Improve Margin Through Proactive Self-Pay Management

Individual and employer insurance markets are increasingly moving to high-deductible health plans (HDHPs).  A 2017 Kaiser Family Foundation survey found that the percentage of workers in HDHPs grew sevenfold over the past ten years, from four percent in 2006 to 28 percent in 2017. This report shows HDHPs experiencing a significant enrollment growth in the last three years.

Deductibles also continued to grow in 2017. Over the last six years, the percentage of covered workers facing a general annual deductible has grown from 74 percent to 81 percent. The average single deductible amount increased 51 percent, from $991 to $1,505.

Increased Patient Responsibility Leads to Financial Challenges

For providers without optimized revenue cycle processes, the shift to increased patient responsibility can have adverse effects, namely escalating patient receivables. This shift from payor to patient responsibility can negatively impact cash flow, net revenue, bad debt and cost-to-collect.

On average, hospitals receive 15 percent of revenue owed from balances owed sent to collections, according to ACA International’s Top Collection Markets Survey for 2013. As HDHPs become the norm, patients’ remaining balances become increasingly difficult to collect, potentially increasing a facility’s bad debt. In addition, organizations incur a higher cost to collect and manage patient balances than payer receivables. It takes more time and effort of staff to resolve a patient balance than to settle a claim with a payor.

Comprehensive Patient Financial Care Processes Are Necessary From First Contact

Without effective processes for engaging patients around their financial responsibilities, healthcare organizations can experience mounting levels of bad debt. According to the Hospital Financial Management Association’s 2017 MAP Benchmark for High Performance in Revenue Cycle, the bad debt write-off median is .08 percent, with a 2.8 percent cost-to-collect.  Organizations that plan on managing balances due from the beginning of the patient care cycle are more likely to collect that debt.

There are a number of opportunities to consider within the revenue cycle to improve operating margin and strengthen cash flow. By applying best practices to improve the patient financial experience, the provider organization improves its net revenue. As patient responsibility grows, organizations must find better ways to collect more efficiently while improving the patient financial experience.

Facilities seeking to take action should consider the following opportunities:

• Provide robust financial counseling to increase the likelihood of full payment
• Improve accuracy of gathering patient financial information early in the process
• Provide for ease of payments by patients
• Improve self-pay and self-pay after insurance collections processes

Understand Your Organization’s Situation

The shift in the payment source is requiring providers to assess each step of the revenue cycle, from patient access through final adjudication.

As a first step, understand your trends, risks and challenges in these areas:

• Self-pay receivables
• Cash flow
• Bad debt
• Patient financial experience
• Cost-to-collect

Implementing a new approach to patient responsibility is understandably daunting for many organizations.  If you are uncomfortable with your organization’s performance, it may be time to consider a revenue cycle transformation.