Revenue cycle leaders need to prepare now to avoid bad debt problems related to the newly insured patients from the exchanges.

The slower-than-expected enrollment through public health insurance exchanges may have a silver lining: It gives revenue cycle leaders extra time to fine-tune procedures to avoid big problems when exchange-purchased insurance becomes more common.

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A key culprit is confusion, says Richard Madison, vice president-revenue cycle at Crozer-Keystone Health System, Springfield, Pa. “Without trained staff available to help patients, it’s going to become a self-pay nightmare for a lot of hospitals.”

Many newly insured patients do not understand common insurance concepts, such as coinsurance, deductibles, and in-network versus out-of-network. Another problem is the high out-of-pocket costs for consumers who choose low-premium plans offered on the exchanges. Bronze plans, which have the lowest premiums, can have annual out-of-pocket costs of up to $6,267 for an individual and $12,569 for a family (see the exhibit on page xx).

RCS-0214-Butcher-Self-Pay Snapshot for Insurance Exchange Plans

To prevent bad debt and to protect patients from incurring healthcare bills that they cannot afford, revenue cycle leaders need to take some proactive steps to avoid or address collection problems.

Prepare for Likely Scenarios

While it’s difficult to predict every issue that might arise with the new exchange plans, revenue cycle leaders should be ready to deal with these likely scenarios, say experts.

Uninsured eligible patients. One potentially common scenario might be patients who are eligible for insurance via the exchanges but who have not enrolled. Crozer-Keystone prepared for this challenge by sending about a dozen staff members—financial counselors, patient access managers, and staff from financial clearance—to be trained as certified application counselors (CACs.) “In the event that we are talking to uninsured patients who want to schedule or register for a service, we can help guide them through their options,” Madison says.

To help patients apply for coverage, hospitals need to be certified as CAC organizations, according to requirements from the Centers for Medicare & Medicaid Services. After Crozer-Keystone received certification, it sent the staff members for a free, five-hour training course, and each staff member passed an online test to qualify as a counselor. 

In-network versus out-of-network coverage. Many consumers buying insurance through the exchanges are choosing narrow provider network plans in exchange for lower premiums. Indeed, when McKinsey & Co. conducted simulations of the exchange purchasing experience to forecast buyer behavior, its researchers found that 55 percent chose lower-cost plans with narrow or tiered provider networks. Even those shoppers who chose more expensive plans chose non-broad networks (Bauman, N. et al, Winning Strategies for Participating in Narrow-Network Exchange Offerings, May 2013). 

Affordable Care Act regulations cap a patient’s annual out-of-pocket expense for in-network care, but the patient’s responsibility—and the hospital’s exposure—is unlimited for care delivered out-of-network. Some newly insured patients will not understand that their coverage is limited to certain providers. “Front-line staff must know how to educate the patient about the difference in out-of-pocket responsibility,” says Terry Rappuhn, project leader, HFMA’s Patient-Friendly Billing® project.

Staff should be coached to think like a patient, she says. “What would you want to know and what help would you need if you tried to come to an out-of-network hospital for services?” she says. “Patients are, knowingly or unknowingly, making a decision to pay more for out-of-network services. If you want their cooperation when it comes time to pay, then you need to let them know what that decision costs.”

Verification specifics. In this narrow-network era, a hospital that has a contract with an insurer may not be in the network for all the insurer’s plans. “All your front-line people need to be trained to recognize what kind of plan the patient has and know whether that patient is in-network or out-of-network,” Rappuhn says.

That makes it essential that each hospital refine its verification procedures. In some states, a patient’s insurance card may be marked with a code that indicates his or her plan was purchased via the exchange. That notifies patient financial services staff that they need to verify whether the hospital or physician is in the network for that patient’s plan.

While verifying exchange-based insurance, frontline staff may have to perform more investigative work than usual to determine the limits of the policy, says Chad Mulvany, HFMA’s director of healthcare finance policy, strategy and development. “Try and get an understanding of what the contract looks like and what the patient’s responsibility is going to be,” he says. “That is going to be key to avoiding a lot of the back-end headaches.”

