Understanding and Adapting to Changing Healthcare Costs
Amy, a 30-year-old woman in good health, suddenly developed a mysterious illness that required extensive medical testing and forced her to go on short-term disability leave, reducing her income. During the six months that she spent recovering from her illness, she incurred several thousands of dollars in medical debt. Although covered under private health insurance, Amy was unable to deal with the costs incurred under her high-deductible health plan (HDHP), and her bills went into collections. Unfortunately, at no point during her journey was Amy introduced to a financial counselor who could provide guidance or help her understand available options for her specific situation.
Amy’s situation is not unique. During the past several years, enrollment has trended toward HDHPs and increased employee cost sharing. The CDC’s annual National Health Interview Survey found that enrollment in HDHPs for people under 65 with private insurance has increased from 25.3% in 2010 to 47% in 2018. However, consumers, now expected to shoulder more of the cost burden, have not yet adjusted to these changes. A major contributor to this problem is the fact that consumers generally lack the tools and/or knowledge to make informed decisions about their healthcare and do not fully understand the ramifications of their choices as they relate to personal finances, leaving them with surprise medical bills they cannot afford. A recent study from global payment company TSYS found that about 68% of patients in 2016 failed to pay off medical insurance bills, up from 49% in 2014. Further, the survey found that 37% of Americans said they would be unable to pay for an unexpected medical bill of $100 or more without going into debt.
This trend impacts the health of an organization’s revenue cycle operations , particularly concerning levels of bad debt and collection of patient-due balances, as well as the financial well-being of patients. So how do healthcare organizations successfully navigate these realities and continue to provide high-quality care to the communities they serve while establishing a system that increases self-pay collections and reduces bad debt at a reasonable cost?
Many organizations turn to technology or third-party vendors to supplement their internal resources or outsource entirely. These tactics have resulted in varying levels of success. While technology and outsourcing can be turnkey solutions, organizations must also evaluate their overall approach to self-pay collections from the perspective of the patient. Transitioning from post-service debt collectors to patient advocates can help build meaningful and lasting relationships with patients as they navigate the complex healthcare reimbursement landscape.
Becoming a Patient Advocate
Establishing a culture of patient advocacy is a journey that takes thorough planning and organization-wide dedication to a patient-centric approach. It requires not only retraining internal staff but reeducating the patient population. It is also important to note that patient advocacy is not a “one size fits all” approach; it requires a deep understanding of the community to ensure the approach is tailored to be most effective for the people involved. To become a better financial advocate for your patients, there are three things you can do, as outlined below.
1) Create a Proactive Financial Clearance Model
Healthcare organizations should aim to establish a financial clearance model that communicates proactively with patients ahead of their scheduled services. The goal of the proactive financial clearance model is to ensure there is a mutual understanding of financial responsibilities between the patient and the healthcare organization and to assist patients with evaluating options and/or securing assistance in the event of a financial hardship.
At a minimum, organizations should aim to achieve the following during financial clearance:
- Ensure patients understand their eligibility and benefit levels as communicated by their insurance plans.
- Acquire authorization and/or precertification.
- Provide patients with an out-of-pocket estimate based on plan guidelines.
- Provide patients with an option to prepay (for scheduled testing, imaging, procedural services, etc.).
- Communicate expectations for time-of-service payments (copay, past balances, etc.).
- Provide information on available resources in the event of financial hardships.
2) Maximize Previsit Patient Engagements
Additionally, a proactive financial clearance model allows for organizations to collect patient balances at a reduced cost, as it may limit the volume of statements and follow-up activities required after service by taking advantage of multiple patient contacts prior to service (see figure 1). Organizations dedicate tremendous resources to collect patient-due balances, but most tend to focus their efforts on post-adjudication processes, which represent the highest cost to collect for the organization.
3) Establish a Role for Patient Financial Advocates (PFAs)
Self-pay follow-up activities are often fragmented, with tasks assigned to staff who do not have a complete understanding of the resources available to patients in the event of financial hardship. This can create confusion for the patient and result in an unnecessary referral of the outstanding balance(s) to a bad debt collections agency. Creating a PFA role adds another layer of protection against bad debt, as these staff become the organizational subject matter experts on all available resources, including but not limited to:
- Payment plans.
- Medicaid eligibility.
- Organizational charity care.
- Grant eligibility.
- Available waiver programs.
- Medical financing companies.
The goal of the PFA role is to create a one-stop shop for patients experiencing financial hardship and ensure that all available options have been exhausted prior to a bad debt referral.
Heading in the Right Direction
Taking these three proactive steps will not reduce bad debt overnight; however, embedding them into the organizational fabric will, over time, transform the culture from that of debt pursuit to patient advocacy. Improving patient relationships does not address the growing cost and income divides associated with health plans, but it conditions the patient and the organization to take a more proactive role in understanding the cost implications of care.