Absolute Receivables Risk Reduction: Securing Guaranteed Performance in the Face of Growing Patient Financial Responsibility Contact James A. Zadoorian, Ph.D. President ARxChange 843 757 5469 jzadoorian@arxchange.com
OVERVIEW - This session describes how U.S. health systems can dramatically reduce risk associated with the resolution of the patient portion of medical bills. - It illustrates that by aligning medical debt collection best practices and emerging federal requirements with market-based, investment-grade financial techniques, healthcare executives can altogether reduce performance risk by achieving guaranteed resolution of their patient receivables. LEARNING OBJECTIVES Financial Forward Performance Upon completion of this seminar, healthcare executives will have learned established analytical techniques, metrics, and the valuation approaches currently used throughout the financial markets to reduce risk and strengthen medical receivables performance. Participants will be able to apply these techniques to: 1 - Accurately determine the value of their patient receivables. 2 - Forecast performance scenarios. 3 - Design net return objectives. 4 - Achieve these objectives on a real-time, guaranteed, non-recourse, basis.
Market Dynamics FINANCIAL ECOSYSTEM :HIGH-DEDUCTIBLE ENROLLMENT GROWTH High-Deductible Enrollment Growth (in Millions) 2005 1 2006 3.2 2007 4.5 2008 6.1 2009 8 2010 10 2011 11.4 2012 13.5 2013 15.5 0% Source: Modern Healthcare, August 2013 400% 800% 1,200% 1,600%
Market Dynamics FINANCIAL ECOSYSTEM: INSURANCE EXCHANGES The average individual deductible for what is called a bronze plan on the exchange the lowest-priced coverage is $5,081 a year, according to a new report on insurance and bronze plans pay only about 60% of costs. the insurance plans sold on the exchange eliminate almost all out-of-network coverage and patients don t understand their financial exposure is far greater!! as a result, hospitals have grave concerns that they will experience major headaches trying to collect these amounts from patients Sources: Wall Street Journal, December 9, 2013 & Crain s Health Pulse, January 21, 2014
Market Dynamics NEW REQUIREMENTS FOR CHARITABLE 501(R) 501(r) requires that providers make reasonable efforts to determine whether an individual is eligible for assistance under the hospital s financial assistance policy before engaging in extraordinary collection actions (ECAs) against the individual. In particular: - Establish written financial assistance and emergency medical care policies. - Limit amounts charged for emergency or other medically necessary care to individuals eligible for assistance under the hospital's financial assistance policy. - Make reasonable efforts to determine whether an individual is eligible for assistance under the hospital s financial assistance policy before engaging in extraordinary collection actions against the individual. - Conduct a community health needs assessment and adopt an an implementation strategy at least once every three years. - Establish a formal policy regarding use of (ECAs) e.g. liens, credit reporting, lawsuits, wage garnishments, or sale of debt.