Staff should also ask the insurer whether the patient’s premium is delinquent and, if so, whether it is more than 30 days delinquent, says Robert T. Hoover, director of revenue cycle at Meadville Medical Center Health System in Pennsylvania. Providers may be at risk for services provided to patients who have not paid their premiums.

Beyond that, technical problems in the launch means some enrollments did not reach the insurers. “Patients will think they have coverage, and the insurance company may or may not have a record of it,” says Rappuhn.

Patient financial services staff need to know how each marketplace insurer intends to handle patients who think they are insured even though the company does not have a record. Find out what documentation the insurer will require the patient to have to honor the policy. “Be a patient advocate and a solution-finder,” she says.

In the early months of the exchanges, patients can sign up for coverage that will start at the beginning of the next month. Perhaps staff should be trained to ask those patients who want to schedule services before the policy is actually in effect if they wish to delay services until they know for sure that the policy is in place. “If so, make sure the physician agrees,” she says. “Most patients will be grateful for your help resolving coverage issues.”

Referrals and preauthorizations. “It is critical that we continue learning about and monitoring changes in each individual plan,” Hoover says.

Many plans sold through the exchanges will require that patients obtain a referral to a specialist from their primary care physicians, although specialty practices may not be familiar with the requirement. “Those claims will be denied and what happens to the advanced testing that may have come out of that specialty appointment with no PCP referral? Will that be denied as well?” Hoover says. “Upfront staff have to be held accountable to ensure that PCP referrals are obtained and documented, which means more staff education and monitoring.”

Likewise, obtaining preauthorizations for procedures and services will be required for some plans purchased via the exchanges, Hoover says. Hospitals must train preregistration staff to obtain those authorizations and devise a protocol for situations in which a service has been scheduled but preauthorization is not in place. Options are to reschedule the service until authorization has been obtained or to require the patient to sign a statement agreeing to be financially responsible for the service if it is denied.

The patient’s responsibility. In the early days of exchange enrollment, silver plans were emerging as the most popular option. On average, those plans carry a $2,907 deductible for an individual and $6,078 for a family, according to HealthPocket, a company that analyzes health insurance plans.

“It’s very likely that the individuals buying these plans won’t understand that they are on the hook for this much money,” Mulvany says. Considering that the U.S. median household income is about $50,000, those deductible levels will be difficult for many patients to pay, he says. Hospitals must provide good estimates of a patient’s out-of-pocket responsibility before scheduling elective care so that patients understand what they will be expected to pay.

Both Crozer-Keystone and Meadville currently provide upfront estimates; Crozer-Keystone is acquiring new technology this year to enhance that effort, and Meadville may add web-based software that would allow patients to obtain price estimates online.

“This will require a team effort between primary care physicians, specialty physicians, and hospitals to educate the insurance-exchange beneficiaries on the magnitude of their financial responsibilities for the health care that they are requesting, as well as the authorizations required,” Hoover says.

These conversations must occur early enough that the patient has time to make a decision. Patients may be able to reduce their responsibilities by changing the site of care, opting for a less expensive treatment, or foregoing care that may not be worth the expense. “You need to give people the opportunity to make a choice where they can make a choice,” Mulvany says.

Both Crozer-Keystone and Meadville created brochures that are placed in hospitals and clinics to help newly insured patients understand the financial responsibility that comes with insurance, as well as the availability of financial assistance and charity care.

Access related tool: Crozer-Keystone Patient Brochure: Understanding and Managing Your Health-Care Costs

“That is just a start,” Hoover says. “We will need to take our education efforts out into the communities that we serve.”

Upfront collections. Newly insured patients—or those who are eligible for insurance but have not yet applied—may be in the habit of going to the emergency department (ED) for a wide range of healthcare services. That is why Crozer-Keystone is assigning a financial counselor with CAC certification to work in the ED during its busiest hours.

The Emergency Medical Treatment & Labor Act requires hospitals to provide emergency care to patients regardless of their ability to pay. But the financial counselor at Crozer-Keystone can help uninsured patients sign up for coverage and will also be responsible for collecting self-pay amounts from newly insured patients who are unaccustomed to paying anything for care delivered at the ED. “They are now going to have that copay that they may not have had before, so we need to explain that,” Madison says. “And we’re going to be asking them for a payment.”

