The December issue of Health Affairs included an intriguing study that sought to explain the recent trend toward more high-intensity billing in emergency departments (EDs). Using ED visit data for “treat-and-release” visits (i.e. ED patients who were not admitted to the hospital), the study found that visits deemed high-intensity, as defined by certain high-complexity or critical care billing codes, rose from around 5 percent of visits in 2006 to 19 percent in 2019.
The authors conclude that while about half of this increase can be explained by changes in patient case mix and available care services that were visible in claims data, the other half is due to the adoption of sophisticated revenue cycle management programs, and industry-wide changes to billing practices that include upcoding.
The Gist: At first blush, an increase in high-intensity ED billing may not be a bad thing, if it means that greater numbers of people with low-acuity needs are going to urgent care centers, and avoiding EDs for needs that can be managed elsewhere. But the study finds thattreat-and-release rates are going up for high-intensity patients.
Though the authors list many potential reasons for this—including the changed role of the ED as a diagnostic referral center used by primary care physicians for quick workups of complex patients, the growing number of multimorbid seniors, and value-based care’s pressure to reduce hospital admission rates in favor of more resource-intensive ED visits—we have a strong suspicion that good old-fashioned upcoding also plays a role, especially as the percentage of emergency medicine practices managed by private equity companies increased from four percent to over eleven percent across the same time period as the study.
On Tuesday, the Centers for Medicare and Medicaid Services (CMS) announced a proposed rule that aims to streamline the prior authorization process by requiring certain payers to establish a method for electronic transmission, shorten response time for physician requests, and provide a reason for denials. This rule replaces one proposed in December 2020 that was never finalized.
In addition to applying to Medicaid and Affordable Care Act exchange plans, the new rule would also apply to Medicare Advantage plans, which the previous rule did not. If finalized, it will take effect in 2026.
The Gist: Managing prior authorization requests is one of providers’ greatest sources of frustration, with over 80 percent of physicians rating it as “very or extremely burdensome” in a recent Medical Group Management Association survey.
Not only would patients would benefit from faster turnarounds, but even major payers agree that the status quo is suboptimal, and payer advocacy organization AHIP has signaled support for transmitting prior authorization requests electronically.
The challenge for regulators will be to strike a balance that satisfies the competing interests of payers and providers—turnaround time is likely to be a sticking point—but the one good thing about a system that no one likes is that there’s plenty of room for improvement.
Revenue cycle challenges “seem to have intensified over the past year,” according to Kaufman Hall’s “2022 State of Healthcare Performance Improvement” report, released Oct. 18.
The consulting firm said that in 2021, 25 percent of survey respondents said they had not seen any pandemic-related effects on their respective revenue cycles. This year, only 7 percent said they saw no effects.
The findings in Kaufman Hall’s report are based on survey responses from 86 hospital and health system leaders across the U.S.
Here are the top five ways leaders said the pandemic affected the revenue cycle in 2022:
1. Increased rate claim denials — 67 percent
2. Change in payer mix: Lower percentage of commercially insured patients — 51 percent
3. Increase in bad debt/uncompensated care — 41 percent
4. Change in payer mix: Higher percentage of Medicaid patients — 35 percent
5. Change in payer mix: Higher percentage of self-pay or uninsured patients — 31 percent
Stillwater Medical Center in Oklahoma has ended all in-network contracts with Medicare Advantage plans amid financial challenges at the 117-bed hospital, the Stillwater News Press reported Oct. 14.
Humana and BCBS of Oklahoma were notified that their members will no longer receive in-network coverage after Jan. 1, 2023.
“BCBSOK is willing to work with Stillwater Medical Center in finding solutions that will allow Payne County residents continued local access to Medicare Advantage providers,” a BCBS spokesperson told the newspaper.
The hospital said it made the decision after facing rising operating costs and a high prior authorization burden for the MA plans.
