For hospitals that want to get paid — while also maintaining high patient satisfaction — the status quo in revenue cycle management just won’t cut it anymore. That’s because the amount of money hospitals and other providers receive from private insurance and the government is rapidly falling, as more people come under high-deductible health plans. The proportion of workers with a deductible of more than $2,000 skyrocketed to 29 percent in 2016 from just 5 percent in 2008, according to the Kaiser Family Foundation — and shifts toward patient responsibility in health care spending are expected to increase through at least 2018, an analysis by Optum360 found.
When the dust settles, patients will most likely be responsible for nearly a third of their health care bills, according to Advisory Board experts, and providers are probably going to be able to recover just 35 percent of that. That means the already staggering amount of uncompensated work hospitals perform — worth some $35.7 billion in 2015, says the American Hospital Association — is going to tick upward. At the same time, the level of reimbursement the government pays for Medicare and Medicaid patients is also falling. Combined government underpayment to health care providers totaled a stunning $57.8 billion in 2015, per the American Hospital Association.
So clearly, doing the same things in revenue cycle management simply isn’t a sustainable option. According to an Advisory Board report, a typical 300-bed hospital that does nothing to address these revenue cycle changes will watch its operating margin drop to a negative 16.9 percent by 2021. Yet health care organizations that modernize their approach to revenue cycle management and partner with patients to help them make the best decisions can push back against these headwinds and surge ahead in the race to capture payment. Here are four steps you can take to keep revenue flowing in 2017 and beyond.
1. Get Smarter About Assessing Coverage and Asking for Payment
Last year, 9 percent of U.S. hospital charges, totaling $262 billion, were denied the first time around, according to a study by Orlando-based Change Healthcare. That translates to an average of nearly $5 million per hospital. Nearly two-thirds of that denied money is recoverable, the study found, but appealing denials costs about $118 per claim — or as much as $8.6 billion in administrative costs. The best way to head off these costs is to get proper documentation and determine benefit eligibility before care.
Obtaining preauthorization for services is critical, but the process today is often messy and manual, and spread across multiple databases. Providers should strive to integrate the preauthorization process with the patient scheduling department, ideally via an electronic medical records system. Automating the process at the very beginning of the patient’s interaction ensures that providers can consistently verify coverage — and streamline the process for patients, improving their experience in the process. This helps cut down on denials, improves reimbursement rates, and prevents patients from receiving those dreaded “surprise” bills.
After a patient’s own financial responsibility is clarified, it’s important to ask for that payment at the time of service. No one doubts that it’s tough to ask for money when a patient is sick, and providers often shy away from doing so. An Athena Health analysis of 5.4 million health care visits across 51,000 providers last year found that doctors and hospitals collected just 12 percent of outstanding balances at the time of service. Two-thirds of the time, they collected nothing. That must change if providers want to improve their margins.
2. Tell Patients the Price
More than half of Americans have a $1,000-plus deductible, according to the Kaiser Family Foundation — an amount even more staggering when one considers that nearly 60 percent have less than $1,000 in savings. As they shoulder an increasing portion of their health care costs, many people voice frustration at the opacity of provider pricing. “This system is so maddeningly complex, there is no real price for anything—the price is what the market will bear and what your insurer — or, increasingly, you — can be backed into paying,” writes Elisabeth Rosenthal, PBS’s “Making Sense” columnist. “Frankly, at a personal level, it smells a bit like extortion."
Yet cultivating a sense of empowerment is possible. Providers can calm that sense of outrage while more effectively collecting what they’re owed by sharing with patients at the time of scheduling — the beginning of the revenue cycle — how much the service is expected to cost and the specific amount they will have to pay. This can empower them to either start saving or talk with their health care provider about ways to lower that bill.
“The research shows when people are told they need an MRI or a lab, if their cost-sharing is high, a lot of people don’t understand that prices vary,” Devon Herrick, senior fellow at the National Center for Policy Analysis, told HealthPayerIntelligence.com. “What they often do is say, ‘I can’t afford that’ or ‘I won’t pay that.’”
Price transparency isn’t only about information sharing — it’s also a tool for diffusing the financial anxiety that can precede a procedure and the anger created by unexpected costs. "People who understand their obligations going in are more likely to pay," Richard Gundling, vice president of the Healthcare Financial Management Association, told Modern Healthcare. “If I felt like I got tricked, I'm not going to pay.”
Those highly charged negative emotions may play a role in how Americans prioritize paying their medical bills — which is to say, shoving them to the bottom of the to-pay pile, below credit card bills, home and car loans, and even internet and cellphone bills. That’s true even when they have the financial resources to make the payment, McKinsey research shows.