That is the right approach, Mulvany says. “Give patients a reasonably accurate estimate and start the collections process by asking them how they want to pay it.”

Unpaid premiums. Some consumers who buy insurance through the exchange qualify for a subsidy to pay their premiums. Consumers who pay the first month’s premium in a timely manner can have a 90-day grace period—and some plans have extended that a bit—to pay the next premium before insurers can drop their coverage; however, individuals will be considered “delinquent” during the grace period.

Providers are at risk of non-payment for services rendered during that last 60 days of the 90-day grace period. Insurers will pay for services provided during the first 30 days of delinquency, but they will not pay claims after the first 30 days. If the full premium payment is not received by the end of the grace period, the consumer will be dropped from coverage and pended claims may not be paid.

That means providers should anticipate bad debt stemming from patients who have not paid their premiums, Hoover says. To help protect patients from unexpected bills, providers must help them understand their financial obligations in advance. To help protect the health system, a reserve fund should be started.

“We need to conservatively estimate a reserve for uncollectable amounts due to failure of the beneficiary to pay their monthly premiums,” he says. “Maybe we start with reserving an amount in the order of 25 percent of net revenues (coming from patients who purchased insurance through the exchanges) until we have more experience.”

Charity care policies. Every hospital should review its charity care and financial assistance programs to decide whether—and in what circumstances—a patient’s balance after insurance can be covered by one of those programs.

At Crozer-Keystone, a patient’s balance after insurance can be covered by charity care or financial assistance if he or she meets the eligibility criteria. Charity care applies if a patient’s income is at or below 200 percent of the federal poverty level (FPL). Financial assistance on a sliding scale is available if the patient’s income is between 201 percent and 400 percent of the FPL.

“For the facilities that don’t have charity care policies for balance after insurance, I certainly think they need to think about making a change,” Mulvany says. “Otherwise, they are going to have a lot of patient balances written off as bad debt when, in reality, it probably is not bad debt because there was never any chance of collecting it in the first place.”

Rappuhn encourages revenue cycle leaders to analyze their early experiences with patients newly insured via the exchanges and adjust their charity care policies accordingly. On the one hand, an increasing number of patients with insurance should bolster the hospital’s finances. On the other, an increasing number of patients who cannot pay their out-of-pocket medical expenses may overburden the charity care fund.

“CFOs have to do this balancing between ‘Can I afford to give this discount to all these patients?’ and ‘I have fewer uninsured patients,’” she says. “CFOs need to really focus on this
in the early months to figure out the pluses and minuses to the organization. Then determine the policy and train the staff to carry it out.”

Make Patient-Friendly a Priority

Revenue cycle leaders should a keep patient-friendly perspective in mind as they develop their policies and train their staff to interact with newly insured patients, Mulvany says. Consumers are increasingly sensitive to hospital prices, and newly insured patients may become easily alarmed about a large hospital bill.

Mulvany encourages revenue cycle leaders to adopt HFMA’s Patient Financial Communications Best Practices to minimize avoidable communication problems. The best practices address patient financial communications in several settings: before service, in the ED, and at other points of care.  

“It’s not hard for me to imagine a newly insured patient getting a bill, feeling sticker shock, and calling the local newspaper or TV station with their complaint,” he says. “Suddenly you’ve got ‘12 On Your Side’ doing an exposé of your hospital pricing, all because of one patient’s deductible. Hospitals need to put policies and practices in place to make sure that that doesn’t happen.”

Lola Butcher is a freelance writer and editor based in Missouri.

Interviewed for this article:

Robert T. Hoover is director of revenue cycle at Meadville Medical Center Health System, Meadville, Pa., and a member of HFMA’s Western Pennsylvania Chapter. 

Richard Madison is vice president-revenue cycle, Crozer-Keystone Health System, Springfield, Pa., and a member of HFMA’s Metropolitan Philadelphia Chapter. 

Chad Mulvany, HFMA’s director of healthcare finance policy, strategy and development. 

Terry Rappuhn is a former hospital system CFO and corporate board member, Nashville; project leader, HFMA’s Patient-Friendly Billing® project; and a member of HFMA’s Tennessee Chapter. 


Publication Date: Saturday, February 01, 2014