1 Telling Your Story: How to Use Technology to Maximize Community Benefit and Reduce Compliance Exposure SC HFMA September 9,
2 Neil Smithson (954) Today s Speaker Neil Smithson, Managing Member and Founder, PARO Decision Support, LLC. PARO provides charity screening and revenue cycle scoring solutions to hundreds of hospitals nationwide. PARO has help millions of consumers receive free or discounted care since its inception in Special thanks for input on this presentation from Mark Rukavina at Community Health Advisors, LLC. Mark is a leading authority on consumer advocacy and healthcare financial assistance policy and procedure. Mark has most recently participated as a member of HFMA s Medical Debt Task Force. His contact information if provided on the last page of this presentation. 2
3 Disclosure The following information is not intended as legal advice and may not be used as legal advice. Legal advice must be tailored to the specific facts and circumstances of each case or inquiry. Every effort has been made to assure that the information contained in this presentation is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area, nor should it be used to replace the advice of your own legal counsel.
4 Agenda Section 501 r Update Financial Assistance & Billing/Collection Policy Requirements CFPB potential involvement Industry Response Patient Friendly Billing and more Opportunities for Improving Processes, Reducing Bad Debt and Bad PR Recommendations for Implementation Q&A 4
5 IRS Section 501 r Affordable Care Act Federal Tax Exemption Requirements - Section 9007 Establishes Section 501 r IRS issued Notice of Proposed Rulemaking REG in June 2012 on Financial Assistance, Limitation on Charges and Billing and Collection Practices IRS Publishes REG in April Notice of Proposed Rulemaking Related to Community Health Needs Assessments and Implementation Strategies. 5
6 Internal Revenue Code Section 501 r Establishes the following requirements: Financial assistance policy Limitation on charges Billing and collection practices Community health needs assessment 6
7 Written financial assistance policy Financial Assistance Requirements Criteria for eligibility income, assets, insurance status Type of assistance provide (i.e. free care, discounted care, medical indigent or hardship) Clearly inform patients of how and where to apply Explain documentation requirements Assistance may not be denied based on omission of documentation not specified in the policy Applicants must be notified in writing of eligibility determination Policy must be approved by the Board or Trustees or another governing body of the tax-exempt hospital Considered implemented when the policy is consistently carried out by the facility 7
8 Limitation on Charges Fees charged to patients eligible for financial assistance must to limited to amounts generally billed those with insurance. Regulations cite specific examples for calculating AGB AGB is applied to all ER care and medically necessary care 8
9 Billing and Collection Policy May stand as a separate policy or be incorporated into the overall financial assistance policy Describe permissible collection actions that may be taken in event of nonpayment and time frame for taking action Applies to both internal hospital collection efforts and efforts undertaken by authorized third parties If a patient is determined to be FAP qualified later in the revenue cycle, the extraordinary collection actions must be reversed 9
10 Extraordinary Collection Actions Extraordinary Collection Actions (ECA)are defined as actions taken by the hospital, or a third party acting on behalf of the hospital, that require legal or judicial process. Hospitals must refrain from taking ECAs throughout the notification period and prior to making reasonable efforts to determine eligibility for FAP. They include, but are not limited to the following: Reporting adverse information to credit bureaus Sale of debt to another party Initiating civil litigation Liens on property Foreclosure on real estate Attaching or seizing bank account Causing and Individuals arrest Body attachments Garnishment of wages 10
11 Reasonable Efforts Notification Period 120 day notification period which begins after issuing the first bill to the patient Hospitals are prohibited from engaging in extraordinary collection actions while making reasonable efforts to determine whether an individual is eligible for assistance under their financial assistance policy. 11
12 Application Period 120 application period, a patient may submit an application. With an incomplete application, the hospital must refrain from collection actions and provide information on what is needed to complete application. 12
13 Efforts to Inform Patients Distribute plain language summary of policy and offer application prior to discharge Include summary in at least three billing statements and other written communication during notification period Inform patient of policy in all oral communication regarding amount of bill due during notification period 13
14 Notice on Collection Action Provide with at least on written notice, a minimum of 30 days prior to deadline specified within notice, informing patient about collection actions that may be taken if patient does not submit application for assistance or pay the outstanding balance 14
15 Anti-Abuse Provision Contains an anti-abuse rule stating that a hospital will not have made reasonable efforts to determine eligibility if the hospital bases a decision on inadequate information. For example the data could be unreliable, incorrect, or could be obtained from the individual under duress or through the use of coercive practices. Coercive practices would include delaying or denying emergency care until individual provides requested information.
16 Waiver NOT a Reasonable Effort A waiver signed by patients stating that they do not wish to apply for FAP does not constitute a determination of FAP-eligibility and will not satisfy the reasonable efforts to determine whether a patient is FAP-eligible prior to engaging in ECAs.
