Elizabeth M. Guyton
Richard D. Madison
At a Glance
A patient payment strategy should have four objectives:
- Establish equitable and consistent policies and communicate them clearly to patients.
- Facilitate appropriate payment, regardless of the payer
- Increase patients' awareness of their payment options and responsibilities.
- Enhance patient relations.
Healthcare providers, even as they struggle to implement new strategies for delivering clinical services, face profound changes in who will pay for those services. In today's healthcare environment, payments due from patients account for about 20 percent of a hospital's revenue, and that percentage is rising quickly. As healthcare reimbursement evolves, healthcare consumers are taking increasing responsibility-financial and otherwise-for their healthcare decisions. Consumer-directed health plans, with their complex contracts and coverage rules, are a rapidly growing segment of the medical insurance market.
Given this trend, hospitals that don't effectively get patients to meet their financial responsibilities will see their profit margins decline. Even not-for-profit hospitals, whose missions include the need to care for indigent patients, cannot afford to write off payments from patients who have the means to pay-or who have access to community funding.
With the rising tide of increased patient liability for healthcare services, hospitals have little choice but to adopt a patient payment strategy. The primary goal of such a strategy should be to align people, processes, and technology to optimize the payment of patient liabilities, while strengthening consumer relationships by improving financial education and advocacy. To this end, hospitals should focus on establishing equitable, consistent policies and communicating them clearly to patients; developing processes to facilitate appropriate payment, regardless of payer; and educating patients, in a consumer-friendly manner, about their payment options and responsibilities.
A hallmark of an effective patient payment strategy is attention to making early interventions at the point of scheduling. At this level, the objectives of the strategy should be to identify financially "at risk" patients prior to an acute episode and-to the extent possible and appropriate-obtain full payment as close as possible to the moment of service.
Achieving these objectives requires an interdisciplinary approach involving multiskilled workers and clearly assigned responsibilities and accountabilities for clinical and financial performance. An integrated revenue cycle is required, with good front-end screening and clear communication to patients about their financial responsibility, which is, in most cases, likely to be a higher portion of the total cost than they expect. The interdisciplinary staff should include individuals with deep experience in insurance coverage and alternative funding options and strong analytical skills to determine financial responsibilities based on a patient's insurance coverage and expected hospital care. Clinical staff with case/care management experience should be available, if not assigned, to patient access departments, to clarify expected care to be provided, provide consultative support to admitting physicians to ensure appropriateness of the selected clinical setting and plan of care, and communicate with third-party clinical review professionals for precertification requirements.
Other important components of the strategy include:
- A time-of-service collection plan
- Good financial counseling services
- The ability to accept payment from a wide variety of payment plans, including credit cards, debit cards, bank loans, and alternative sources.
Carrying through to the back end of the revenue cycle, hospitals need to ensure they have adequate follow-up on accounts receivable and an effective collection process that is handled either internally or externally. Also, an important point to bear in mind when developing a patient payment strategy is the competitive environment and the hospital's need to differentiate itself by providing high-level customer service. The results, therefore, should demonstrate financial success while promoting the highest quality of care.
Different Strategies for Different Patients
The patient payment strategy should allow for different approaches to obtaining payment, given that different patients have widely different financial circumstances Therefore, prior to commencement of services, patients should be placed into one of three categories based on ability and willingness to pay:
- Patients who do not have the capacity to pay
- Patients who have the capacity to pay but are unwilling to pay
- Patients who are able and willing to pay
Each category then should have its own corresponding payment strategies.
Patients who cannot pay. In the category of indigent patients who cannot pay for services, payment strategies should center around providing financial counseling and researching alternate funding sources such as state, federal, and local grants that fund indigent care. If patients qualify for such funding, the hospital should help them apply to the identified funding source.
Hospitals should develop staff resources with the expertise to provide financial aid services similar to those provided by colleges and universities. Financial counselors need to be knowledgeable about sources of funding, government regulations on a state-by-state basis, and payer regulations regarding discounting of services.
The challenges of mobilizing a hospital's resources to provide financial counseling should not be underestimated, because a great deal of knowledge and research is required to develop policies and keep them up to date. Although the policies should be developed internally, the scope of the effort can be minimized by outsourcing certain financial counseling and credit reporting tasks. Local outsourcing firms can take over the whole financial counseling process, working with patients to explore funding options, and can even finance receivables back to the hospital.
Patients who can but are unwilling to pay. Hospitals should more aggressively pursue payment from patients who are able but unwilling to pay. For such patients, identifying financial obligation up front avoids nasty surprises that can lead to intransigence in paying bills.
One strategy that often works is to offer a prompt-payment discount. Patients usually don't know what their actual coverage and benefits are, so education and communication play important roles here. Effective approaches to improving education and communication include posting signs in admitting and registration areas describing payment options, and including complete, easy-to-understand descriptions of the hospital's financial policies in patient handbooks that are provided to patients prior to service.
Billing protocols and follow-up time frames should be standard and applied consistently, with clearly defined policies for escalating accounts in predetermined increments based on account balance and time in accounts receivable. Clearly defined policies also are needed for addressing when to transfer bad debt to collection agencies.
Patients who can and are willing to pay. Strategies for patients with the resources and willingness to pay for their care should center on making patient information accessible at every point of service. Patients should know their financial liabilities before a service is rendered, and the hospital should have processes in place to accept patients' checks, transfers from medical savings accounts, credit cards, and other forms of payment at the point of service. With information accessible at every point of contact, and collaborative links with payer networks, hospitals can submit patient bills and insurance claims concurrently.
Applying the Strategies
Different hospitals will apply these strategies in different ways. Not-for-profits are more likely to be more charitable toward indigent care, but they, too, should research government and community programs that help to fund charity care instead of always writing off these costs to their own charity care missions. For-profits are more likely to aggressively employ a "delay and deny" policy, where patients who can't or won't pay up front will be denied elective services. Some hospitals may decide to conduct cost-benefit analyses of the expense of pursuing debtor patients versus the likely return and/or effect on public relations.
Whatever approach a hospital chooses, all hospitals will face the same essential challenges as patients increasingly assume responsibility to pay for their healthcare services. To succeed in this new environment, therefore, each hospital must be willing to seek payment aggressively in the most appropriate way from all categories of patients. That doesn't mean being confrontational. But it does mean taking clear steps to obtain appropriate payment and to enhance revenue cycle processes, such as making patient and insurance information available at every point of service and developing staff who can work with patients to help them understand their financial responsibilities and apply for financial aid when they qualify.
In short, hospitals may begin to see that high-quality financial consulting for patients is a competitive advantage. Handling finances in an "up front and personal" manner results in better patient relations and a much more educated consumer.
Elizabeth M. Guyton, CPA, is a partner, Accenture's Health & Life Sciences practice, Atlanta, and a member of HFMA's Georgia Chapter (firstname.lastname@example.org).
Richard D. Madison is a partner, Accenture's Health & Life Sciences practice, Philadelphia, and a member of HFMA's Metropolitan Philadelphia Chapter.
Tina DeMarco is a partner, Accenture's Health & Life Sciences practice, Chicago, and a member of HFMA's First Illinois Chapter.
Publication Date: Saturday, October 01, 2005