“This was a very tough financial decision for the Stillwater Medical leadership team. Our cost to operate has increased 26 percent over the past 2 years,” Tamie Young, vice president of revenue cycle at SMC, told the News Press. “Financial challenges are increased by a 22 percent denial of service rate from Medicare Advantage plans. This is in comparison to a less than 1 percent denial rate from traditional Medicare.”
Amid new price transparency laws and growing consumer demand, more hospitals are adding cash pay options for certain health care services instead of just accepting insurance, Nora Tepper writes for Modern Healthcare—and some hospital officials say these offerings are “only going to go up” in the future.
How an ‘anomaly’ is becoming more common
Providers advertising cash pay rates for their services used to be considered an “anomaly,” Tepper writes. Now, the No Surprises Act, the federal price transparency law, and changing consumer expectations may make cash-only payments for health care services more common.
“The market is going there,” said Larry Van Horn, associate professor of management, law, and health policy and executive director of health affairs at Vanderbilt University. “You’ve got direct primary care, you’ve got physicians going and moving into cash pay. You’re gonna have to sit there at some point and say, ‘Wait a minute, they’re taking my business.'”
Although some hospitals and health systems that serve certain populations—such as Pomerene Hospital in Ohio with Amish and Anabaptist patients and the University of Texas MD Anderson Cancer Center with medical tourists—have long had cash-pay systems, it is still a relatively new concept for most providers in the United States.
According to data from Medscape, which surveyed more than 17,000 clinicians, just 17% of clinicians used cash-only, concierge, or direct-pay primary care models in 2020. Primary care providers (PCPs) made up the largest proportion of providers accepting cash pay, with 10% of practices charging patients a flat monthly fee for unlimited services.
“[S]ome providers embracing the cash pay revolution say their bottom line benefits from faster reimbursement, lower administration costs and higher patient retention,” Tepper writes.
In a 2020 report from the Society of Actuaries, almost all PCPs who operated under self-pay models reported “better or much better” personal and professional satisfaction compared to those under a traditional fee-for-service system. In addition, 34% of respondents reported “better or much better” earnings under a direct payment model.
How patients could benefit from cash-pay systems
According to Tepper, hospitals generally offer self-paying patients, who have typically been uninsured individuals or those with high-deductible health plans, lower rates for services compared to commercial insurers since they don’t have to handle administrative work or collections.
In a 2021 study published in JAMA Network Open, researchers analyzed rates for “shoppable” services at 922 hospitals and found that the proportion of hospitals that had lower cash prices than their median commercial negotiated rate ranged from 38.4% for liver tests to 68.5% for C-sections.
During the pandemic, more insured patients began to inquire about what services they could pay cash for, leading some health systems to create new payment models for certain procedures.
For example, Deaconess Health System launched an in-house bundled payment program, which includes cardiology, radiology, and urgent care services, in July 2020. The first year, the health system sold 130 bundled services, which increased to 351 in 2021, and 489 as of August 2022.
For any services not covered by the program, Deaconess offers a 50% discount on cash payments compared to its insurer rate. However, self-paying patients are required to pay the full cost of a procedure upfront.
“The patient has decided to take a bet on themselves,” said Steve Russell, VP and chief revenue cycle officer at Deaconess. “They have a high deductible, they don’t think they’re going to reach that threshold and their thought is, ‘If I don’t use my insurance, what kind of discount can you give me?'”
Separately, CommonSpirit Health‘s Catholic Health Initiatives (CHI) launched its own bundled cash price program in 2018 after noticing that many patients with high-deductible plans would defer care due to affordability concerns. The health system also advertises and sells its services on MDsave, an online marketplace that allows consumers to shop for health care procedures.
“With the No Surprises Act and the price transparency regulations, this has to be something that we offer,” said Jeanette Wojtalewicz, SVP and CFO at CHI Health’s Midwest division. “You’ll see more of this coming.”
The future of cash-pay systems in hospitals
According to Aaron Miri, SVP and chief digital and information officer at Baptist Health South Florida, although few patients are currently paying directly for health care services, the industry is heading towards that direction, which means health systems need to be prepared to meet the demand.
