Jim Bohnsack
Scott Hawig

Technologies that accurately predict a patient's financial responsibility, combined with effective staff training and benchmarks for collections performance, can enhance revenue and satisfaction.

At a Glance

Healthcare organizations should keep three key considerations in mind when selecting and implementing a pricing transparency tool:

  • The approach that the tool will take (e.g., claims-based or contract-based)
  • The training required of staff
  • The benchmarks that will be used to measure performance, ROI, and satisfaction of patients and staff

A short while ago, a not-for-profit, academic health system faced increased demand from patients for estimates of what they might pay for care and services. To meet the demand quickly, revenue cycle staff used spreadsheets based on charges and historical averages to manually render estimates. Although these efforts satisfied the immediate need for estimates, they also resulted in some unintended consequences for the health system: Staff became insecure about asking for the amount predicted in the estimates because they did not trust that the estimates were accurate. Meanwhile, problems related to the accuracy of patient estimates began to affect patient satisfaction.

The digitization of healthcare information, as well as the evolution of patients into consumers, has created a new world in which patients are more assertively requesting information that will help them determine where they spend their healthcare dollars. One of the biggest challenges hospitals and health systems face is pricing transparency: providing accurate estimates of a patient's financial responsibility for care and services after insurance has paid its portion.

When hospitals or health systems do not have systems in place to provide accurate estimates to patients, patient satisfaction declines and point-of-service collections are put at risk. Ironically, many healthcare providers spend days and weeks ensuring that healthcare outcomes and clinical experiences are positive for patients and then risk unwittingly destroying those good feelings through their collections processes. Effectively managing all aspects of the patient experience-including experiences with revenue cycle staff-is a critical strategy for today's hospitals and health systems.

Today, a number of technologies exist that can enhance pricing transparency for hospitals and health systems and support higher rates of point-of-service collections. Healthcare organizations should keep three key considerations in mind when selecting and implementing a pricing transparency tool:

  • The approach that the tool will take (e.g., claims-based or contract-based)
  • The training required of staff
  • The benchmarks that will be used to measure performance, ROI, and satisfaction of patients and staff

Approaches to Patient Estimation

Enhanced pricing transparency can improve the financial performance of hospitals and health systems by giving revenue cycle staff the tools with which to prepare accurate estimates and the confidence to request payment from patients at the point of service. It also can lead to improved satisfaction for patients and staff.

A June 2011 survey of healthcare finance professionals at ANI: The HFMA National Institute found that point-of-service collections-and consequently, a hospital's bottom line-are greatly compromised by a lack of preparedness and awareness on both sides of the payment equation.

Seven out of 10 healthcare finance professionals who were surveyed reported that their hospitals or health systems collect less than 30 percent of patient balances up front. According to survey respondents, the biggest challenges for collecting payments at the point of service are determining what is owed (37 percent of respondents) and preparing staff to ask for payment (35 percent of respondents).

In theory, collecting from patients at the point of service should be easier than tracking down patients after care and services have been provided and collecting payment after discharge. The challenge with point-of-service collections has always been the unknown: What services will actually be provided? How will the claim be adjudicated by the payer? How much of the patient's deductible has already been met? Today, estimation solutions are using the power of technology to remove much of the uncertainty in this process and allow end users to feel confident in requesting payments for future services.

Two approaches to patient estimation are available in the market today: claims-based and contract-based systems.

Claims-based systems use historical paid claims data to project payment patterns for a given service by a given health plan. The benefit of a claims-based system is that it can be implemented quickly. Its drawback is accuracy of the data that are used. Managed care contract terms and payer adjudication logic change annually and can render historical claim data meaningless. Complicating matters, if a statistically significant sample is not available for the rendering provider, payer, and service combination, how can an accurate estimate be projected? Although an estimate based on historical data is better than no estimate at all, the shift to consumerism in health care is creating more of a demand for accuracy.

Contract-based systems require a slightly longer implementation period, but have greater accuracy than claims-based systems. Under this approach, managed care contract terms for a healthcare organization are modeled in an effort to accurately reflect the adjudication logic of a payer. Hospitals and health systems that select this approach should remember to update contract terms regularly, as managed care contract cycles tend to vary. Most vendors in the market support the modeling of contracts on behalf of the healthcare provider.

Regardless of the approach your organization chooses, it is important to ensure that the solution incorporates insurance eligibility and benefit transactions as part of the estimates that are calculated. A standard Health Insurance Portability and Accountability Act (HIPAA) 270/271 transaction set contains important input information necessary to deliver an accurate estimate. Outside of confirming coverage for the date of service, information related to the copay, co-insurance, and deductible also should be obtained for the service that is about to be rendered. If a patient has met his or her deductible prior to service being rendered or is not covered for a particular service, the accuracy of the estimate can be compromised.