17 Reversing Collection Actions If a patient is determined to be eligible later in the revenue cycle, the hospital must: Refund excess payment made in excess of amounts generally billed Reverse extraordinary collection actions
18 Why is the CFPB Interested in Medical Debt?
19 AHA Legal Advisory The CFPB and Medical Debt Collections: What Hospitals Need to Know The text of the Dodd-Frank Act itself indicates that the defining characteristic of an arrangement subject to CFPB oversight will be the imposition of a finance charge, such as an interest rate. So long as hospitals and other providers are not charging patients additional money to enter into a payment plan, they will have a strong argument that the Act does not apply.
20 Medical Collections and Credit Reports More than half (52%) of accounts in collection on credit reports are medical collections The vast majority (86%) of medical collections had balances due, when reported, of $500 or less An Overview of Consumer Data and Credit Reporting, Avery et al Federal Reserve Bulletin, Summer 2003
21 CFPB Study: Americans are Unfairly Penalized by Medical Debt May 2014 But in many ways, medical bills are unusual. When you take out a loan, typically you know how much you will owe and the interest rate you will be charged up front. But with medical costs, you have less visibility. Costs are often unknown until after treatment. CFPB Director, Richard Cordray
22 CFPB Study: Medical Debt and Credit Scores The study found that credit scoring models do not consider medical debt as well as they could and that the models could be more precise Credit scores may underestimate creditworthiness by ten points for consumers who owe medical debt. Consumers who subsequently paid medical debt that had gone into collections were more likely to pay back their debts, similar to consumers with scores 16 to 22 points higher. Allowing for different treatment of paid and unpaid medical collections would likely result in increased scores for consumers who have paid their medical collections in full. Consumers with reduced scores, especially those on the brink of subprime, are affected by higher interest rates and ability get credit.
23 Concerns About Passive Collection August 2014 HFM Magazine In the white paper and in other public venues, the CFPB asserts that a "unique characteristic "of medical debt is that the consumer may sometimes be unaware of outstanding medical collections. This point is the rationale not only for the study, but also potentially for future regulatory intervention. In conversations with HFMA, the CFPB underscored this point with an egregious example, gleaned from its interviews with collection agencies, of what it refers to as "parking" of low-dollar medical debt. The CFPB alleges that, with this practice, some collection agencies may be seeking to reduce their collection costs by simply reporting a patient's debt to a credit bureau, without first sending any statement to the patient, and then waiting for the patient to apply for financing to discover the debt and resolve it.
24 Industry Response in New Environment HFMA/ACA Medical Debt Task Force In January of this year, HFMA and ACA released best practice guidelines for fair resolution of the patient portion of medical bills. 24
25 Summary of Collection Actions Policies related to extraordinary collections activity (ECAs) (as defined by the IRS i.e. liens, credit reporting, lawsuits, wage garnishments, or sale of debt) are board approved, and communicated to and practiced by collection agencies. Ongoing provider efforts to educate patients about the account resolution process including informing patients of the ECAs that are board sanctioned. If account is delinquent, communicate to the patient that the potential exists for all board-approved ECAs (including reporting to credit bureaus) prior to initial placement. 25
26 Tracking Patient Billing/ Collection Complaints All business affiliates involved in account resolution activities are required to report patient complaints. Review by management teams to monitor billing/registration and other revenue cycle issues that result in inappropriate accounts sent to collections Call audits and other quality assurance activities to ensure that policies are followed and provide process improvement 26
27 Access to Financial Assistance Policy All collection efforts (either internal or external) should adhere to internal written/formal provider collection policies, which include but are not limited to screening individuals for and applying charity care/financial assistance policies to those who are eligible and permissible account resolution tactics. 27
28 Presumptive Eligibility Safeguard Presumptive eligibility screening provides hospitals with an important safeguard regarding collection actions and demonstrates effort made to qualify patients for assistance Presumptive eligibility must be extended for the most generous level of financial assistance 28
29 Where to Deploy Scoring Presumptive Charity filter prior to bad debt assignment and to reclassify accounts already in bad debt Charity of last resort Applied after all other funding and eligibility sources have been exhausted Applied consistently to all patient balances Extended to historical visits and not applied to future transactions Accounts failing to document in financial counseling Accounts completing Active A/R unpaid As a prioritization tool for self-pay post-treatment At Final Bill in business office or after treatment for inpatient patients Used to segment work flow of counselors and Rev Cycle follow up Integrated into IS host As a point-of-service triage tool Used to segment work flow of counselors and follow up Integrated into IS host Detailed access training required Bad-Debt Assignment PARO Score Bad-Debt Collection Declare Presumptive Charity 2014 PARO Decision Support, LLC 29
