the self-pay problem

With billions of dollars left uncollected each year, improvements in patient self-pay can make a huge difference to a provider's bottom line.

Over the past five years, many healthcare providers have experienced increases of 10 percent or more to their self-pay accounts receivable (A/R). Providers initially responded to this trend by looking for ways to become more aggressive in their collections for medical services, but their efforts were limited by stricter regulations imposed by federal and state governments aimed at protecting consumers from unlawful and questionable collection tactics.

Providers also have reduced bad debt by shifting much of it to "charity care" to comply with community benefit standards. Meanwhile, the number of bad debt accounts due to patients lacking insurance or facing prohibitively large self-pay amounts after insurance has continued to increase.

Prior to the implementation of the Affordable Care Act (ACA), the downturn in the economy saw many people unemployed and left without basic health insurance coverage. The Gallup-Healthways Well-Being Index, which trends the percentage of adults in the United States who lack health insurance, reported that the uninsured adult rate dropped to 13.9 percent at the end of the fourth quarter 3014, from a high of 18 percent the previous year.

Although the ACA provides previously uninsured patients with the opportunity to obtain some insurance coverage through the health insurance exchanges, the plans available on the exchanges have high deductibles and copayments, which have added to the high levels of self-pay A/R. This increase translates into not only more dollars that remain uncollected and eventually written off to bad debt or charily but also a greater volume of accounts that require staffing to work, adding significant cost to already stretched administrative budgets. The exhibit below compares self-pay A/R with total A/R for 10 actual provider organizations. These data are not meant to be a representative sample of the industiy but simply to underscore how self-pay A/R represents a growing issue that should not be ignored.

The exhibit shows that, among the 10 provider organizations, self-pay receivables constitute roughly 8 to 40 percent of total A/R, while the number of accounts within this self-pay bucket represents, for the most part, an even greater percentage of the total accounts. Providers tend to use the 80/ 30 rule when assigning staff to collect A/R and increase operational cash flow, based on the premise that 80 percent of the dollar amounts tied up in a provider's A/R are in 30 percent of the accounts (for the 10 providers shown, the ratio is 75 /?5).

Generally, although there are more dollars to collect from third-party payers, there also are fewer accounts, and collecting dollars from third-party payers typically is easier than collecting from patients. The example of the 10 providers reinforces the notion that self-pay A/R is a serious revenue cycle issue. A 3011 USA Today article reported that up to $49 billion in costs for hospitalization of uninsured patients goes uncollected.* Data issued by the American Hospital Association, MGMA, and other sources indicate that, altogether, hospital, pharmacy, and medical-practice bad debt amounts to about $130 billion annually-constituting 4 percent of all healthcare spending.*1 This situation makes it incumbent upon providers to have a plan to address the ever-increasing self-pay A/R challenge.

When developing such a self-pay plan, providers should consider their internal capabilities and what types of technology and other services can assist with improving collections. Tasks that can be supported by technology solutions include scheduling, eligibility checking, Medicaid and charity application processing, patient estimation, in-house collections, scoring/propensityto-pay data, early-out receivable collections, data analysis, and other revenue cycle responsibilities. As a preliminaiy step, organizations should thoroughly assess the extent to which they are able to build and implement new processes, deploy staff and train additional personnel, and manage all processes to obtain financially acceptable results. An important part of this step is to conduct an inventory of resources available for these purposes.

Hospitals have five opportunities within a typical revenue cycle to influence a patient's decision to pay and, thereby, improve collections: during scheduling and preregistration, admission and financial counseling, time of service, discharge, and post-billing. As with any new initiative, hospitals embarking on an effort to improve collections should develop a baseline of performance and report on progress regularly.

Scheduling and Preregistration

The scheduling and preregistration phase of the revenue cycle is the first opportunity to ensure payment. Hospitals should schedule and preregister as many patients as possible, including outpatients, and should perform eligibility screening and identify patient deductibles and coinsurance. Many insurance companies indicate patients' percentages of payment responsibility on the reverse side of their insurance cards. The hospital's patient financial services (PFS) system should allow for storage of deductible amounts or estimated coinsurance amounts so that separate and distinct collection efforts can be made prior to service.

Technology also may be useful at this stage. Staffing always is a huge cost, and more staff does not necessarily mean better results and performance. Technology should be used for contacting patients and collecting dollars before service. It is important to understand each step in the scheduling and preregistration process and to automate as many processes as possible to simplify the collection process for these staff members. Patient online portals can allow patients to preregister and include insurance information. Once a patient completes this process, some systems can perform eligibility checking and inform the patient of deductibles or coinsurance amounts that should be paid before or at the time of service. Hospitals also should consider sending electronic alerts to patients to inform them of their self-pay responsibility, in accordance with the most recent ruling under the Telephone Collection Practice Act (TCPA), which states that providers must have written consent from patients authorizing the use of electronic communication.0

Technology tools also may help reduce no-shows and the loss of revenue by making appointment reminder calls to the patient. These calls can inform the patient of both the medical requirements for service and the organization's financial policy and financial assistance program.

