The Future of Healthcare Collections

Transcription

1 Collector Published by ACA International February 2015 The Future of Healthcare Collections Healthcare providers and collection agencies will need to focus on people, processes and technology to ensure both entities high standards are met. CFPB Field Hearing Self-Pay Accounts Economic Outlook

2 WORKING SMARTER Agencies can use scoring and predictive analytics to address challenges with self-pay and charity care accounts. By Anne Rosso 30 I February 2015 Collector

3 M edical debt rates are up. Self-pay is up. The cost to collect is up. In an effort to adapt to these challenges and work smarter, many collection agencies are using technology to improve internal efficiencies and boost their bottom line. In a session at ACA International s Fall Forum conference in November, Tim Haag, client services manager at State Collection Service in Madison, Wis., and John Moroz, vice president of sales and business development for Connance Inc. in Waltham, Mass., discussed how agencies can use account scoring and predictive analytics to succeed amidst the health exchange rollout. Managing Risk Uncompensated care costs both charity care as well as bad debt make up a big part of healthcare providers budgets. A study published in Health Affairs estimated that providers uncompensated care costs in 2013 reached between $74.9 billion and $84.9 billion. While government programs such as Medicare and Medicaid helped offset approximately 65 percent of those costs, hospitals were responsible for the remainder. The Obama administration projected that hospitals would save $5.7 billion in uncompensated care costs in 2014 as previously uninsured patients acquired coverage through the Affordable Care Act, although going forward those savings may be mitigated in part by cuts in payments hospitals have traditionally used to offset uncompensated care costs, such as Medicaid Disproportionate Share Hospital payments, which are scheduled to be phased out starting in While the Affordable Care Act was designed to increase consumers access to healthcare, its health plans can carry significant patient financial responsibility. Budget-minded consumers often opt for plans with high deductibles and low monthly premiums. This has lead to an increase in self-pay account balances, requiring collection agencies to improve how they collect that part of a healthcare provider s revenue. Additionally, Moroz said approximately 20 percent of consumers who enrolled in Silver or Bronze plans under the Affordable Care Act in 2014 did not make their initial plan payments. The uninsured are still an issue, Moroz said. I think it s safe to say from an agency perspective, you should start to see an uptick in the balance after insurance. Today providers must bear expanded risks as they prepare to move from the traditional fee-for-service healthcare model to a value-based approach. Meanwhile, their risk for patient reimbursement continues to increase, thanks to the rise of high-deductible insurance plans. A transition to valuebased care also brings up-front costs of care coordination, and many providers are moving to enhanced clinical integration between hospitals and doctors to both increase the delivery of care and reduce costs in the long run. Additionally, as the industry readies itself for ICD-10, providers must wrangle the details of proper admissions coding as well as how to handle bundled payments that straddle the Oct. 1, 2015, implementation deadline. Risk is becoming an increasingly important buzzword, particularly from a provider/cfo level, Moroz said. Providers are taking on much more risk than they used to, especially from the revenue side. This creates an opportunity for all of us. Collection agencies know that scrutinizing the potential return on investment is becoming an increasingly important part of how providers choose business partners and vendors. From a budget prospective, providers are under a lot of strain. There is no room for budget growth and many have committed capital budgets to their clinical IT development. Collection agencies should make sure they are addressing these issues, and thinking of ways to help providers maximize their revenue at every turn. I can say with a fair amount of confidence that the revenue cycle is not going away any time soon, Moroz said. We have more than 500 providers on our platform [at Connance], and there are about 6,000 hospitals in the U.S. In the last seven years, we ve talked to most of them in some way, and it s clear to us that while the revenue cycle is changing and evolving, it certainly is not going away any time in the near future. More than 60 percent of hospital chief financial officers and business managers in struggling hospitals expect to be fired by 2016 due to outdated revenue cycle management solutions, according to a recent Black Book survey. This presents a great opportunity for all of us, Moroz said. Whether it s a botched rollout of electronic health records systems or other IT issues, these CFOs believe their revenue cycle is the single biggest thing holding them back. Analytics The healthcare environment is changing quickly, and every dollar counts. With commercial insurance companies responsible for fewer claims and some physicians refusing to accept Affordable Care Act exchange health plans, self-pay after insurance is rising. Replacing commercial payor revenue with patient-pay revenue has a significant cash flow impact on both providers and collection agencies. It takes more resources to settle accounts with patients than it does insurance companies, and more often than not patients simply cannot afford to pay at all. Haag said he s found that 30 percent of self-pay accounts have no cash value. To maximize time and resources, collection agencies should focus their efforts on patients with a financial ability and willingness to pay. By using a variety February 2015 Collector I 31

