs in health care is bleak now, then the future does not appear to be any brighter. In 2007, an estimated 25 million people between ages 19 and 64 lacked adequate insurance—a 60 percent increase since 2003. At the same time, census figures show 45.7 million people lacked health insurance altogether. Into this mix throw in rising unemployment, lower earnings, and a worsening economy. The result: As more patients are becoming responsible for their healthcare costs, it’s becoming increasingly difficult for them to afford care and, in turn, for hospitals to collect from them when they do seek care.

For many hospitals, this perfect storm of eroding health benefits, increasing patient financial responsibility, and economic woes has led to a rise in bad debt. According to the American Hospital Association, the cost of uncompensated care (including bad debt and charity) for the country’s 4,897 registered community hospitals grew to $34 billion in 2007.

Stemming the Flow
Given this worsening environment and the related mounting bad debt, hospital executives may feel there is little that can be done. Fortunately, this isn’t the truth. By leveraging innovative technologies and rethinking or evolving processes, many healthcare providers are discovering opportunities for keeping bad debt in check.

One key strategy hospitals can employ is to improve efforts to differentiate between patients who are able but unwilling to pay and those who truly are unable to pay. Stronger efforts should then be undertaken for those patients without payment ability not only to assist in determining eligibility for financial assistance or charity care but also to aid in the enrollment process. Individuals with an ability to pay can be best served with efforts that help them understand the obligation and processes that help facilitate payment.

Of course, pursuing such an approach can be challenging. Providers may find themselves reengineering processes, retooling with new technology, and retraining employees. Also, underlying any self-pay strategy should be the realization that a delicate balance must be maintained between a high-tech tool that increases efficiency and a personal touch that recognizes the importance of treating all patients with respect.

Shifts in Revenue Cycle Focus
Not so very long ago, discussion of payment and payment options took place in some cases long after the hospital service was rendered. For example, a patient had surgery and a bill was then sent followed perhaps by a collections letter or two. If payment wasn’t received promptly, only then did discussion about payment options begin.

In today’s environment of patients’ increased financial responsibility, the discussion of payment and payment options after the delivery of nonemergency care is not well-suited. Instead of focusing on payment after healthcare services are rendered by the hospital, the discussion of financial responsibility often must shift to the front of the revenue cycle.

Like many providers, Martin Memorial Health Systems, a 344-bed, two-hospital organization based in Stuart, FL, has changed its payment processes to promote earlier discussion about financial responsibility and up-front collections practices. Rather than the day before the patient is admitted to the hospital for elective procedures, the eligibility process at MMHS begins several days before the patient is admitted, says Carol Plato Nicosia, administrative director of corporate business services for MMHS. If registration staff determines that an uninsured patient scheduling services does have the means to pay, then the hospital requests an up-front payment before the patient is admitted. Uninsured patients pay a steeply discounted rate, which helps patients’ ability to pay in many cases, she adds.

Starting eligibility verification early in the process allows the patient time to come up with the down payment, if needed. Patients appreciate the up-front communication, Plato Nicosia says. “They are not faced with an unexpected responsibility for a large dollar amount the day before the procedure.”

The process change not only has been welcomed by patients, but also has been a welcome relief to the bottom line. Since implementing the change three years ago, MMHS has been able to slow the rate of increase of its bad debt by about 1 percent, says Plato Nicosia.

To find out more about Strategies for Reducing Bad Debt, click here to read this report in its entirety.