“When you look at the directionality of demand, this is only going to go up,” Miri said. “Patients are going to start seeing their total estimated bill and say, ‘I want to spend my $500 at a health system that was really transparent with me, and made me feel comfortable, versus the health system down the road that I’ve always gone to, but that simply can’t tell me what my actual amount due is.”
To make it easier for patients to directly pay for procedures, some health systems, including Baptist Health, have updated their payment options by adding Apple Pay, Google Pay, or other online payment systems instead of just accepting payment in-person or by phone.
However, even as direct payment models become more common, some insurers are “using their leverage to slow adoption of cash pay,” Tepper writes.
Kimberly Scaccia, VP of revenue management at MercyHealth, said some of the health system’s contracts with insurers prohibit it from offering cash discounts to insured patients.
“Some of the smaller payers, they’re fine with removing [cash pay restrictions],” Scaccia said. “Some of the very, very large payers, they simply will not allow it.”
In addition, Matthew Fiedler, a senior fellow of economic studies at the USC-Brookings Schaeffer Initiative for Health Policy, said clinicians may also be concerned about insurers asking to pay the lower cash rate during contract renewals or jeopardizing a provider’s network position.
“An insurer could say, ‘We’re gonna put this provider out-of-network, but we’re gonna put them in a preferred out-of-network position in our benefit design, where the cost-sharing is not that onerous, because we know they have this really good cash price,'” Fiedler said.
In a blistering article published in the New York Times, reporters Reed Abelson and Margot Sanger-Katz detail widespread fraud allegations involving the nation’s largest MA insurers. Nine of the ten largest plans have been accused by the government of fraud or overbilling, generally for upcoding practices that exaggerate the disease burden among their beneficiaries, without providing them more care. Insurers have disputed most allegations, and regulators have been slow to punish known infractions. As a growing steam of seniors continue the enter the program, aggressive risk adjustment has significantly increased the government’s costs. The Centers for Medicare and Medicaid Services has yet to reduce payments in response to overbilling, despite having the power to do so.
The Gist: While these practices were well known to many in the healthcare industry, MA’s growth—set to overtake traditional Medicare enrollment next year—has added a spotlight worthy of national attention. While many beneficiaries report being satisfied with their MA benefits, the program was also intended to improve the cost efficiency of senior care.
With payers gaming the system to garner record profits, the government has seen higher per-enrollee spending in MA compared to traditional Medicare. There are some signs that the strings are starting to tighten for insurers, as many of the largest are losing Medicare star bonuses in 2023, impacting both plan revenue and ability to market throughout the year. However, reduced quality bonuses change nothing about the underlying MA payment structure, and could even drive insurers to more profit-seeking behavior.
In an explosive two-part series published late last month, New York Times reporters Jessica Silver-Greenberg and Katie Thomas cast a spotlight on the revenue collection tactics used by two of the nation’s largest not-for-profit health systems, Renton, WA-based Providence and Cincinnati-based Bon Secours Mercy Health.
The articles detail how Providence leveraged help from consulting firm McKinsey & Company to collect sums as small as $2 from patients pressured to pay anything they could for their care, even if many were actually eligible for free care under state law. Bon Secours was scrutinized for conduct in its Richmond, VA market, where it was portrayed as leveraging safety-net facility Richmond Community Hospital for its 340B license, while stripping out essential services needed by the surrounding lower-income community.
Both health systems have responded to the Times investigation,Providence by refunding payments collected from hundreds of low-income patients, saying they were charged due to an “unintended error,” and Bon Secours by claiming the allegations in the article were “baseless” and stating that it has invested millions into its Richmond Community Hospital.
The Gist: Providence and Bon Secours Mercy Health are far from the only health systems accused of pursuing patient collections though any means available, which makes these articles especially worrisome to many system executives: the tactics deployed by the two systems are relatively common across the industry.
Given current margin pressures, health systems are already beginning to double down on aggressive revenue cycle management. But as most are also not-for-profit organizations who anchor their missions in providing community benefit, their tactics must also pass muster when judged in the court of public opinion.