Hospitals continue to face financial challenges as the landscape shifts, and the challenge posed to hospitals by patient balances after insurance, or PBAI, is growing. That’s according to a new TransUnion Healthcare analysis that showed PBAI rose from 8 percent of the total bill responsibility during the first quarter of 2012 to 12.2 percent during the same quarter in 2017.
Commercially insured patients experienced a PBAI increase of 67 percent from $467 to $781, the analysis showed. The rising trend fueled an 88 percent increase in total hospital revenue attributed to PBAI over the 5-year period.
As patients take on more risk and shoulder more of their own healthcare costs, uncompensated care is also rising. TransUnion cited the American Hospital Association’s 2017 Hospital Fact Sheet, which said uncompensated care increased by $2.6 billion dollars in 2016, the first increase in three years. Rising PBAI has no doubt amplified bad debt for providers, contributing to that rise.
Jonathan Wiik, principal for healthcare strategy at TransUnion, said he expects the figure to have risen in 2017 and again in 2018.
The analysis also indicated that Medicare Bad Debt, which happens when Medicare patients don’t pay their deductibles and coinsurance, rose from $3.14 billion in 2012 to $3.69 billion in 2016, a 17 percent increase. If a hospital feels it has exhausted all efforts to get money from a Medicare beneficiary who has an outstanding copay coinsurance or deductible, and they have documented their efforts to collect, Medicare will actually pay the hospital back though not dollar-for-dollar. Wiik said Medicare pays about 65 cents on the dollar for that payback so the hospital still loses some money, about a third of the bill to be exact.
“A great example of that is a hip surgery patient that has Medicare, has a $1,000 deductible and never paid it,” Wilk said. “The hospital would have gotten $650 back but lost $350.”
The trend indicates that hospitals continue to experience reimbursement pressure that can be tied directly to the increase in how much of their own medical cost patients are now taking on
“That’s a very scary thing. For the average elective surgery the number used to be 10 percent, now it’s 30. Patients are great volume for hospitals but they are horrible payers compared to insurance companies. They cost twice as much to collect from and they take three times as long to pay. That’s an administrative burden for the hospital-cost to collect – it’s significantly higher to collect from a patient than from a insurer,” Wilk said.
To show just how much the payer landscape has shifted for hospitals, patients are now generally ranked as a top tier payer for hospitals, right after Medicare and Medicaid. Then comes PBAI and then commercial, according to Wiik. And with patients in the top of a hospital’s AR ranking, he’s seeing some clinics do deductible holds in which they delay their claim while a related hospital claim processes. They don’t send it in until the patient meets the deductible through the hospital. Once it is met then the clinic will send in their claim and get paid right away because the payer is paying, not the patient.
A big part of the problem is a huge gap in benefits literacy for patients coupled with the driving force of consumerism.
“They don’t understand the magnitude of the costs they they are going to get hit with. A relatively simple elective surgery will blow a $2,500 dollar deductible out of the water almost every time. Patients don’t realize that until it happens so hospitals should be engaging them early and putting patient-facing estimates in front of them. And it’s really not about collecting money from patients anymore it’s about getting them financing,” Wiik said.
That means proactively setting up payment plans to spread debt out over time, which protects not only the patient experience but also the hospital’s revenue. Plus it’s a more pleasant conversation to have. If patients are a higher ranking payer, hospitals should be putting into place more policies to deal with their needs and requirements, treating them like the force they are becoming.
“Imagine if you were going in for knee surgery and your hospital sent you a text that said here’s your payment plan would you like to start that now. I think a lot of patients would appreciate that. It doesn’t happen. But it should. The technology is there. You can buy groceries online now and go pick them up. It’s all billed electronically now.”
It can be hard to do estimates and set up payment plans early because medical costs cost can vary so much, but patients want that kind of experience. They put it on the hospitals to figure out how to get them a bill that is at least close to what they were expecting, and set them up to pay for it.
“They are going to go somewhere where that experience is frictionless. That’s what hospitals have to be aware of,” Wilk said. “The market is highly competitive when it comes to that type of stuff and the ones who are innovating and engaging patients are going to get those millennials and the folks that live paying their bills online.”
Today’s healthcare financial leaders face escalating costs, quality improvement issues, difficult reimbursement environments, an increasingly complex service portfolio, and risk management associated with performance contracting.
