In an era of high-deductible health plans (HDHPs) and increasing healthcare costs, it is no surprise that health systems are facing rising bad debt that for many is approaching devastating levels. For example, Advocate Health Care, Illinois’ largest hospital network, saw a 22 percent increase in bad debt, amounting to $269.5 million, in 2016, roughly 5 percent of the health system’s overall revenue. Moody’s Investors Service reports that the bad debt is expected to climb, in particular, in states that did not expand Medicaid eligibility under the Affordable Care Act.
Advocate attributes much of its increased bad debt to patients with HDHPs. These plans vary widely, but had out-of-pocket maximums, on average, of $5,762 for individuals and $16,737 for families in 2016, according to a report by the Henry J. Kaiser Foundation. An interview by the National Center for Health Statistics Division of Health Interview Statistics found that the number of Americans under age 65 with private health insurance enrolled in such plans increased from 39.4 percent in 2016 to 42.3 percent in the first three months of 2017. The ranks of these patients have steadily grown so much so that, by at least one estimate, the patient is now the third-largest payer behind Medicare and Medicaid.
Rethinking Patient Payment
In light of these trends and the potential consequences, hospitals and other providers must reconfigure and expand their revenue cycle management workflows to focus beyond commercial and government health insurance to this emerging payer class. What healthcare organizations need to do to combat delayed payment and uncollectible debt is threefold:
Use tools that provide real-time knowledge of the patient’s full financial responsibility early in the process.
Educate patients about their payment responsibility.
Collect payments either before or immediately after services are rendered.
Following are four strategies to accomplish these goals.
Know the patient’s full financial responsibility. All providers have financial IT systems that attempt to confirm the patient’s insurance benefits eligibility, but knowing a patient’s eligibility no longer ensures payment. What these tools lack is accurate, real-time data that reveal to the business office and front-office staff the patient’s remaining deductible before any insurance benefits kick in.
Access to reliable, real-time data allows a patient representative to discuss and educate patients about their financial responsibility before services are delivered. As patients assume more and more financial responsibility, education is essential for a positive patient experience.
Know what to collect from the patient. Commercial health plans and government payers each have their own contractual allowed charges for provider and hospital services. Likewise, the health plan member’s payment will vary depending on those obligations and services. Once organizations have real-time health plan deductible data, they’ll need to determine the health plan’s allowed charge for the expected services. If that fee is less than or equal to the remaining deductible, the organization will have to collect that charge entirely from the patient.
Draw upon organizational philosophy to determine how and when to collect. Armed with the patient’s real-time deductible status and billable amount, providers then need to determine how and when they want to collect from patients. For services where expected charges are clearly defined, such as elective procedures or scheduled diagnostic tests, providers now can collect before services are rendered.
For sick visits in a practice or emergency care in a hospital, prepayment may not be feasible; however, real-time health plan data presented to the patient during the visit can go a long way in ensuring payment. At or near discharge, a patient representative can visit the patient’s room with a tablet or laptop to guide the financial education and payment discussion. Ideally, a family member or other caregiver will be in the patient room as well, especially in cases where the patient is not capable of having the discussion. In an ambulatory environment, this education and payment discussion could occur at a designated check-out area of the facility.
Use interest-free payment plans as transitional measures. Being asked to pay before or at the time of service may be a surprise for some patients who are accustomed to receiving a bill weeks or months later in the mail. Other patients may not understand their financial obligations if they have a new health plan or are simply unfamiliar with how health insurance works. In accordance with their internal philosophies and policies, organizations can ease patients’ transition into this new way of thinking about their responsibility by offering them interest-free, monthly-installment payment plans for the expected outstanding balances.
An interest-free payment plan not only helps patients understand their financial responsibility, but also helps them leave the hospital or practice with greater certainty over their budgets and out-of-pocket costs, which ultimately is likely to make them more satisfied with the experience.
The New Payment Landscape
The changing paradigm from third-party to direct payment requires organizations to educate patients while embracing the tools and processes to collect effectively and efficiently before or immediately after services are rendered. Mailing a bill and hoping for the best is no longer a viable option. Hundreds of millions, or even billions, of dollars a year from patients are at stake.
By William “Todd” Andros: The founder and CEO of tevixMD Corporation.