Third-Party Billing at Student Health Centers: Key Considerations for Implementation Custom Research Brief March 7, 2010

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1 STUDENT AFFAIRS LEADERSHIP COUNCIL Third-Party Billing at Student Health Centers: Key Considerations for Implementation Custom Research Brief March 7, 2010 Table of Contents Research Associate Katherine Feeney Research Director Perri Strawn I. Research Methodology II. III. IV. Executive Overview Overview of Third-Party Billing Deciding to Implement a Third-Party Billing System V. Transitioning to Third-Party Insurance Billing VI. Meeting Student Need in Third-Party Systems VII. Defining Treatable Populations & Maintaining Use of In-House Laboratories 2010 The Advisory Board Company Washington, D.C.

2 Research Methodology Project Challenge: A small private member institution approached the Student Affairs Leadership Council with the following questions: How many major insurance carriers are accepted, and what percentage of the student body has preexisting coverage from these carriers? Does the college provide any assistance to students who would incur excessive out-of-pocket charges (i.e. uninsured or underinsured students)? Are student health insurance plans negatively affected by the transition to a third-party billing system? Can these two systems coexist successfully? If providers at the center accept a given insurance carrier (i.e. Blue Cross Blue Shield), must they accept all patients on that plan, regardless of campus affiliation? For example, must a physician at the health center treat a community member covered by BCBS? Do insurers typically require use of approved labs? Have any institutions been able to contract with insurance carriers to allow the use of in-house labs, versus a corporation similar to LabCorp or Quest Diagnostics? Sources: During the course of the research, the Council searched the following resources to deepen their understanding of the topic: Advisory Board s internal and online ( research libraries Education Resources Information Center (ERIC) National Center for Education Statistics Contact organizations web sites Recommended Resources: The Council recommends the following articles and sources on the topic of third-party billing at student health centers: Mohn, Tanya. Health Coverage Often Stops at the Campus Gate. The New York Times. 23 February June, Audrey Williams. Colleges Tap Students Private Insurance to Cover Health-Care Shortfalls. The Chronicle of Higher Education. 5 May Research Parameters: Based on the requesting member s preference, the Council focused its outreach on institutions with longstanding or well-established third-party billing systems. Third-Party Billing 2

3 Research Methodology (cont.) Below is a guide to universities profiled in this brief: Institutions Location Enrollment (Total/ Undergraduate) Classification University A Southwest: Mid-size city 67,000 / 53,000 Public; Research University (Very High Research Activity) University B Southeast : Small town 17,000 / 15,000 Public; Research University University C Midwest: Small town / 6,000 University D Midwest: Rural 19,000 / 14,000 University E Mid-Atlantic: Large suburb 12,000 / 9,000 University F Southeast: Small city 20,000 / 17,000 Public; Master s University (Larger Programs) Public; Research University (High Research Activity) Public; Research University (High Research Activity) Public; Master s University (Larger Programs) Source: National Center for Education Statistics; Carnegie Foundation for the Advancement of Teaching Third-Party Billing 3

4 Executive Overview Key Observations The trend toward third-party billing has predominantly permeated mid- to large-sized public universities. Due to student body demographics and the sheer size of the population, the opportunity for revenue generation at these institutions is significant; thus the up-front investment of time and resources is viewed as relatively less expensive against future revenues. The key consideration when deciding whether to outsource or to administer third-party billing in-house is the extent of investment of resources. Institutions that administer systems in-house retain 100% of revenues from third-party billing, but must take the time to identify and contract with carriers, and to train staff in billing and coding procedures. Institutions that choose to contract with a facilitator, such as Highland Campus Health Group, may be able to bypass the majority of staff training and contract negotiation time, but will relinquish a significant portion of revenues. Institutions contract with as many major insurance providers as necessary to cover at least 75 percent of the student population. Depending upon the profile of the student body, this may be as few as three or four carriers. Maintaining a student health fee structure while adding a revenue stream from third-party billing ensures that under- or un-insured students are still able to receive the medical care they need. In addition, several universities are establishing reserve funds to assist uninsured students, or are accepting Medicare, Medicaid, and Tricare insurance plans. Student health insurance plan enrollments are largely unaffected by the addition of a third-party billing system. No contact institution reports a significant change in enrollment in a university-administered health insurance plan due to implementation of a third-party system. Institutions rely on careful contract negotiation to define their treatable populations. In the event that state regulations do not allow such stipulations, contacts report that local residents are largely uninterested in receiving treatment at a student-focused health center. Use of in-house laboratories can be maintained even in third-party billing systems. No contact institution reports having to alter use of in-house laboratories, provided that such laboratories are appropriately credentialed. Third-Party Billing 4