30 Policies: Charity Types Traditional Charity Care Patient Engaged and completes process Usually contains documentation from the patient and is most accepted by auditors and for reimbursement purposes Medically Indigent Out of pocket expense exceed a specified amount or ratio to household income or assets Presumptive Charity Provider able to document specific indicative conditions Patient already qualifies for means-tested public program Deceased with no estate or known family Transient, homeless persons Persons estranged from family with no support group Persons with unknown identity Validated 3 rd party score establishing charity-qualified conditions Patients unresponsive or incapable of completing traditional process May not be accepted for reimbursement or disproportionate share 30
31 Presumptive Charity and Audit Presumptive scoring does not replace traditional FAP application processes; it is used to supplement these efforts Scoring/electronic screening results are used in the absence of additional information from the patient FAP requires updates to include language that: States that the Hospital recognizes that some patients will be unable or otherwise unresponsive to traditional FAP processes; and In an effort to remove barriers for these patients and improve community benefits, the hospital will utilize an electronic screening process prior to bad debt assignment after all other funding sources have been exhausted; and That the information returned via this electronic screening will constitute adequate documentation under the Hospital s policy; and The patients eligible through this process will not be assigned to bad debt Consider language that emphasizes consistency of process p31
32 Issues Unique to Consumers Living in Poverty Basic charity application and documentation processes barriers for many, often poorest, consumers 1 in 5 consumers are functionally illiterate and cannot complete an application process US Department of Education 1 in 12 Families do not have household transaction accounts 8.7% of US Population The Federal Reserve 33% of the uninsured are high school dropouts compared to only 7% for insured patients Employment Policy Institute Financial Shadows are roughly 26 million consisting largely of minorities, low income and the young The Federal Reserve 32
33 Elements to consider in selecting a charity model What kind of calibration occurs? Is it calibrated to your market and your FAP? How does it handle non-traditional financial profiles? What percent are not able to be evaluated? When not evaluated, what does the service do? How much and which patient data is required? SSN, name, address, other What 3rd party data is utilized? Credit files, public records, etc. How current are these records? Patient permission requirements Does it utilize multiple checks on the recommendation? Adequate measures for income, liquidity and asset testing Acceptance by the IRS, your Auditor and other groups? What audit support is available? What reporting and Community Benefit and analysis reports are available? 33
34 Recommended Strategy: Hospital Calibration and Validation PARO less than 642 with FPL less than 246% and Absence of Homeownership status Deceased are included if they meet the PARO criteria Historical Charity Unknowns (Self Pay) Sample Size for $1.66 mil PARO Fitness Stat (Deployment Threshold) PARO Median FPL Ratio Range 246% to 277% 258% to 292% # Accounts $ Balance PresumptiveCharity based on these rules 369 $0.446 mil % of file which meets presumptive guidelines 29.52% 26.87% 2014 PARO Decision Support, LLC 34
35 Segmentation Results POS Conversion The ability to segment the patient to the correct revenue cycle path yields results. Accounts are scored for Cash Collection and FAP need (discharge or POS) 45.00% 40.00% 35.00% Ranking are created that 30.00% indicates the correct Revenue 25.00% Cycle Path 20.00% Indicator 6 accounts paid at % time the rate of Indicator % accounts Indicator 1 accounts converted to Medicaid at 19 times the rate of Indicator 6 accounts 5.00% 0.00% Less Eligibility Predicted More Eligibility Predicted Revenue Cycle Path Indicator Paid Converted to Medicaid 2014 PARO Decision Support, LLC
36 Community Needs Index (Income, Culture/language, Education, Insurance, Housing Elements) CNI was developed by Dignity Health
37 Distribution by Community Need 2014 PARO Decision Support, LLC 37
38 Leverage your Historical Data Density Mapping Premium Tax Credit Enrollment Efforts Focus on Medicaid Enrollment Emphasis Cost Share Reduction 2014 PARO Decision Support, LLC 38
39 Compliance and Timing What to Do Now Take this opportunity to affirm that the hospital organization currently satisfies all of the expressed requirements of Section 501(r) of the Tax Code (which are currently in effect). Begin compliance efforts by reviewing existing financial assistance policies, charge methodologies, and billing and collection policies and procedures. The tax community anticipates that the final regulations will generally track the overall framework of the proposed regulations. Hospitals, today, must report on IRS Schedule H, Form 990 on their policies that address financial assistance, billing and collection, and emergency medical care, and describe rational for how a hospital charges individuals eligible for financial assistance. Develop implementation process and train staff. Inform governing Board of new requirements and secure Board approval for new policies Involve professional advisors to help ensure that all regulatory issues are addressed. 39
40 Implementation What to Do Now Perform a Readiness Assessment NOW Review and Revise your new FAP (considering using an outside expert avoid a search and replace approach) Publish your new FAP Train your Staff (including collection vendors) with initial training and periodic updates Monitor Performance and seek lessons learned Start telling your Story FAP is valuable to your tax status and your community share the results in terms of patients served 40
41 Question and Answer 41
42 Contact Information Neil Smithson (954) Debra Stall (615) Melanie Parks Self Regional Hospital Patient Financial Services (864) Financial Assistance Policy Review and Update Resources: Mark Rukavina (617)