4 Selecting a Predictive Analytics Vendor S ome key questions to ask potential vendors when selecting a predictive analytics system: What was the model built to predict? Is it specific to healthcare? What data is used and how often is it refreshed? Does any of it present potential compliance issues with the Fair Credit Reporting Act? Are the databases useful for nontrade households, e.g. the very young, very poor or homeless? What percentage of patients will be scored? Does the analytics system handle both balance after insurance and uninsured accounts equally effectively? Does it include support for segment definition and segment-specific workflows? Does the system include ongoing performance monitoring? For charity accounts, is the decision made based on multiple rules and checks? What is the risk in overqualifying? For charity accounts, is the application calibrated to the local economy and the hospital s charity policy? What support is available to craft updates to charity policies and audits? Can the model be consistently applied so that presumptive charity becomes proactive as opposed to reactive? of scoring models, including those that evaluate behavior, past history and demographics, providers and collection agencies can identify patients propensity to pay as well as which accounts would quality for charity care. Scoring can help agencies unlock patterns and work accounts effectively, identifying which accounts would be most beneficial to work immediately and which would be worth very little cash regardless of your effort. While many agencies use basic business intelligence tools that slice and dice internal data to segment a patient population and pinpoint the best way to collect those account, Moroz urged agencies to look beyond those methods. We live in an era of big data, he said. There is a lot of data out there, and up until recently there wasn t a good way to take advantage of it. A number of other industries have been using predictive analytics for a long time, but in our industry this is a relatively new phenomenon. With predictive analytics, companies can move beyond using simple historical data the trend in the past was X, so the future might mean Y to instead shape the data to maximize collection efforts and minimize costs. Predictive analytics can tell agencies what will likely happen with each account and the extent to which their efforts can alter the outcome. A number of vendors offer scores that agencies can use to segment accounts, but we believe the key is not necessarily the score, but what you do with the score, Moroz said. Taking that score and building a segmented workflow is what ultimately drives increased cash and lowers your cost. While income estimates are common business intelligence tools, they have high error rates and are least accurate for people in lower income brackets, Moroz noted, so companies should look at other indicators as well to assess a patient from a collection perspective. We do still use income estimators, Haag said. But we find that unless you re getting that information back on a regular basis, like monthly or quarterly, it changes so quickly today that it really doesn t have as much value as it did in the past. And especially during the recession, those things were worthless. All of the sudden, unemployment jumped and people who had a good income were out of work. But you wouldn t know that unless you were getting income estimators on a regular basis but that is costly. Credit scores or a lack of one can also be misleading indicators of a patient s poverty level or an account s cash value. On a lot of our bad debt accounts, we do still use a credit-based score, and we find that when we show zero credit for a patient, those are actually in a high collectible bucket for us, Haag said. If it comes back with a zero score, it could be that they are new to credit and haven t established any yet, or they ve lost their credit because they are older and own their home and car and don t use credit cards. Or if a patient comes back without a score, that might be because we didn t have enough information and that person actually would score very high, and we would mark that as a high propensity to pay. Propensity to pay is an industry standard that helps structure optimal account workflow. Low propensity to pay does not necessarily indicate the person is poor while high propensity to pay does not mean the person is wealthy or that the account has a high value. Making these assumptions will cause agencies to leave a lot of cash on the table. With self-pay accounts, Moroz noted that the core questions are: What is the cash value of those accounts, and what is the most effective and efficient means to realize that cash? How can agencies best engage with the consumer? Because there is not one allencompassing tool to assess an account, 32 I February 2015 Collector