Market Performance Data Integrity & Accuracy - 58% Error Rate* *Market Sample Based on analysis of approximately $150 million in 200- day old patient receivables data sampled from 63-health systems across 12 states. Identity & Contact Error 11% Identity Error 10% Contact Information Error 37% Correct 42% Correct Contact Information Error Identity Error Identity & Contact Error Source: Georgia Hospital Association/Georgia Hospital Health Services. Innovative Technologies to Strengthen Receivables Performance & Secure Guaranteed Outcomes, Summer 2013
Market Performance Avg. Account Misidentification* *Market Sample Based on analysis of approximately $150 million in 200- day old patient receivables data sampled from 63-health systems across 12 states. 24% 18% 23% 22% 12% 6% 6% 0% % Charity Care Misidentification % Premium Account Misidentification % Insurance Eligibility Misidentification Source: Georgia Hospital Association/Georgia Hospital Health Services. Innovative Technologies to Strengthen Receivables Performance & Secure Guaranteed Outcomes, Summer 2013
Performance Confidence How confident are you with your current and future patient receivables performance? Performance Interval Confidence Level None Low Moderate High Current Performance 0% 43% 57% 0% Future Performance 0% 40% 60% 0% Source: HFMA Illinois First Chapter, Securing Guaranteed Returns in the Face of Growing Patient Financial Responsibility. Web Seminar Polling Question Responses. February 18, 2014
External Data Use Using the following scale, rate your reliance on external analytic sources to successfully perform on your patient receivables. External Data Set Reported Use Rates None Low Moderate High Credit & Wealth Data 14% 29% 43% 14% Identity Verification 0% 44% 31% 25% Healthcare Propensity to Pay Behavioral Payment Triggers 19% 38% 25% 19% 6% 50% 38% 6% Performance Forecasters 25% 38% 31% 6% Servicing Agency Data 0% 20% 27% 53% Source: HFMA Illinois First Chapter, Securing Guaranteed Returns in the Face of Growing Patient Financial Responsibility. Web Seminar Polling Question Responses. February 18, 2014
Suggested Top 10 Best Practices MEDICAL ACCOUNT RESOLUTION 1. Lay the groundwork for successful account resolution by educating patients and following best practices for communication prior to the time of service. 2. Make bills and all communications clear, concise, correct, and patient-friendly. 3. Establish policies for account resolution and ensure that they are followed internally and by business affiliates. 4. Be consistent in key aspects of account resolution from billing disputes to payment application. 5. Coordinate account resolution activities with business affiliates to avoid duplicative patient contacts. 6. Exercise good judgment about the best ways to communicate with patients about bills. 7. Start the account resolution clock when the first statement is sent to the patient. 8. Report back to credit bureaus when an account is resolved (in the event that an account is reported to a credit bureau). 9. Track all consumer complaints. 10.Use best practices, principles, and guidelines to inform organizational approach to medical account resolution. As recommended by the HFMA Medical Debt Collections Task Force - 2014
Medical Debt Resolution Process As recommended by the HFMA Medical Debt Collections Task Force - 2014
Process vs. Investment-Based Performance PROCESSED-BASED MEDICAL ACCOUNT RESOLUTION A transactional journey involving the financial progression of accounts receivables throughout the process of revenue capture. Actions center around structured techniques to optimize and minimize process variability. INVESTMENT-BASED MEDICAL ACCOUNT RESOLUTION Achieve investment-grade management of collective receivables assets. Actions center around structured financial management techniques designed to optimize and minimize net-performance variability. PERFORMANCE PHILOSOPHY - Manage to process efficiency and effectiveness. - METRICS (E.G.) 1. Net AR Days (i.e., the combined statistics of the 2013 HFMA MAP Award applicants produced a median 40 days in A/R). 2. Aged AR as a % of Billed AR 3. Cash Collections 4. Cost to Collect PERFORMANCE PHILOSOPHY - Manage to net-performance efficiency and effectiveness. Metrics (E.G.) 1. The market value of patient receivables. 2. Performance forecasting scenarios. 3. Net return objectives in relation to forecasted returns. 4. Achieving these objectives on expedited, guaranteed, non-recourse, basis - Goal is 0 days in AR.
Learning Objective #1: Receivables Valuation FINANCIAL MARKET ANALYTICAL TECHNIQUES Use extensive consumer and business information assets to deliver analytic precision and investment-grade performance visibility. - Identity Verification - Financial Aid/Charity Care Eligibility Investment-Grade Revenue Cycle financial forward performance. - Coverage Discovery - Investment-Grade Performance Segmentation & Scoring - On-line Performance Portal - Performance Advisement - Guaranteed Performance
Data Integrity IDENTITY AUTHENTICATION Street Identity Verification with External Analytic Use* 31% Investment-Grade Revenue Cycle financial forward performance. City State Zip 16% 16% 20% *External Data Set Use Credit & Wealth Data Identity Verification Healthcare Propensity to Pay Phone 24% Behavioral Payment Triggers Name 9% Performance Forecasters DOB 16% SSN 3% 5% 10% 15% 20% 25% 30% 35%
Financial Assistance Eligibility Charity Care Screening Accuracy Incorrectly Qualified 1% Investment-Grade Revenue Cycle financial forward performance. Some Additional Manual Review Required 12% Accurately Screened Some Additional Manual Review Required Incorrectly Qualified Accurately Screened 87%
Learning Objective #2: Forecasting Performance Scenarios 3D - PROFIT SEGMENTATION (E.G.) Investment-Grade Revenue Cycle financial forward performance.