Pressure mounts on CFOs to ensure their organizations remain viable as they deal with these issues, which makes gleaning proven strategies from colleagues imperative.
Four dozen executives will convene at a private roundtable forum during the 2018 HealthLeaders Media CFO Exchange, August 8–10 in Santa Barbara, California, to
address top-of-mind concerns.
In pre-event planning calls, Exchange participants—representing integrated health systems, academic medical centers, community hospitals, and safety net providers from across the U.S.—want to know how others are taking on risk, improving costs, addressing consumerism, and capturing additional reimbursement.
During the two-day event, a series of moderated roundtables will explore areas of special interest expressed by CFOs, including the following:
1. Cost improvement
Since costs are increasing at rates higher than reimbursement, how does a CFO drive cost performance to maintain sufficient operating margins? How are systems successfully leveraging scale to rationalize administrative and support services?
2. Proliferation of mergers and acquisitions
How can an independent organization survive in this environment? Should it consider other affiliations? For those involved in new entities, how are leaders achieving value?
3. Taking on risk
How does an organization prepare to take on and reduce risk, and when does an organization know that it is ready? How can CFOs build reserves to offset unexpected outlays?
4. Enhancing revenue cycle performance
How can financial leaders improve payer terms, reduce denials, ensure payer compliance, and improve clinical documentation? What are effective ways to deploy new workflow technologies in patient accounts?
5. Performance-based contracts
How are organizations engaging medical staff to reduce the cost of care and improve outcomes?
6. Medical group employment
How does a health system minimize provider subsidies for employed physicians and improve practice performance?
7. Medical consumerism
How can healthcare organizations compete against disruptors in the growing environment of consumer choice? What are creative ideas for meeting consumer demand without adding cost?
Additional information will be shared during the two-day gathering. The CFO Exchange is one of six annual HealthLeaders Media events for healthcare thought leadership and networking.
Revenue cycle and patient financial experience
Recently, HealthLeaders Media hosted a Revenue Cycle Exchange, which brought together 50 executives to discuss improving the patient financial experience; maximizing reimbursement; managing claims denials; technology adoption and data analytics; revenue cycle optimization; and creating a leaner, more effective team.
Noting how consumerism is influencing bill payment and giving rise to the patient voice, leaders are seeking ways to make paying easier. Consumer feedback suggested easy-to-understand and consolidated statements.
“We have a single business office with Epic, so regardless of where a patient gets their services, they get one bill from our organization,” says Cassi Birnbaum, director of health information management and revenue integrity at UC San Diego Health.
“We’ve also created a position for a patient experience director, so any complaint goes through that unit and they’ll contact one of my supervisors to ensure the patient gets the answers they need. That’s helped a lot and provides a one-stop, concierge, patient-facing experience to help ensure the patient’s balance is paid,” Birnbaum says.
Providing estimates and leveraging technology are also helpful for fostering patient payments. More health systems are promoting MyChart, an online tool for patients to manage their health information, as well as kiosks in key locations.
“We have a patient portal in which you can see any outstanding balance at a hospital or clinic and decide what you want to pay today,” says Mary Wickersham, vice president of central business office services at Avera in Sioux Falls, South Dakota.
“Patients can also extend their payments since we have a hyperlink that goes to the extended loan program if needed. With kiosks at our clinics, patients pull out their credit card and complete their copay. Nobody asks; they just automatically do it,” she says.
Front- and back-end staff play an integral role in calculating payment estimates, collecting dollars in advance of procedures and tests, and communicating the often-puzzling connection between hospital charges for physician practice and provider-based department patients.
“One of our big challenges now is we’re bringing a lot of that back-end work to the front,” says Terri Etnier, director of system patient access at Indiana University Health in Bloomington, Indiana.
As facilities move toward centralized scheduling systems to manage reimbursement, some facilities are centralizing coding and billing processes.
“We don’t have a full comprehensive preregistration function for our clinics mainly due to volume. We’re piloting a preregistration group for our clinic visits to work accounts ahead of time since we are continuing to work toward automation,” says Katherine Cardwell, assistant vice president at Ochsner Health System in New Orleans.
“We have kiosks in some of our clinics. Epic has an e-precheck function where we can now do forms. You can sign forms on your phone, and make your payment and your copayment ahead of time. And you can actually get a barcode that you can just scan when you get to the clinic,” Cardwell says.