But technology won't get the whole job done at this stage. Staff members are another great asset and necessary to the process. Hospitals should provide ongoing education and develop collection scripts for staff to ensure they are proficient with collection practices.

Admissions and Financial Counseling

For all nonemergency services, eligibility should be verified prior to service. This practice creates an opportunity to collect self-pay balances expected after insurance payment.

Access to the latest banking technology can increase collections of both credit card and personal check transactions. Staff in admissions or financial counseling can use direct-transaction deposit technology to collect payments with minimal cashiering support.

At this time, patients may be informed of the provider's financial policy to include financial assistance.

The use of kiosks is becoming more acceptable during the registration phase. This technology allows patients to effectively communicate their medical, demographic, and financial information without having to wait for a staff member to complete this process.

It also creates a framework for getting patients to pay their portion. By using kiosk technology that is capable of verifying eligibility and uploading these data into the A/R system, a hospital can improve its understanding of patient responsibility and its communication of that information to patients. The kiosk should be able to request payment at time of registration and create an exception list of those patients who indicated that they could not make a payment at that time. The kiosk should provide patients with information about financial assistance and alert a financial counselor if a patient has made an inquiry.

Time of Service

Financial counselors should review all inpatient self-pay admissions. Most provider organizations have some form of Medicaid eligibility process in place. The effectiveness of this process should be tracked in terms of applications approved, net dollars collected, and number of times visited by individual patients.

Although many states have expanded their Medicaid eligibility, some programs carry some form of deductibles or copayment amounts. Efforts should be made to identify these amounts, inform the patient, and collect the amounts prior to discharge or release from service. While receiving services and as part of the Medicaid application process, patients should be made aware of the provider's financial assistance policy (FAP). The FAP application should be made available online for the patient to complete and forward to the PFS department for evaluation and determination.

If the provider has an internal television network capable of broadcasting videos, consideration should be made to developing a video that explains the organization's financial policies. This basic technology can be used to assist with collections and with identifying and communicating with patients who require financial assistance.

During a patient's stay, patients and their authorized family members should be able to communicate freely with the PFS department. Typically, this communication will be by internal email that allows the patient to access account information and submit information for obtaining financial assistance.

Payment of deductibles and copayments should be requested during this phase when possible. Again, the provider's agent should be trained appropriately and well-versed in the use of collection scripts. In particular, a process should be in place to collect copayments from patients who are released after service in the emergency department. If a patient is unable to pay at the time of this request, a statement and selfaddressed envelope, with the amount of the copayment and a due date within three days of the service, should be handed to the patient. Scripts used by collections staff should convey respectfully and non-aggressively a sense of urgency regarding payment.

Discharge

Most providers have a courtesy discharge policy for patient convenience; therefore, this phase provides little opportunity to interact in person. Patients can be provided with discharge packets that include an explanation of the provider's financial policies, including financial assistance. Kiosks again may be useful. Placed in high-traffic areas, they can allow patients to pay their bill without having to stop and talk with a provider's representative.

Should a patient need to pay offsite, having an online system-and educating patients on where to find it-is important. Many providers bury their online payment portals deep in their websites, posing a hurdle for patients who are ready and willing to pay.

Post-Billing

Despite discussions in the healthcare finance literature on point-of-service collections, and the fact that some winners of HFMA's MAP Award for High Performance in Revenue Cycle have strong up-front collections, most hospitals tend to concentrate collections efforts in the period after patients have been billed. For some, the stock answer to improve self-pay collections is to add staff, add bolt-on technology, or even increase charity. The question hospital revenue cycle leaders should ask is, Will such actions increase cash performance?

Adding staff may not be the best solution. The exhibit on page 100 demonstrates the number of collectors required based on the number of open self-pay accounts. Assuming an account base per collector of 5,000 to 10,000 accounts, the exhibit lists the salary cost for these collectors (at $40,000 per collector). Nonetheless, this cost does not include office housing, hardware and software, and support. The exhibit at right provides an estimate of the cash improvement from extracting a 1 to 5 percent uptake of cash from the self-pay accounts receivable. (Note, these data are based on self-pay A/R for the same 10 providers whose data were presented in the exhibit on page 97.)

Physician providers are the most vulnerable because the average A/R balance is low, and they cannot justify adding staff to make collection telephone calls on small balance accounts. Automation can be of great benefit to these providers. A large volume of accounts dictates a provider's need to understand what is in its self-pay A/R and what to do to extract the uncollected cash. Here are six key points to consider.

