January 2007 Health Reimbursement & Health Savings Accounts (HRAs/HSAs) President and Chief Executive Officer
Health Reimbursement and Health Savings Accounts (HRAs/HSAs) Various funding strategies attempt to redistribute the increasing costs of healthcare among the payer, employer, patient and provider. HMOs, capitation and flex plans are all attempts to shift the financial burden among these key players. Unfortunately, healthcare providers are not positioned to alter the financial responsibility, but they often shoulder the burden of the deepening reimbursement quagmire. However, providers can take a proactive approach to avoid and minimize the financial risks of a struggling healthcare system through process and system optimization for today s challenges. HRAs and HSAs have been touted by many think tanks, healthcare groups and business groups as the fabled silver bullet for addressing the ever-increasing cost of healthcare delivery in the United States. Policy makers believe that consumerism will delay the rise in cost and allow each person to make better financial and healthcare decisions by managing, budgeting and spending more of their own money through such savings plans and high-deductible coverage. These plans require pre-tax contributions as a funding mechanism paired with a high-deductible insurance plan of $2,000 to $5,000. Combined with a healthcare flex plan, an individual then has the ability to directly fund his or her deductible and other potential out-of-pocket healthcare costs on a pre-tax basis. Uptake is Slow Consumer behavior indicates challenges in widespread acceptance of saving for medical costs that are already difficult to afford and harder to predict and understand. Based on reports from the Bureau of Economic Analysis (BEA) and recent surveys by the Kaiser Family Foundation, and Hewitt and Associates, healthcare providers are already finding that this silver bullet has a long road to success in turning around the healthcare cost crisis. General consumer savings habits are at an all-time low, with personal savings rates trending negative while real disposable income increases remain very modest but positive (Source: BEA) National spending levels for medical services spending remained consistent from 2003-2005, even while personal income and spending levels increased (Source: BEA) Only 4 percent of workers are enrolled in an HRA/HSA healthcare plan versus 60 percent in PPOs, 20 percent in HMOs and 13 percent in POS plans (Source: Kaiser Family Foundation) The 4 percent HRA/HSA enrollment rate did not change from 2005 to 2006 More than 50 percent of those enrolled in high-deductible plans with HSAs will not re-enroll (Source: Hewitt and Associates) 1
Scope is Limited Despite often conflicting reports on the participation and growth of these plans, certain facts indicate that HRAs and HSAs are unlikely to alter the cost structure of the U.S. healthcare system: Medicare participants cannot enroll in an HSA Many major healthcare expenditures are age dependent, i.e. neonatal care and senior care All consumers carry the costs of care for the Medicaid-dependent, uninsured and/or unemployed population receiving all medical care from urgent care or emergency centers Deferred care that consumerism promotes does not appear to result in better chronic disease care that reduces or prevents the higher costs of long-term treatment Patients have not yet demonstrated the ability or willingness to purchase healthcare services on the basis of cost, need and/or quality While not providing the silver bullet most are hoping to reduce healthcare costs, HRAs and HSAs are logical attempts to balance the unlimited supply and limited demand in the healthcare economy, with benefits for informed, disciplined consumers with sufficient income levels to allow saving. These plans are a great choice for people who are rarely sick, as well as high-wage earners who will receive a tax deduction and pool of money to offset the lack of Medicare and Social Security benefits when they retire in the future. Regardless of who benefits from HSA and HRA plans, the appropriate quality focus should be on medical-error reduction, and wellness and disease management programs, rather than driving over-utilization of urgent and emergency care or limiting a patient s medical options based on cost, timing or convenience. Provider Impact: Self-Pay Processes The most immediate impact of HRAs and HSAs will occur at the physician s office, where self-pay collection remains the most difficult collection process for a number of reasons: Patients have not been required to pay for healthcare at the time of service due to the prevalence of managed care with low deductibles and co-pays Patients have limited online access to eligibility, benefits and deductible information to inform them of the correct amount due to the physician at the time of service Front desk staffs have high turnover, which requires ongoing retraining on how to collect There is little evidence that physicians deny services to patients due to their inability to pay. However, HRAs and HSAs differentiate patients ability to pay from their willingness to pay. Physicians will provide savings to the healthcare system by the deferral of payment from the payer to the patient. Today, physician offices serve as the customer service departments for payers and employers without real tools to make a difference. This phenomenon will continue under HSAs and HRAs with less money to fund this support. 2
With the potential growth of HRAs and HSAs looming, physicians should be compelled to review and revise policies and procedures for self-pay collections to support this type of plan. Recommendations to consider implementing now include: 1. 2. 3. Add a check box and signature line to your registration forms for patients to indicate prior and current use of the following: (a) high-deductible plan, (b) HRA, (c) HSA and (d) deductible payments to date. As an alternative, ask the patient to indicate his or her number of year-todate medical visits. Develop a process to review self-pay balances owed or aged insurance balances with the physician prior to a patient s date of service. Also, develop a customer service focused process to call the patient prior to their visit to confirm their appointment and set expectations that payment is due at the time of service. Build a self-pay credit-rating process to establish the credit worthiness of the patient prior to the visit. You must first check the legal requirements for both soft and hard credit scoring in your state. 4. Require surgery deposits in advance. 5. Verify patient employment to confirm ability to pay. 6. 7. Accept credit cards, which moves the liability from the provider practice to the credit card company. Offer payment plans with a maximum six-month duration and minimum $100 monthly payment. Consumers payment patterns generally deteriorate as the outstanding balances age, so avoid offering costly plans with longer terms and lower minimum payments. Summary As the U.S. healthcare environment continues to evolve, and complexities change and increase, providers will remain the point-of-purchase for the consumer. While the solutions used by physician practices are often complex by necessity, designing and implementing those solutions is a burden physicians and hospitals do not have to bear alone. With technology partners that offer business and financial insight into improving patient flow and profitability, physicians can turn their attention to day-to-day patient care, treatment management and personal service, regardless of the plans and coverage used by consumers and offered by payers. 3
President and Chief Executive Officer John Thomas has been with MedSynergies since its inception in 1996, when he began as senior vice president and managing director of development. While at MedSynergies, Mr. Thomas has held positions such as senior vice president and chief financial officer, and has been a member of the board of directors since 1999. Prior to joining MedSynergies, Mr. Thomas was the vice president of the newly formed HealthCare Finance Group for Bank One. He was also the assistant vice president for Texas Commerce Bank, where he focused on hospitals, emerging healthcare markets, core finance and revenue. About Now serving 1,000 healthcare providers in 23 states, MedSynergies provides revenue cycle services and integrates leading software programs into the daily operations of healthcare organizations. Founded in 1996, MedSynergies serves physicians in hospitals, specialty medical groups, ambulatory surgical centers, rehabilitation centers, and independent practice associations (IPAs). Based in Irving, Texas, the company has regional offices across the United States. For more information on MedSynergies, please visit www.medsynergies.com. Mr. Thomas is a national speaker on topics such as revenue cycle management, billing and collections processes and capitalization, raising funds, bank debt, turnaround and high/low debt revenue. Mr. Thomas received his Master of Business Administration, with honors, from the University of Texas Graduate School of Business. While at the University of Texas, he focused on finance and management and was selected as the Sword Scholar and received the Dean s Academic Award. Mr. Thomas received his Bachelor of Arts from the University of Arkansas. 1255 Corporate Drive Third Floor Irving, Texas 75038 972.791.1224 www.medsynergies.com Copyright 2007 No reproduction, in whole or part, without written permission.