Prepare for a significant increase in self-pay liabilities from the “high-deductible“ patient population or risk a reduced level of reimbursement
The Affordable Care Act (ACA) presents significant revenue risks to providers that require immediate attention. Several provisions will induce changes to the patient population that could reduce revenue if hospitals are not well-prepared.
With the onset of the individual mandate and the online state health insurance exchanges, it is critical that hospitals prepare for a new, larger population of patients with high-deductible plans and self-pay liabilities. Possibly adding to this population, many individuals with employer-sponsored insurance may forgo their current insurance and select plans on the exchanges in order to take advantage of premium subsidies.
In light of these provisions, hospitals must prepare for a significant increase in self-pay liabilities from this new “high-deductible“ patient population or risk a reduced level of reimbursement. To do this, they should reconsider their charity polices, understand the different levels of patient liability, and re-evaluate four points within their revenue cycle.
The healthcare exchanges are positioned to replace the Disproportionate Share Hospital (DSH) charity system with a system of increased patient liability through high-deductible plans. Under DSH, a hospital’s charity policy is applied to patients without insurance and those not eligible for state and local healthcare programs. The DSH programs were set as a percentage of the federal poverty line, and hospitals received reimbursement for their proportionate share of the funds. This reimbursement partially compensated hospitals for uninsured patients. ACA changes the rules of the game by gradually eliminating DSH. This is forcing hospitals to reconsider their charity policy.
Specifically, hospitals must ensure that their existing charity policy does not provide an incentive for patients to forgo the government-subsidized health insurance (state or federal) available through the exchanges. Not only would this be counterproductive to the goals of the exchanges, but it would also make the charity program unsustainable. Developing new strategies to align with the state’s exchange model is a way to offset this possible unintended consequence. The bottom line is that it is important for a hospital’s charity program to complement the exchanges rather than compete with them.
Closely related, hospitals must understand the issues around the different levels of patient liability related to the level of a patient’s healthcare plan. The assumption that all individuals will take advantage of the options available in the marketplace may not be realistic. In light of this, hospitals must develop and augment patient payment collection strategies for those who do not purchase health insurance and decide to pay the penalty instead.
The influx of patients who don’t qualify for charity care and who have high-deductible insurance plans could expose ineffective processes in a hospital’s revenue cycle. In addition, failure to monitor the population of patients with a self-pay component in their health insurance or failure to develop a collection strategy for this new pool of patients can lead to an increased share of revenue at risk of being written off.
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Hospitals also need to re-evaluate their revenue cycle and develop focused patient payment collection processes for patients with high-deductible insurance plans. A hospital’s revenue cycle begins at the point of scheduling and extends until the healthcare provider is reimbursed for services rendered. Hospitals should re-evaluate their revenue cycle from the four points of patient interactions and pursue initiatives to improve the integration of processes, knowledge and communication.
Pre-arrival: Patient scheduling initiates the revenue cycle, which then triggers the financial counseling process. At this point, a hospital should first determine if a scheduled patient has health insurance and, if not, provide guidance to the patient and promote insurance options available on the exchange. Hospitals must ensure patient access representatives are educated and trained on the exchanges. These representatives must be able to provide assistance during the pre-arrival process as well as at arrival upon verification of insurance.
Also, in an effort to increase collections during the pre-arrival financial clearance phase, patients should be given an estimate of their liability. Now more than ever, it is critical for hospitals to estimate the total cost of services for self-pay patients or estimate the patient liability for a patient with a high-deductible plan. Patients should be notified and requested to bring their copayment and deductible at the time of arrival.
Arrival: The arrival stage, in the case of scheduled patients, presents another opportunity to collect copayments and deductibles. In order to collect at the time of service, hospitals must develop capabilities to understand and estimate the cost of services in order to maximize payment at the point of service. For non-scheduled patients, the point of arrival presents an opportunity to offer financial counseling and provide tools to assist a patient in signing up for insurance on the exchanges. Hospitals might consider investing in technology and staff training to facilitate the financial counseling process in this new environment. This may come in the form of installing private computer terminals for patients to review their insurance options on the exchange and to receive assistance in navigating that process.
Billing and collection: Proactive financial counseling and focused point-of-service collection efforts produce more timely and accurate billing as well as a reduction in follow-up activities and backlog. These benefits are underscored by strong front-end processes to prevent issues from feeding into the later stages of the revenue cycle. To take advantage of these benefits and manage this new high-deductible population, it becomes pivotal to administer payment plans, interact with self-pay vendors effectively, and generate patient-friendly statements.
Focused self-pay collections process: Hospitals must also determine if they have a cohesive strategy around self-pay collections in general and the self-pay after insurance (SPAI) population in particular. Without a collection strategy, the SPAI portion of the accounts receivable will likely increase and hospitals will have to incur the costs of a third-party collection agency.
Collecting on patients without insurance, or with high-deductible insurance, has traditionally been very different than insurance follow up. Typically, SPAI patients are more compliant, but there may be reduced rates from the greater number of enrollees who do not realize their potentially significant self-pay liability. Hospitals must re-evaluate their pre-arrival and arrival collection processes and should consider establishing payment plans in anticipation of the services being provided to such patients.
Healthcare providers who do not already have efficient processes around these areas will likely have additional issues and potential revenue leakage. Nonetheless, they can prepare for the impacts of the ACA by adopting some leading revenue cycle practices. This can help companies increase net revenue capture, enhance cash collections, and reduce costs.
Susan McBride is a principal in KPMG’s Cleveland office with healthcare experience in operations and consulting. Randy Notes is a principal in KPMG’s Healthcare Advisory practice, focusing on revenue cycle operations and improvement.
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What should hospitals do now to prepare?
Ensure that their charity policy is aligned to their state’s exchange model.
Reevaluate their entire self-pay lifecycle and their management of the self-pay population.
Take a critical look at their financial counseling process to ensure that they are maximizing the options available to patients today and can push them toward insurance on the exchange.
Understand the costs of their services to get an accurate cost estimate and get paid at the time of service.
Don’t delay. Healthcare exchanges are open for selection between October 1, 2013 and March 31, 2014, with benefits effective on January 1, 2014.Deductibles reset for most of the existing insured population on January 1, 2014, and this will be compounded as a new high-deductible population emerges from the health insurance exchanges.