Discovering effective strategies for managing the self-pay cycle

The following is an important excerpt from the recent HFMA Special Advertising Section article titled "Self-Pay Strategies to Improve Revenue and Maintain Customer Satisfaction"

The economic “perfect storm” is coming to healthcare organizations: a rising tide of uninsured and underinsured patients, aging baby boomers that will present greater healthcare demands, a challenging economic climate, shifting eligibility requirements, and cultural obstacles regarding healthcare payments.

Collectively, it’s creating an impact so significant that hospitals cannot afford to ignore it. Just a few years ago, as little as 3 to 5 percent of a hospital’s revenue came from self pay. Today, it’s as much as 20 percent and growing.

HFMA research from November 2009 found that 97 percent of hospitals had seen an increase in self-pay accounts receivable over the previous year. More than 33 percent of them had experienced an increase of 10 percent or more in the number of accounts, and the balances due have risen by more than 10 percent as well. Receivables are growing faster than patient revenue at almost one-third of hospitals with emergency departments and unscheduled outpatient services showing the greatest growth. These findings suggest that what used to be highly collectible, highly reliable revenue is now going through consumers—and the result is lower recoveries and slower rates of payment.

Stuart Hanson, vice president of healthcare solutions for Fifth Third Bank and a member of HFMA’s First Illinois chapter, notes that these healthcare financial obligations are unlike any other type of consumer debt. “These charges are large, and they are often unexpected,” he says. “It is not like someone is incurring debt because they’re running out to buy a new flat-screen TV or take a planned vacation. They’re often getting slammed with a large expense out of the blue as a result of an illness or accident. Changes in health status also may prevent the patient from earning income, thus becoming a double blow. For families living on a thin margin—and that’s a growing number these days—the added cost can throw a family budget out of whack.”

Of course, even when patients have clear means to pay, healthcare bills may not be a high priority. Patients may balk at payment responsibilities associated with high deductibles and coinsurance levels, when they are used to employers largely shouldering this burden. Individuals simply may feel they are entitled to healthcare but not responsible for its costs. Also, a healthcare debt may not seem as pressing as other financial obligations where the collector may apply fines or engage in more aggressive collection practices than healthcare providers.

The payment process itself also can be a challenge. Patients may not understand what they are being charged or why, particularly so long after receiving services, when the bill is no longer top of mind or easily deciphered.

Start with the Culture
“Frankly, this is a screwed-up retail industry,” Hanson says. “It’s an industry where you walk in, get service, and walk away without paying anything or providing any sort of payment guarantee. Hospitals end up trying to collect after the fact, when they’re sending a bill 45 days later. Unfortunately, once the patient leaves the building, ability to collect drops by 40 percent. What’s more, insurers are, by and large, using creaky old systems. Providers have to do lots of work to submit faster and cleaner bills. Ultimately, it’s not enough to make a dent, because we need to change the way people pay.”

This sentiment is shared by Jim Lacy, CFO and general counsel of ZirMed, a healthcare revenue cycle management technology company. “The first change we must make as an industry, and even as a society, is to change the culture of entitlement. It starts with getting patients with payment ability to understand that they are not, in fact, entitled to healthcare services for free—that these services have a cost and must be paid for. “Unfortunately,” he continues, “the industry has decades of payment experience where patients simply showed up and were treated and payment was processed and made by someone else. So we have to completely rewire that mind-set. It becomes fundamental for the provider to act much more like a merchant– offering payment plans, convenient options, and other basics like that. We need to deliver patient-focused billing and enable patients to pay whenever and however they can by using a wider array of technologies and tools.”

Determining Eligibility
The ideal healthcare payment lifecycle starts well before the billing process—and sometimes even before the patient enters the facility. When the patient schedules an appointment or arrives for an unplanned visit, an administrator should first determine the patient’s insurance coverage and eligibility for financial assistance.

“Prior to care delivery, the provider and patient need a thoughtful conversation about anticipated services, payment ability, and financial obligations,” says Steve Levin, CEO of Connance, a vendor of collection technology and services. “They need to explore what it means in terms of cost and ensure patients understand their portion of the financial responsibility. It’s critical to enable patients to understand as early and as completely as possible what portion they will be paying.”