5 Overview of Third-Party Billing In a third-party billing system, an institution s student health center bills private insurance carriers, on the student s behalf, for services rendered at the center. The American College Health Association reports that more than 83% of undergraduate students carry private insurance, most often covered under their parent s plan, yet institutions that bill these plans are in the minority. By billing insurance carriers to recover costs of services rendered, student health centers can become nearly entirely self-sufficient., covering all of their own costs, including staff salaries and benefits, and financing renovations and small-scale capital projects. Third-party billing also relieves funding pressure from student health fees and can prevent institutions from enacting dramatic increases in these fees. In additional to financial motivation, many institutions have implemented third-party billing systems in an effort to improve care to students, and to increase stakeholder satisfaction with services. Contacts largely report that students, parents, and institution administration view the move to third-party billing favorably: Students: Students enjoy the added convenience of being able to receive care free of additional charge; aside from co-pays associated with some private insurers, students are rarely ever required to pay an out-of-pocket fees at the time of service, which contacts cite as a frequent deterrent prior to third-party billing implementation. In addition, revenues from third-party billing may also enable the health center to operate more robust health education and prevention programs throughout campus. Parents: Parents rest easily knowing that their children can receive treatment without paying additional fees. Further, third-party billing generally allows per-semester fees to remain relatively low, which satisfies parents. Administration: Contacts report that institutions central administrations are extremely satisfied with third-party billing systems; these systems increase the self-sufficiency of the health center and generally improve the center s fiscal position to the point that little to no additional support from the institution s general fund is necessary. Traditional System Single-Funding Model Students pay a flat health services fee each semester. The health center operates on funds from student health fees. The university general fund often covers such items as staff salaries, and provides additional funding when necessary. All students receive unlimited care, free of charge. Some fees for extraordinary procedures, such as X-rays, may be assessed. Third-Party Billing System Dual-Funding Model Students pay a flat health services fee each semester. Insurers reimburse the health center for services rendered, providing a significant additional revenue stream for the center. The health center operates on funds from health fees and funds recovered from insurers. All students receive unlimited care, free of charge. Health center staff directly bill students private insurers. Third-Party Billing 5

6 Deciding to Implement a Third-Party Billing System Though some third-party billing systems at student health centers have been in place for more than two decades, the number of schools moving to third-party billing has grown rapidly over the past several years. In an age of uncertain funding sources and ever-increasing medical costs, many institutions have long since been pressuring student health centers to reduce costs or discover additional revenue streams; adopting a third-party billing system can serve to greatly increase the financial independence of a student health center, thus freeing university general fund monies to be utilized elsewhere. Once the initial decision to move to such a system is made, a institution can choose to contract with a third-party facilitator (such as Highland Campus Health Group), or may operate a billing system internally. The following table presents a brief informational background of third-party billing systems at contact institutions. Third-Party Billing Overview Institution University A University B University C University D University E University F Billing System Third-Party Facilitator Highland Campus Health Group Highland Campus Health Group In-house In-house In-house Major Insurance Carrier Contracts Year Implemented Student Health Fee Fee at time of Service Students Covered* All major carriers 2004 Yes No 70-80% About All major carriers (Plus several smaller, local carriers; Arkansas will also bill any insurance carrier) 3 (Plus several smaller, local carriers) Most major carriers (Plus several smaller, local carriers) 1987 Yes; $86 per semester Yes; $5.50 per credit hour Yes; $7.80 per credit hour No 95% No At least 70% No 70-80% 2003 No Yes 75% 2000 Yes; $36 per semester No 83% * Students Covered indicates the approximate percentage of students at the institution covered by the major carriers with which the health center contracts. Increased Self-Sufficiency For most contact health centers, increasing financial self-sufficiency was the primary motivator in transitioning to a third-party billing model. At University A, for example, the central administration had long encouraged the student health center to move toward self-sufficiency through increases in student health fees and cost-cutting measures. Similarly, third-party billing at University C was an important step as the health center moved toward self-sufficiency. For all contact institutions, implementing third-party billing has been a significant revenue generator and has enabled contact institutions to keep student health fees relatively low and stable over several years. While also driven by self-sufficiency and financial motivators, University B saw the move to third-party billing as a method to better serve its students. The university has recently transitioned from a primarily local student body to a regional, and national, student profile. Moving to third-party billing proved to be an effective way for the student health center to increase its revenues, and also to better meet the increasing demands that accompany changes in student demographics. For example, parents of non-local students were relieved that their children could receive insurance-covered medical care on campus, and local students were more likely to receive care at the student health center, where previously they would travel home to family physicians. Third-Party Billing 6

