Before the national healthcare debate really hit the average citizen, the industry began shifting toward increasing patient financial responsibility with consumer-directed plans. According to America’s Health Insurance Plans, this year we’ve seen a 31 percent increase in the number of HSA-eligible plans.
The economic meltdown has also contributed to increasing patient financial responsibility. More people who carry bare-bones insurance plans can’t really afford care when they need it. Pricewaterhouse Coopers estimates there are at least 25 million Americans in this category of “under-insured.”
High unemployment has led to growing numbers of those without insurance at all and made covering the uninsured a focal point of national healthcare reform. More than half of hospitals reported uninsured volume increases in the ED this year.
It is clear from the spikes in uncompensated care and bad debt that many providers are ill prepared to adjust to these trends. Hospitals struggling to meet operating margins have been forced to cut staff, freeze capital spending, declare bankruptcy and even close shop altogether.
The current problems in healthcare are coming to a head at least in part because the industry has never treated its customers like other retail-oriented sectors of our economy. Providers are not comfortable requiring advance payment, especially not-for-profit and faith-based facilities that believe it conflicts with their mission of patient care.
That type of outlook is outdated at best, and must change.
A McKinsey & Company report said hospitals incur $60 billion in bad debt annually because they typically collect only 10 to 20 percent of a total uninsured patient balance after service. For insured patients they can expect to recover only about half after the patient leaves. In the current economic environment, hospitals that fail to proactively collect up-front patient payments are jeopardizing their long-term solvency.
Hospitals must adopt a new mindset of active price transparency and front-end collections. They must have the tools and processes in place to capture every available dollar as early as possible in the patient flow. Every patient who schedules and registers as insured should have his or her eligibility verified before service. This preserves payer reimbursement and reveals co-pay and deducible amounts to be collected up front.
For more precise up-front estimates, hospitals should generate a detailed pre-service patient payment figure. Patient payment estimation tools perform this quickly and accurately by reconciling insurance benefits with hospital chargemaster data and payer contracts.
On average 10 percent of self-pay patients actually qualify for Medicare or Medicaid. Every uninsured patient should first be screened for charity care, and then assessed for credit scoring and propensity and ability to pay for their treatment.
Changing the culture among front-end hospital staff is often the most difficult and complicated step in the process. Hospitals should invest time and resources in staff training so front-end personnel understand the big picture and are comfortable interacting with patients.
Finally, making payment convenient will increase collections. Any point in the hospital with Internet access should be equipped to process any type of tender, including cash, check and credit cards. Offering discounts and setting up payment plans increases the likelihood patients will pay something in advance and ultimately pay in full.
Increasing patient financial responsibility is no longer a new concept but still has the potential for huge loss – or huge gain. Hospitals that seize the opportunity will immediately increase overall revenue and improve their financial health.
Scott MacKenzie is the CEO of Passport Health Communications in Franklin, Tenn. He can be contacted at scott.mackenzie@passporthealth.com.