In order to help patients feel more empowered, providers should also direct them to one of an ever-increasing number of websites dedicated to health care cost transparency. Though a recent study by the Journal of the American Medical Association showed that many of these cost-measurement tools weren’t being utilized, nearly 70 percent of Americans said they would use a tool that showed how much different physicians charged. The disconnect, then, seems to be in the accessibility of the information.
Some hospitals are bucking the trend — making price transparency tools both accessible and intuitive to use. At Mayo Clinic, for instance, patients can talk to a dedicated price estimation office or take advantage of an online tool that clearly walks them through identifying their coverage and upcoming medical procedure and then delivering an estimated cost. Here at Rally Health,SM we think that sort of tech-infused, patient-centric tool will eventually be the norm rather than the exception.
“Providing a cost estimation tool on its own isn’t going to fundamentally change things for people,” says Karl Ulfers, SVP of product at Rally®. “But providing costs as part of a better experience that allows them to easily deal with the health care system wherever they are, and setting realistic expectations to avoid shock or disappointment, will be the fundamental change we need.”
3. Offer Financial Counseling at the Beginning, Not the End
As more patients navigate higher deductibles and self-pay, more hospitals are offering financial counseling services not just after the treatment, but well beforehand, too. Staff members guide patients through the labyrinthine process of getting their care covered, from signing up uninsured people for Medicaid to setting up a payment plan.
The key to successfully collecting money from patients with high-deductible plans is to get in touch before their treatment, Cynamin Kinard, director of patient financial services at Gwinnett Medical Center in Lawrenceville, Ga., told Modern Healthcare. Her team calls people one to three days before they have a procedure. If that’s not possible, she also sends financial counselors to people’s bedsides before they leave the hospital. “If we didn't do that, our bad debt would be increasing,” she said.
Once a financial counselor has identified a patient’s financial obligation, he or she can use analytics technology to estimate how much a patient is able to pay and structure a payment plan accordingly. If, for example, the analytics tool estimates that a patient can pay only $200 of a $500 responsibility, the hospital can offer to take the $200 as a deposit and then set up a six- or 12-month payment plan for the remaining $300. This can go far in capturing revenue that would otherwise be lost: According to research by McKinsey & Co., in 2009, nearly 40 percent of patients said they didn’t pay a bill because they weren’t able to easily create a payment plan. By moving assistance up front, hospitals can improve patient satisfaction while also capturing more revenue.
4. Talk in Episodes
Making patient bills easier to understand is critical to improving the amount of revenue collected. Large health systems that may own a dozen or more hospitals and bill for thousands of services have begun to issue patients a single bill for one health “episode” rather than a separate bill for each doctor and each service rendered.
Payers also encourage this approach for some hospital stays, such as requiring hospitals to bill for delivery and postnatal pediatric care in a single claim. But smaller hospitals that aren’t working with modern technology might still charge by doctor or service, resulting in two bills. That means twice the likelihood of a clerical error, causing the payer to reject the bill, and it increases the probability that a patient will become confused about the amount owed and not pay.
Private companies like Milwaukee-based Health Payment Systems are beginning to work with providers to streamline billing, too. The company contracts with providers to pay their patients’ bills at a discounted rate, saving hospitals and other providers the headache of coordinating bills from multiple doctors. It also earns a fee from patients’ employers, who no longer have to spend HR resources guiding their employees through maddening bill queries. Then Health Payment Systems works directly with the patients to collect what is owed, providing one statement, one payment, and one place to call. The company takes on the risk that the employee might not pay his or her portion of the medical bill because it assumes that most people are willing to pay something they can easily understand.
It’s clear that the very rules of revenue cycle management are shifting, and hospitals that dig in their heels will see more and more of their bottom line slip away. But those health care providers that partner with and empower patients throughout the cycle can not only keep pace with their current revenue capture, they can dramatically improve.
At Rally, we believe that patient empowerment is a game changer for all. Our mission is to put health in the hands of the individual with friendly, easy-to-use products like Rally Connect,SM which makes it simple for consumers to shop for doctors, hospitals, and treatments. Rally Connect is a robust tool that includes clinical quality, price, and patient feedback information. It integrates with health plans so people can calculate their covered and out-of-pocket costs, and find the best care at the right price for their needs.
By doing this, Rally Connect unifies information that has historically been fragmented, and helps health care providers engage patients by clearly presenting their options for care and bringing greater transparency to the associated costs.
Shawn Mobley is chief revenue officer at Rally Health.