As deductibles are rising, patients are taking on more financial responsibility for their medical care. Providers need to recognize how to collect outstanding balances as this trend continues.
It's a transformative time in the healthcare industry — and not just because of what's happening in Washington. Many providers are finding themselves up against the wall in the face of rising expenses and declining admissions. In addition, changes in the insurance industry are having a trickle-down effect on caregivers' bottom line.
Deductibles are rising, which is causing more medical costs to slightly shift toward the patient's responsibility. As that change occurs, providers are struggling to get reimbursed as high out-of-pocket spends can be hard to collect from patients. In fact, new data from athenahealth, published in collaboration with athenaInsight, find practices only collect 12% of outstanding balances at the time of service and collect nothing 67% of the time. Providers, especially smaller practices, need to look rethink their collection strategies. Some efforts such as offering payment options to fit a patient's ability to pay or using a digital intake tool may help providers capture money leaving their doors everyday.
It's not an illusion. Deductibles are rising
One of the Affordable Care Act's successes was it opened up access to health coverage to a greater number of Americans. In April, the uninsured rate of Americans was 11.3%, down from 18% in 2013. However, during that same time, insurers have been moving toward higher deductibles, pushing more costs slowly but consistently to the patient.
A Kaiser Family Foundation (KFF) report found the average deductible for employer-sponsored health plans rose 12% to $1,478 for single coverage for most workers in 2016. In addition, KFF researchers found an average 51% of workers were covered by a health plan with a general annual deductible of $1,000 or more for single coverage in 2016, up from 22% in 2009.
As deductibles continue to grow, healthcare costs are expected to outpace growth of the national economy. Annual family premiums for employer-sponsored coverage increased 3% in 2016, compared to the 2.5% increase in workers' wages and 1.1% increase in inflation, KFF found.
These economic and insurance trends find patients more in a bind over out-of-pocket healthcare costs. Unfortunately, insurance products such as high deductible health plans (HDHPs) can be hard to understand. Individuals can sign up for coverage on a health insurance exchange and think they have full coverage but actually have a large deductible. This can lead to sticker shock if they receive a medical bill they weren't expecting.
Such forces are creating financial risk for health systems. Because a patient with a high deductible and a fully-covered patient may look the same operationally when presenting themselves into the care setting, providers may think they'll get reimbursed from a payer based on contracted rates when in fact, they could end up holding the bag if a patient hasn't yet met their deductible.
Why it's important for providers to manage outstanding balances
As patients take on more financial responsibility of medical costs, it will be important for practices to stay abreast to patients' billings and balances to ensure their fiscal health. Data from athenahealth find many providers are leaving money on the table in the form of outstanding balances.
"We found a relatively low collection rate of outstanding balances overall which is a significant issue when talking about the financial health of a practicing physician," Josh Gray, VP of research at athenahealth, told Healthcare Dive.
Gray's team analyzed 5.4 million visits for 3.1 million patients across 51,000 providers in 2016 and found practices only collect 12% of outstanding balances at the time of service. In fact, organizations collect nothing 67% of the time.
When broken down by price point, athenahealth's data show how the larger the balance, providers are less likely to collect revenue. For example, practices collect 40% of outstanding balances $35 or less at the time of service; collection plummets to 6% for balances over $200.
Only 20% of visits with an outstanding obligation have a balance over $200 but this accounts for 73% of all outstanding dollars, Gray's team found.
Athenahealth data from 2015 found while 93.8% of balances $35 dollars and under were paid within a year, only 66.7% of balances over $200 were paid. Once that balance is left on the table, the data show many providers don't ever capture that revenue.
The bottom line: Providers need to work on their collection strategies. "It's a challenge you need to lean into if you want to have a financially viable practice," Gray said.
And it is a challenge. It is difficult to ask for money when a patient is vulnerable and/or suffering. Collecting from patients versus insurers will always be a greater challenge. In addition, as time moves on from the originating point of service, personnel and administrative costs to collect outstanding balances add up over time. This drives down the relative value if and when the invoices are fulfilled. Therefore, it's important for organizations to rethink their collection strategies. Here are four strategies to consider.
1. Think like a retailer and establish expectations with staff
One of the overarching trends in the last decade has been the growing interest over consumerism in the provider industry. This has led to more alternative care settings and designing business strategies with a patient's choice for care delivery in mind. While there is a need to cater to patients, the flipside of incorporating retail-like principles is the need for providers to act accordingly when asking patients to pay a bill.
Louis Longo, managing director at BDO Consulting, told Healthcare Dive as certain aspects of healthcare mirrors retail more, outgoing personalities employed at the front-of-house will be important. "It's one thing to ask insurance companies for money; it's another to ask people for money," Longo said. "Having the right people that know how to effectively and appropriately ask for payment is important."
When hiring front-of-house staff, Gray suggests establishing expectations and make clear that new hires understand collecting outstanding balances at the time of service is critical and hold them accountable.