7 Deciding to Implement a Third-Party Billing System Third-Party Facilitator versus In-House Administration: Key Considerations When health center administration considers the transition to a third-party billing system, one of the most important questions is whether to utilize a third-party facilitator, or to maintain and administer third-party billing in-house. Several key factors to consider when making this decision include: Capacity of personnel: Both implementation and the ongoing functions of a third-party billing system require a significant investment of personnel. To implement third-party billing, centers must identify and negotiate contracts with insurance carriers; existing employees must also be trained in billing and coding protocol, or new employees with this expertise must be hired. Contacts report that though hiring additional personnel may not always be necessary, the transition does require extensive personnel time and effort. Everyone thinks that they need to hire additional staff, and it s going to cost them a lot of money. I say, why can t we ask our existing staff to take on something extra? It s only a significant time commitment until you get it up and running; then, it s just part of the everyday. -Council Interview Time to profitability: Hiring a facilitator with deep knowledge of the insurance industry and health care contracting may expedite the implementation of a third-party billing system, particularly for those institutions that are most concerned with realizing profits quickly. Contacts whose third-party billing systems are run inhouse note that finalizing contracts with insurance carriers may take up to two years, while external facilitators can often assist a university in implementing third-party billing as quickly as within one academic year. Student Demographics: Understandably, the student body profile can have a significant impact on an institution s decision to administer third-billing internally, or to contract with a facilitator. At those institutions where the majority of students are covered by one or two large insurance carriers, a health center may determine that contracting with an external facilitator is not necessary; an institution with a more varied student profile may need a facilitator to assist in securing and negotiating contracts with a larger number of insurance carriers. For example, the director of the health center at University B contract with Highland Campus Health Group at that institution; however, he had previously implemented an in-house third-party billing system at a large public research university in the southeast. Because the majority of students at the contact s former institution were instate and covered by the same large private insurance carrier, that institution managed third-party billing as an inhouse system. However, the student body at Georgia Southern was covered by a wider variety of private insurers; due to the large volume of insurance carriers covering students, the Georgia Southern administration chose to contract with Highland Campus Health Group to manage contract negotiations. Expanding Service to Faculty: Health center administration may wish to consider expanding service to faculty and staff simultaneously to moving to third-party billing. Often, centers (and institutions) are motivated to move to insurance billing because of the revenue potential; offering care to faculty and staff can serve to further expand that revenue potential. Expanding Service to Faculty Treating faculty and staff, in addition to the student population, can provide significant additional revenue for student health centers. University F reports that 15% of revenues from third-party billing are derived from encounters with faculty, staff, and their family members, while University D faculty and staff account for 5% of health center visits and revenues. Like those two institutions, University E expanded service to faculty and staff when moving to third-party billing, and contacts describe a positive relationship with faculty and staff. As highlighted by contacts at University D, an unexpected benefit of treating faculty and staff has been increased credibility of the health center. Faculty and other employees in student-facing positions are in turn more likely to send students in need of medical attention to the health center if they have had positive experiences there. Similarly, the director of the health center at University F reports, somewhat unexpectedly, that neither faculty nor students have expressed any concern about being treated at the same facility; in fact, students and faculty share the same waiting room at the university and no complaints about the expanded service have been received. Third-Party Billing 7

