1% of net revenue: Tools needed to do it
Bad debt is increasing
To excel at upfront collections, patient access need real-time insurance verification, patient risk scoring, and payment estimation tools, according to revenue cycle experts.
• Hospitals need to determine deductibles or co-insurance amounts.
• Bad debt is expected to increase, due to more patient responsibility.
• Hospitals should be able to collect 1% of net revenue.
Technology makes the difference between hospitals that excel at upfront collections and those that do "just OK," says Patrick Teta, a senior consultant with Revenue Cycle Solutions in Pittsburgh. He says the tools top performers in patient access are using include:
• real-time insurance verification to determine eligibility, coverage limits, coinsurance, deductibles, and co-pay amounts;
• payment estimation tools to determine co-insurance amounts;
• patient risk scoring to determine a patient’s ability to pay;
• point-of-service cashiering, to post payments real-time to patient accounts and provide receipts;
• Internet-based credit card services, which turn each registration personal computer into a credit card terminal. "Top performers take advantage of all the functionality including setting up recurring payments," says Teta. (See related story on one department’s quest to offer patients electronic payments, p. 8.)
If hospitals don’t have a good process or tool to determine what the patient’s deductible or co-insurance might be, Teta warns, they’re limited to collecting only co-payments. "It takes a lot of $25 co-pays to equal some of the large coinsurance and deductible amounts," he says.
Depending on payer mix, a typical hospital with good tools, good processes including a financial clearance policy, and incentivized staff should be able to collect 1% of net revenue, according to Teta. "All three areas are key. However, a lack of technology will make that 1% of net revenue number nearly impossible to meet," says Teta. "This could amount to hundreds of thousands of dollars, even for a smaller community hospital."
More bad debt
Ken Perez, a Menlo Park, CA-based healthcare IT and policy consultant, says that with healthcare reform, patient financial responsibility is increasing sharply, "which will undoubtedly lead to more bad debt."
The Middle Class Tax Relief and Job Creation Act of 2012 reduced Medicare bad debt reimbursement for non-critical access hospitals from 70% of allowable bad debts to 65% for 2013 and beyond, notes Perez.
One revenue cycle expert recently projected that bad debt could swell to $200 billion by 2019.1 "In 2011, U.S. hospital bad debt totaled $24.2 billion. That works out to about $5 million for the average hospital," says Perez.2
Integrated system ideal
Ideally, hospitals should employ a single system that integrates multiple information sources and guides patient access staff with "an intelligent, logical workflow that ensures efficient financial counseling," says Perez.
For most U.S. hospitals, the front end of the revenue cycle involves numerous disparate systems, most of which are not integrated into a logical workflow, says Perez.
To collect successfully, Perez says patient access areas need to do the following effectively: patient demographic verification, charity eligibility screening, eligibility and benefits verification, and patient payment estimation. "Studies show, and it stands to reason, that patients who make some payment upfront are more likely to respond positively to subsequent invoices," says Perez.
- Hanson SM. Best practices for managing consumer payments in the current environment. Presented at the Healthcare Financial Management Association National Institute 2013. Orlando; June 2013.
- American Hospital Association. Uncompensated Hospital Care Cost Fact Sheet. Chicago; 2013.
- April C. Robinson, MBA, MHA, Patient Access Manager, Palmetto Health Richland, Columbia, SC. Phone: (803) 434-5140. Fax: (803) 434-1481. Email: [email protected].