The first thing for a hospital to do is ask for payment, Longo stated, adding, "It doesn't always happen believe it or not." Gray said staff may need to be provided with tools such as scripting or role-playing to help ease them into how such conversations can be compassionately handled.
2. Get to know the patient at the time of scheduling
There are multiple opportunities for providers to get upstream of collections.
Longo suggests requesting payment at the time of service or even at the time of scheduling. Jerry Bruno, principal at Deloitte Consulting, agrees. "From a leading practice perspective, everything starts at the front end of the revenue cycle which is identification of the type of services patients are going to be coming in for," Bruno told Healthcare Dive.
Lynn Wolff, CEO of Georgia Hand, Shoulder & Elbow (GHSE), told Healthcare Dive when a patient plans for a surgery at her organization, a scheduler first calls the insurer to inquire if the service will be covered, what the deductible is, how much of the deductible a patient has met and what a copay might be.
If aware of a patient's copay or deductible, a scheduler reminds patients to prepare a payment when firming up a surgery date. A scheduler can also inquire if a patient has a HSA or flexible spending account, whose purposes are to fulfill self-pay portions for medical bills.
These tactics point to having an in-depth knowledge into a perspective patient's ability to pay, insurance coverage before they enter the care setting. Bruno believes technology and analytics can present insights for providers as they prepare collection strategies. Integrating billing systems with EHRs, for example, poses the opportunity to build the system to load a patient's outstanding balance to the front-end staffer at the point of scheduling, which will prompt the staffer to remind the patient of the due payment.
3. Offer payment options to fit the patient's ability to pay
Bruno champions cognitive analytics to evaluate a patient's ability to pay a medical debt based on their financial profile. Once a provider schedules a patient and identifies an opportunity to collect on a service or past-due balance, organizations have a variety of financial arrangements or techniques at their disposal.
Health systems can offer a patient a financial obligation estimate and take a deposit at the time of scheduling. The provider can also offer discounts based on a patient's ability to pay or offer a payment plan over a six or 12-month period. These arrangements are not mutually exclusive and analytics can be critical to determine which collection strategy to take.
For example, a patient may owe a system $200 but the analytics tool identifies the patient as only having the means to pay $100 at the time of service. A provider may be able to capture that $100 as a deposit and then offer a payment plan for subsequent payments. Such a strategy can be a win-win for both the patient and provider. If the strategy is successful, the system receives $100 with the promise for more revenue down the line. On the patient's side, they don't have to spend $200 out-of-pocket upfront or go into bad debt. Without such a tool, Bruno stated, revenue could be lost as the patient may not be able to pay the $200 balance immediately, which, judging from athenahealth's data, is unlikely to be captured down the line.
However, that's not the only collections opportunity technology can help with.
4. Make payment convenient
Making payments easy for patients will allow for a greater opportunity to capture revenue. Best practices already include the ability to take credit cards as well as offer online payments through patient portals or PayPal but new avenues of collections are beginning to trend to make payments customer-friendly.
Digital intake tools at the forefront of payment
Wolff shares that some providers are using digital intake tools to help with payments. GHSE employs a digital intake management system from healthcare tech company Phreesia.
Phreesia's tool allows patients to review their bill in a mobile tablet environment. Jamie McCarthy, director of business development at Phreesia, told Healthcare Dive the tool helps to automate certain aspects of the patient intake process. In addition, the tool engages the patient to think about managing their balance without a front-of-staff member staring them down while standing in line.
Copays can be paid via a card or an HSA and payment plans can be generated according to a practices' preset rules in the system. The program also allows patients to put cards on file which — if they signs a consent form — can be used for automatic billing transactions for payments up to $500.
A typical practice will increase their collections at the time of service by 40%, according to McCarthy. He attributes some of the tool's success to making payments convenient for patients while allowing them to collect their thoughts.
Give credit where credit's due
The healthcare industry is slowly connecting disparate provider organizations across regions through mergers, acquisitions or partnerships. This move toward a more networked industry promises many advantages in the delivery of care to ensure that the right patient is getting the right treatment at the right time.
But billing and payments will change with this shift. Another billing collection strategy Bruno has taken note of is that health systems are beginning to apply credits due to a balance on different accounts for the same patient within their system.
For example, if a patient has a credit balance on the physician side of the system but a balance due on the hospital side, the system will notify the patient it will apply the credit to the balance due. This differs from the past where a patient may have received a check from the physician in the mail only to write an outbound, separate check to the same health system for a balance due. This approach frees up time for both parties.
Data provided by athenahealth. The data are derived from 99,000 providers across athenahealth’s network, who use the company’s services for EHR and revenue cycle management. The network captures de-identified data from 100 million patient encounters per year. For other data findings derived from the athenahealth network, go to athenaInsight, a daily web magazine by athenahealth.