8 Transitioning to Third-Party Insurance Billing Outsourcing: Managing the Facilitator Relationship Though others may exist, the Council was able to identify only one existing facilitator of third-party billing systems for colleges and universities through its research: Highland Campus Health Group. While several contact institutions administer their billing systems with in-house staff, University B and University C both contract with Highland and report a very positive relationship with the organization. Contacts at both institutions report that Highland staff are flexible and have a deep understanding of the university health center environment. Highland has also funded two scholarships at University B, and supports the institution s health fund for underinsured or uninsured students. Spotlight Institution: University F In 1999, the executive administration of University F shifted management of its student health center to an external management firm that would take over all center operations, as well as move the center to a third-party billing model. The management company eventually folded and in 2001, and the center was brought back under university management. By all accounts, the departure of the external company and its financial mismanagement left many loose ends and prompted an in-depth analysis of the center s operations and opportunities. Included in this analysis was the question of outsourcing or administering in-house an insurance billing operation; the university eventually finalized the decision to run the insurance billing operation itself. By 2003, the health center was credentialed with several large insurance carriers. Insurance billing at University F has been a resounding success. The center has held steady its student health fee of $36 per student per semester for nearly 15 years; this constancy was enabled by the revenues from insurance billing. In 2009, funding for the center was nearly between revenues from insurance billing and student health fees; no additional support from the institution s general administration was necessary. In addition to covering its own costs, the center was able to move $400,000 into a center-specific reserve fund that can be used for future needs. Initially, all credentialing, billing, and coding was done by existing staff; now, however, insurance revenues have enabled the hiring of a full-time insurance billing coordinator. The center expanded service to faculty, staff, and their families and act as a primary care provider for that group in addition to the student population; faculty and staff now represent nearly 15% of revenues for the center. The center director readily admits that the transition to third-party billing was not an easy one. Particularly because of a strained relationship with the university s central administration (resulting from the initial outsourcing of center management), many staff members were wary of further change. Staff attitudes were extremely negative at first; the center director notes the importance of not only strong center leadership, but strong support from the university s central administration in order to manage staff concerns. Though management did hold workshops and meetings to assuage staff reservations, the director of the health center believes that staff did not truly embrace the transition until they were able to witness firsthand its positive impact on both the center and the student population. Since the center began accepting private insurance, students visits have increased by 50% over eight years. Staff also see that the center is financially self-sustaining and able to support its own reserve fund. It was definitely a rocky start. There is a culture in most university health centers that change is bad. But if you assume a position of leadership and weather the storm, eventually they will come around. -Council Interview Third-Party Billing 8

9 Transitioning to Third-Party Insurance Billing Staffing Implications The transition to a third-party billing system not only creates additional work for center staff, but also requires an entirely different set of skills. Existing or newly hired staff must be trained in billing and coding protocol, as well as regulations and guidelines pertaining to billing insurance companies on students behalf. The following table presents a brief description of initial and ongoing support offered to staff at contact institutions. Because the staffing implications at a university that contracts with an external facilitator are minimal, those institutions are not included. Initial and Ongoing Support Offered to Staff Relative to Third-Party Billing Systems Institution Billing System Year Implemented Description University D In-house 1987 University E In-house 2003 University F In-house 2000 Over the course of several months, training sessions were offered to staff and providers to educate them about thirdparty billing, the types of changes it would mean for the center Training offered in conjunction with insurance carriers Currently employ one director of insurance, several FTEs have partial responsibility for insurance coding and billing University E hired one FTE with extensive experience in insurance billing and coding to facilitate the transition to third-party billing, who could also serve as a point person for staff inquiries and trainings In addition to aforementioned FTE, the health center now also employs two additional FTEs who each have partial responsibility for billing and coding No additional initial hires were made; staff were asked to take on additional responsibilities to assist in transition After revenues increased, were able to hire one FTE who is solely devoted to administering third-party billing at the center Impact of Third-Party Billing on University-Run Student Health Insurance Plans Contacts uniformly agree that university-run student health insurance plans can successfully coexist with a third-party billing system. All institutions report that a minority of students generally around 10% or less, were enrolled in a student health insurance plan prior to the transition to third-party billing, and this minority figure has remained constant following the transition for all institutions. For students and their families, the student health insurance plan is just another expense. They didn t use it then, and they don t use it now. Most of the time, parents are already paying for their own private insurance to cover their children, and purchasing student health insurance would be a repetitive expense. That s what third-party billing does: saves them from paying twice for something they need once. -Council Interview Third-Party Billing 9