5 agencies should use a variety of deployment strategies, including cash value prioritization, segmented workflows and segment-based insourcing. Moroz noted that these efforts can lead to a percent increase in cash with fewer or better timed letters and calls. Nonprofit hospitals must review every patient account for charity eligibility, proactively classifying patients who are eligible for a hospital s community benefit program. Presumptive charity is an industry standard, particularly at pre-bad-debt assignment. Charity accounts come with complicated issues and require unique scoring models. These models can pinpoint who may qualify for charity care as well as the range of opportunity to collect on the account. In the past, providers have based charity designations on guesses and assumptions because patients may not have provided comprehensive financial information to the hospital. Today, however, providers and their collection agency partners can use scoring methods to mine credit and demographic data as well as internal information from the hospital to determine if the patient might quality for charity care. With a third of bad debt accounts likely to qualify as charity care, the trick for collection agencies is to identify charity accounts and get them returned to the hospital quickly, or offer to send out the charity applications on behalf of the client. If providers don t offer presumptive charity, Haag urged agencies to talk to them about the benefits of investing in that service or offer to do it yourself. State Collection Service uses a score for charity accounts that helps peel them off and get them sent back to the provider as quickly as possible. If you re going to do that, make it a service offering and charge a fee for it, Haag said. We ve been known to do that for some of our clients. We don t get a contingency fee, but we ll get a straight fee for every application that we get returned and that gets processed. That s both on the first-party side and the third-party side. Haag said that while only a small percent of his clients ask his agency to perform presumptive charity analytics on the back-end as opposed to the frontend, the numbers are growing. I try more on the early-out side to offer the charity component, because it s a little more valuable there, he said. If it goes to bad debt, we will still do it though. We ll ask the patient four to five questions to see if that s something we should refer back to the client. As both providers and agencies grapple with a myriad of new responsibilities and obligations in light of the evolving healthcare environment, providers don t want their collection partners to spend time and money working accounts that shouldn t be worked. They want you to identify [charity accounts] and give them back to them, Haag said. They understand that our rates are down and we have to work smarter. The beauty of a predictive analytics system is that agencies can learn the ideal way to work each specific account in order to maximize its value. However, providers sometimes insist that collection agencies work each account exactly the same. Agencies should have conversations with their clients to explain how predictive analytics works and why it drives more cash yield on accounts to treat them individually. Agencies should also communicate with clients about details of their system that might affect them. Haag noted that on early-out debt, his company uses a score provided by its predictive analytics vendor, but for bad debt accounts he uses an internal, credit-based score as well. If you are doing early-out business and using a credit-based score, be prepared for your client to come back to you because a patient is going to say, I got a soft hit why? Haag said. It doesn t look good if you are working in the name of ABC Hospital and all of the sudden the patient gets a credit report pulled and they have never gone to bad debt. It s not good for patient satisfaction. Because medical debt is often unexpected and emotional for patients, collection agencies should take a patient-friendly collection approach and treat consumers with respect. One thing we hear most often from our provider clients is that patient loyalty is really important, Haag said. Hospitals are competitive, and doing more to ensure the patient experience is good and they can keep patients helps everyone. Treating patients properly and fairly is a big part of how you get that good patient experience. The collection challenges both healthcare providers and agencies face today create end-to-end opportunities. To be successful in this new era of healthcare, collection agencies should consider how they can take advantage of the available technology to streamline the collection process and lower overall collection costs. Scoring and predictive analytics can eliminate low-value effort and focus resources on accounts where there is a potential for cash return. You can t possibly work every account the same anymore, Haag said. We ve had a lot of success with predictive analytics. We re proud of what we ve done and our clients love it. cm Anne Rosso is interim editor for Collector. February 2015 Collector I 33