“Eligibility-verification is essential,” Lacy says. “It’s important to require the patient to name the insurance carrier, so you can verify active membership and determine the scope of the coverage. And if you can automate that query to the provider—whether it’s the insurer or a public payer such as Medicaid—that’s even better. If the coverage isn’t there, then you move down a decision tree to determine if the patient is eligible for financial assistance. And, ideally, you also evaluate eligibility for charity care as well.”

According to Ed Caldwell, senior vice president of Emdeon, a vendor of healthcare revenue and payment cycle management solutions, the provider’s first step is determining eligibility for third-party payment. “Just as providers clinically triage a patient, think of this as financial triage,” he says. “You need to separate patients by coverage status and payment responsibility and do so with a high degree of accuracy. We’ve found that roughly 7 to 10 percent of patients identifying themselves as self pay actually already have coverage with some third-party payer. If there’s no insurance, then the provider needs to take the appropriate steps to identify other sources of payment by getting those patients who qualify enrolled in a financial assistance program, such as Medicaid or charity; this will help providers create the right financial workflow based on those qualifications and classifications.”

Lacy notes that determining Medicaid eligibility can sometimes be problematic. “A lot of patients will deny they are eligible for or have received payment for services through Medicaid,” he says. “Rather than pursue assistance available with Medicaid, they will agree to take on full self-pay financial obligation because they mistakenly think they’ll somehow get better care. There’s a perception of inadequacy for Medicaid care that hospitals need to respond to. Consider the situation of one community health provider with a disproportionate share of Medicaid patients. Of the provider’s self-pay population, 85 percent were patients eligible for Medicaid who refused to be covered. It cost the facility millions in potential reimbursements because no one took the opportunity to apply.”

Educating the Patient
Also important is providing patients with advance notice of their financial responsibility. Nobody likes financial surprises—or, more accurately, shocks. That’s why managing the self-pay cycle through clean, clear, and accurate pretreatment estimates can go a long way toward collecting revenue. “Managing those expectations is crucial,” Hanson says. “Communicating those estimates as early as possible is so important to establishing and maintaining the patient’s goodwill.”

Emdeon’s Caldwell believes the industry is on the cusp of achieving a greater level of transparency, accuracy, and speed in pretreatment estimates—so long as the provider has accurate information from the point of eligibility verification. “In a high degree of instances, once providers have accurate eligibility and benefit information from the insurance companies, they can get reliable estimates—usually within 1 to 2 percent of the actual payment,” he says. “If you’re coming in for a knee replacement, and the provider knows your insurer and plan, it’s possible to pin it down tightly.”

There are three common ways to create estimates. The first involves leveraging contract data with the payers. A provider models the contracts of the top 25 to 30 payers and uses these models to build estimates. All too often, however, those contracts exist in quarterly binders of thousands of pages requiring a lot of manual work. Another option is to create a table of all payers and list it against the provider’s chargemaster. So a hospital may say “Given a cost of $100 for procedure A, then payer X will get a discount of 15 percent and payer Y will get a discount of 10 percent.” Finally, a hospital can look at claims-payment history to see what a payer has previously paid for an identical procedure and extrapolate an estimate. Many organizations are aiming to use various combinations of these techniques.

Once providers have an estimate, how much should they collect? It often comes down to organizational preference. “Some of the providers want to err on the high side, so that they don’t have to return a second time to ask for additional payment from the patient,” Caldwell says. “That’s understandable—they’ll pleasantly surprise the patient by simply crediting any overages or issuing a refund. But other providers approach it from the other perspective—trying to avoid the refund process, which can be difficult to administer. Both approaches have merit.”

Some hospitals also institute a disciplined process of getting a signed agreement with the patient. “By presenting the best possible good-faith estimate, the institution is asking for, essentially, ‘informed financial consent,’” Caldwell says. “Transparency is essential and when you achieve it, you get faster and fuller payment while improving patient satisfaction and goodwill.”

Read the full article on Strategies for Managing the Self-Pay Cycle. To find out more about Strategies for Managing the Self-Pay Cycle, call 877.EMDEON.6 (877.363.3666) or visit us online.


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