Healthcare organizations have made tremendous strides in designing sophisticated and patient friendly collections programs. Driven by a call to increase transparency, improve the patient experience, and minimize IRS scrutiny over community benefits, hospitals now offer everything from easy-to-understand patient statements to front-end help with Medicaid eligibility and charity assistance programs. They use state-of-the-art analytics to examine entire portfolios, and to improve self-pay collections recovery and overall costs. But it's a brand-new day in self-pay collections.
As millions of people gain insurance through the Affordable Care Act (ACA), and more consumers choose high deductible health plans, hospitals are experiencing shifts in patient volumes and in patient financial classes. Newly insured consumers have now been seeking healthcare where prior to gaining exchange coverage, many chose to avoid using those services. As a result, patients are leaving the hospital owing more money than they expected or did just a few years prior. As an example, one large national healthcare system experienced a 20 percent increase in ER visits and a 23 percent increase on the inpatient side between January 2013 and January 2015. Data from the same system also shows a 57 percent increase in ER dollars and a 37 percent increase in inpatient dollars that are now passed onto the patients.
As the ACA brings in an influx of new patients, hospitals need to be aware of key changes happening in self-pay collections and develop new strategic plans for how they will address them.
1. A New Financial Class Has Been Created. Hospitals are seeing a new patient financial group. These are patients who are either newly insured, or their insurance has changed under the ACA. A high percentage of these new consumers receive significant subsidies from the healthcare exchanges. Because this is a new financial class, there has been much uncertainty in their ability to pay. Recent data, however, is shedding new light. The majority of these patients who have gone from having no insurance to being insured are experiencing a balance due on their hospital bill after their insurance pays its portion. These same patients are starting to show they are struggling to pay their hospital bills. Data from the aforementioned healthcare system shows that between January 2014 and March 2015 patients with health exchange insurance had a 50 percent higher average balance due compared to traditional residual co-pay balance after insurance accounts.
2. True Self-Pay Financial Class Dollars Are Dropping. Typically, true self-pay financial class dollars equal 3-5 percent of average collection liquidity. As increasing numbers of uninsured patients gain insurance through the new healthcare law, new data show that true self-pay dollars owed to hospitals is going down. The same healthcare system mentioned earlier experienced a 40 percent decline in true self-pay volumes. This trend is being driven from Medicaid expansion, presumptive charity programs and the shifting population from uninsured to the healthcare exchanges. Those that remain in the true self-pay category are even more likely to default on that remaining balance.
3. Balance After Insurance Financial Class Dollars Are Increasing. The number of dollars attributed to patients with a residual balance after insurance (from deductibles and co-pays) is increasing. Hospitals, however, are experiencing recovery rate declines for this category, likely due in part to consumers who have subsidized insurance but can't afford the residual balance left as their responsibility. For example, between October 2014 and March 2015, the same national healthcare system experienced a 16 percent drop in average liquidation for the traditional co-pay financial classes for consumers with subsidized coverage through the health insurance exchanges THE VALUE OF COLLABORATION parallon.com
Between January 2014 and March 2015, co-pay and deductible only data for all financial classes versus the health insurance exchange financial class showed the following for a national healthcare system with 160 hospitals:
Be proactive. Hospitals can no longer rely on the key indicators they used over the last decade to help them understand how to designate dollars to the different financial class buckets. Relying on old methodologies will result in false conclusions being made on current collection trends. With a new patient financial class emerging, it's time for hospitals to change how they evaluate and stop comparing new collections statistics to historic statistics and rates.
The good news is hospitals are gaining more visibility on who is gaining insurance through the health exchanges and how many of those consumers are partially and fully subsidized. As a result, hospitals have more insight on how healthcare trends are impacting self-pay collections. But they shouldn't stall on implementing new plans. Now, hospitals have the ability to capture the data and use it to make quantitative changes to collection workflows and processes that will help offset overall costs, reduce wasted costs, and increase productivity in the right areas.