10 Meeting Student Need with Third-Party Systems Selecting Carriers for Contracting Contacts agree that an institution should aim to contract with carriers covering somewhere between seventy-five and ninety-five percent of students. For those institutions that contract directly with insurance carriers, such as University D, contacts advise prioritizing contracts with those largest carriers and establishing those relationships first. Notably, contracting with an insurance carrier to become a preferred provider is not a fundamental step for all institutions. University of Maryland Baltimore County, for example, will bill any insurance carrier under which a student is covered; upon receiving the bill, the carrier decides whether or not it will reimburse the health center. Contacts at University E note that this option has been particularly popular with parents, who enjoy knowing that their children will be covered by any pre-existing plan, regardless of carrier. Depending upon the student body profile, an institution may also want to consider becoming an approved provider under Medicare, Medicaid, and Tricare. Both University B and University F are approved providers under these plans and believe that expanding coverage to students served by these plans has been an important step in increasing service to the entire student body. Local Third-Party Administrators are Key Contacts at University F and at University D, both of which facilitate third-party billing in-house, also contract with local third-party administrators (TPAs) serving the surrounding area. By contracting with these TPAs, student health centers at the institutions are automatically preferred providers of several local plans. Providing Support for Underinsured and Uninsured Students In maintaining student health fees (or service fees) while collecting revenues from third-party billing, health centers are able to ensure that service is available for underinsured or uninsured students; those who do not have insurance are simply not required to pay, and it is understood that the cost of services rendered will be absorbed into the center s overall expense budget. However, several institutions have taken specific steps to offer financial support to students who are uninsured or severely underinsured. University D has agreed to allow students to pay any out-of-pocket fees with their student charge account, and students can then formulate a payment plan through the bursar s office. University A has crafted a Bridge Plan for uninsured students. The Bridge Plan is not an insurance plan, but a discount program; students pay a fee to enroll at the start of the semester and thereafter pay a significantly reduced service fee for basic X-ray and laboratory tests, and office visits. The health center at University B has developed a fund, in concert with the university s financial aid office, devoted to providing financial assistance for under- or un-insured students in need of otherwise-unaffordable medical care. Third-Party Billing 10

11 Defining Treatable Populations & Maintaining In-House Laboratories Centers with Third-Party Billing: For Students Only? A chief concern of several institutions when considering the move to third-party billing is whether or not the institution will retain the right to define its treatable population when contracting with insurance carriers. For example, if a student health center becomes a preferred provider of Blue Cross Blue Shield, is the center obligated to treat a local resident who is unaffiliated with the university but is also covered by Blue Cross Blue Shield? University B, University A, and University D have all been able to negotiate their contracts with insurance carriers to stipulate that centers are only obligated to treat students or members of the university community. These schools are also not published in provider directories available to other policy holders under those carriers. However, state regulations prevent such a stipulation from being included in contracts held by University E. As a result, the student health center at University E is obligated to treat community members who wish to be seen at the center. The director of the student health center admits that this is an inconvenience, though rare. Perhaps once or twice annually, a community member wishes to be seen at the center. Once the individual arrives, however, he or she is unlikely to return, as the patient begins to understand that the center really is focused solely on students. In addition, the reception staff at the center have been trained to gently discourage community members who may walk in and wish to be seen by providing them with information of other local doctors on the same insurance plans. We have found that insurers want to work with universities, and they don t mind letting us define those things in our contract. Carriers know that student health centers are providing a level of preventative care that is keeping these kids out of much more expensive services. They can be treated for strep throat here now, or they can be hospitalized with mono in three months over summer break. -Council Interview Usage of In-House Laboratories Like treatable populations, usage of in-house laboratories is largely a matter of contract negotiation. All contact institutions report the use of in-house laboratories for common tests, though reference laboratories (include corporate laboratories such as Quest or LabCorps) are used regularly for more elaborate testing. Provided that health center laboratories are CLIA certified and meet any additional local and state certification regulations, insurance carriers are generally willing to allow institutions to maintain usage of in-house laboratories. Third-Party Billing 11

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