Know the patients who constitute the organization's self-pay A/R. Typically, there are two classifications; pure self-pay (i.e., patients who have no insurance or some type of limited policy) and self-pay after insurance. Within these two categories, there will be patients with and without valid telephone numbers. Reing able to use auto dialers to reach out to self-pay patients for outstanding balances is preferable to simply sending statements. Patients without valid telephone numbers will need to go through a letter series. Patients with a valid telephone number should go through a call campaign process with effective statements.

Develop a collection process that uses patient-friendly billing statements and effective telephone contact. Collection efforts should have an early focus, with a collection policy that requires payment in full within 90 to 120 days of service. A customer service satisfaction survey should be included to measure patient satisfaction and measure financial results.

The focus also should be on identifying and resolving patient concerns quickly and on cultivating a culture in which staff are encouraged to enlist the support of management in addressing patient problems, when necessary, and can expect a speedy response.

Automated telephone campaigns may be useful, provided they focus on the intended audience with a high likelihood of reaching that audience. To this end, the provider will need to answer key questions, such as what the best day of the week and time might be to call a Medicare patient with a deductible or co-insurance amount due. The same questions should be asked of each payer. Auto-dialer systems can provide detailed information to help focus collection efforts and improve their effectiveness.

Stay abreast of current and future TCPA rulings and clarifications. For hospitals, using auto-dialers and calling a patient's cell phone number are hot topics under debate that will likely continue to be battled in the court system. Nonetheless, systems are available to separate telephone numbers based on land lines and cell phone lines. Hospitals should consider using these types of services to further segment self-pay A/R and create calling campaigns, and at the very least, they should use semi-automated dialing to improve calling efficiency. Hospitals should understand their options and update their patient consent forms to include consent for the provider and business associates to use an auto-dialer.

Include more than just propensity to pay when segmenting self-pay A/R. Typically, most organizations focus on large-balance A/R. Although resolving large-balance accounts is imperative (and will reduce a hospital's overall A/R and days of sales outstanding faster than small balance accounts), collecting payment on these accounts is much more difficult and time consuming. Simply stated, it is easier to collect a $100 outpatient deductible than it is to collect a $100,000 inpatient self-pay account. Accounts should be segmented by balance and automation used to work account balances of $5,000 or less, with staff assigned to work the accounts with greater amounts. The large-balance accounts should again be screened for some type of financial assistance (Medicaid or charity) and may require some longer-term payment plan assistance.

Build a strong customer-service staff capable of answering patient questions and collecting self-pay balances. Alternatives for automating routine inquiries should be considered, but patients should have the option of being routed to a customer-service agent. Routine inquiries could be as simple as requesting an account balance, sending a statement or bill, and paying online. To provide strong customer service, interactions should balance resolving patient concerns with collecting self-pay amounts, as appropriate.

Develop community programs aimed at disseminating information about Medicare, Medicaid, HMO insurance, and the financial policies of your organization. Hospital executives should speak at the local AARP meetings, nursing homes, and/or other community events and opportunities. Establishing a quarterly kiosk in a well-trafñcked mall can also be an effective means to share information about provider's services and financial policies. Hospital billing staff should help patients solve billing questions, even for medical bills that are not for hospital service. Patients should view the hospital as a community resource for medical billing.

A Growing Opportunity

Self-pay A/R is a growing issue and an opportunity for provider organizations to increase cash. Obtaining a solid ROI requires a good self-pay collection plan, however, and effective use of technology. To be successful, provider organizations also must thoroughly understand their self-pay collection process and ensure that every step toward automation also reflects the human element of caring and is fully compliant with TCPAand other regulatory requirements. Best results will come from providing patients with strong and caring customer service in accordance with a hospital's mission and seizing every opportunity to educate staff and the community through all points in the revenue cycle.

AT A GLANCE

Development of a self-pay plan is key to improving collections. The five opportunities for providers to do this include:

* Pre-registration/scheduling

* Admissions

* Time of service

* Discharge

* Post-billing

As with any new initiative, hospitals embarking on an effort to improve collections should develop a baseline of performance and report on progress regularly.

Automated telephone campaigns may be useful, provided they focus on the intended audience with a high likelihood of reaching that audience. Auto-dialer systems can provide detailed information to help focus collection efforts and improve their effectiveness.

a. Kennedy, K., "Up to $49 Billion Unpaid by Uninsured (or Hospitalizations," USA Today, May 13,2011.

b. This statistic is (rom a calculation, drawing (rom AHA, MGMA, and other sources, by Dan Munro, a healthcare writer and contributor at Forbes. See Munro's answer to the question 'How much 'bad debt' do physicians write off nationally per year due to patient non-payment?' at quora.com/Dan-Munro.

c. See Federal Communications Commission, "Declaratory Ruling and Order," July 10,2015.

About the author

Richard R. DeSoto, CRCE - i, is principal and CEO of DeSoto Healthcare Solutions, Palmetto Bay, Fla., and a member of HFMA's Florida Chapter ([email protected]).