Account Quality Assignment PERFORMANCE SEGMENTATION BY ACCOUNT QUALITY Investment-Grade Revenue Cycle FPL < 200% Potential charity care or Medicaid Identity issues Potential fraud Strong ability to pay Collect payment at time of service Borderline ability to pay Consider for financing solutions financial forward performance. Account Quality Variables (E.G) Days Since Last Payment Performance Advisor Score Available Credit Identity Verification Income Strength Inpatient/Outpatient Payment Behavioral Trigers
Learning Objective #3: Design Net Return Objectives LIQUIDITY BANDING FORECASTING & UNIT YIELD Performance Tracks by Recievables Class Investment-Grade Revenue Cycle financial forward performance. 70% 22% 8% 0% 17.5% 35% 52.5% 70% % Payment in High-Scoring Segments % Payment in Mid-Scoring Segments % Payment in Low-Scoring Segments
Learning Objective #3: Design Net Return Objectives PERFORMANCE LOT DESIGN Optimal External and Internal Performance Path Determinations Investment-Grade Revenue Cycle financial forward performance.
Internal Performance Vintage (E.G.) 400% 12 Month ROI Investment-Grade Revenue Cycle 346% 300% 261% 234% 228% 248% 242% 269% 229% 297% financial forward performance. 200% 148% 168% 100% 0% 0% Jan Feb March April May June July Aug Sept Oct Nov Dec Results from 5 State Hospital System
Learning Objective #4: Securing Guaranteed Performance GUARANTEED RECEIVABLES CLEARING Access an integrated electronic marketplace that connects hospitals and health systems to qualified institutional capital entities that acquire structured receivables pools based on predefined performance and pricing schedules. Investment-Grade Revenue Cycle financial forward performance. EXTERNAL GUARANTEED PERFORMANCE LOT DESIGN
Managing Performance to Unit Yields SERVICING SAFEGUARDS/ASSURANCES Organizational Policies and Standards Asset Management Communications and Operations Management Access Control Account Placement Human Resources Physical Security Performance Compliance financial forward performance. Unit Yields/Units of Performance Energy Most Expensive Moderately Expensive Least Expensive Brand Awareness Business Continuity Work Standards Reporting Audit Compliance
Investment-Grade Revenue Cycle financial forward performance. Patient Financial Account Warehouse Analytics Engine Internal Optimization Through Asset Management Receivables Clearinghouse: The Power of Capital Markets - The central data repository where hospitals can upload, store and access refined and verified patient identity, contact information, and financial and payment performance information. - Apply investmentgrade analysis and advanced informational assets to value, classify, and identify optimal performance pathways. - Use investment-grade analytics for actionable performance insights to guide internal riskmanagement, revenue streams, and produce higher net returns. - Use the power of capital markets to design net return objectives across all or selected receivables and then safely redeem or clear these receivables for their current cash value (on non-recourse, guaranteed forward flowing basis).
CONTACT James A. Zadoorian, Ph.D. President ARxChange 843 757 5469 jzadoorian@arxchange.com Speaker Bio/Credentials Jim Zadoorian, Ph.D. is President of the (shorthand for "Accounts Receivable Exchange).! He has approximately 25 years of experience successfully developing and delivering business solutions and advanced technologies into the healthcare market in the U.S. and abroad.! Jim s approaches to advanced AR performance have been featured in Forbes, WSJ, HFM, Inside patient Finance and other leading journals.! Jim authored (and his firm holds) the patents on the foundational properties that are used to value receivable throughout the US consumer debt markets, including medical accounts.! Jim received his Ph.D. and M.A degrees from the Rockefeller School at the State University of New York at Albany and his undergraduate degree from Siena College.