It is important to remember that the accuracy of the estimate ultimately depends on the input information used to calculate the amount owed. Variances in estimates are most commonly caused by complications related to care or service and by out-of-date information related to the patient's deductible.

As estimation tools continue to evolve, additional capabilities are being added. One such enhancement is the integration of third-party data sources to improve the collections process. Integrating third-party data sources-including address verification, ability to pay, and probability of financial aid-increases the confidence of the registrar in the estimation process. Within an estimation solution, registrars can ensure they have the correct patient, determine how much that patient will owe, and either collect from that patient or refer the patient to a financial counselor for alternative payment arrangements. Understanding how much a patient owes is important, but understanding the patient's capacity to meet that obligation is equally important. In cases where the patient cannot pay, proactively identifying programs such as Medicaid or charity reduces the cost to collect and improves patient satisfaction.

Roll-Out Strategies

With any technology implementation, it is critical for the healthcare organization to determine its roll-out strategy. Should the organization adopt a "big bang" approach and implement the solution at every registration point? Or should the organization undertake a phased approach to implementation, identifying the areas where the highest risk for collections exists and deploying the solution in those areas first?

Phasing in implementation of an estimation product is a prudent approach. The organization should start by identifying areas with poor point-of-service collection performance and lower throughput. Any task added at the point of registration has an initial impact on throughput. To minimize the impact on patient wait times, it is important to perfect training and process flow in areas where throughput is not as intense. The lessons learned regarding the initial impact of the system on patient wait times and the learning curve required for registrars in these areas will help your organization better plan for implementation in high-throughput areas, such as the emergency department and primary care clinics.

A health system may face challenges related to its culture-both internally and externally-as new point-of-service strategies and solutions are introduced. Loyal patients may not be used to the formality of a written patient estimate and may not understand the terms and specific data used to determine the patient's liability. Conversations with front-end staff regarding what aspects of the approach are working well in relations with consumers and where opportunities for improvement exist will enable the organization to adjust its approach to better meet the needs of consumers.

Answers to financial questions from patients are often complicated, and these financial conversations can be awkward if staff are not properly prepared and given the most accurate and up-to-date information with which to respond. To orient staff with the new technology and processes for point-of-services collections, it is vitally important to provide training to the leaders who manage front-end staff as well as to the staff members themselves.

Creating a group of "super-users" of the technology prior to go-live will help drive successful adoption by staff and will provide staff with a resource to go to when they have questions regarding how to navigate the system. As users become more comfortable with the estimation tools, their confidence in asking for payments will increase. Accurate data can help staff answer patients' questions, reducing the potential for disputes and thus creating more efficiency throughout the process.

Another way to help achieve consistent messaging across all requests for payment is to offer a script to front-end staff. This script should be adjusted over time based on feedback from patients and staff. Offering role-playing and mock scenarios to staff can help in developing a streamlined, tested approach for dealing with the escalation process for exceptions and complaints they might encounter from consumers.

Scripts for registrars can be provided within the estimation solution or as a crib sheet at the registration desk. The following is an example of a script for point-of-service collections:

Mr. Jones, we currently have you scheduled for a hip replacement and show that you have coverage with Blue Cross. Under your benefits with Blue Cross, we show that your responsibilities include a $1,000 deductible and 10 percent co-insurance. Were you aware of those obligations? Blue Cross indicates that you have met $500 of your deductible year to date. When combining the remaining $500 of the deductible with the 10 percent co-insurance, we anticipate that the total amount you will owe for your procedure is $600. Let me walk you through the estimate letter and see if you have any questions.

With no further questions, I would like to remind you that this is an estimate, and there may be additional charges that we cannot predict. If that does occur, we will send you a patient statement after we receive payment from Blue Cross. So how would you like to pay for the $600 owed for the services to be rendered today? We accept cash, checks, and all major credit cards.

The use of scripting, role playing, and training are all important for a successful implementation. To obtain the expected results, the entire organization must support the initiative, from the board of trustees to the registrars.

So how did the health system mentioned at the beginning of this article fare in its approach to improving point-of-service collections? Key stakeholders were on board with implementing the new technology; their only hesitation was the use of third-party ability-to-pay data derived from a credit report. The fear was that a credit inquiry would have a negative impact on a patient's credit report, which would have a detrimental effect on patient satisfaction. The use of credit data for point-of-service collection purposes by a healthcare organization results in a "soft-credit inquiry" to a patient's credit report-an inquiry that is only visible to the patient, not to other lenders, and which has no impact on the patient's credit scores or creditworthiness.

It is important to educate the organization's leaders, front-line staff, and patients on the facts regarding the use of credit data in a healthcare setting. Doing so empowers the registrar to craft the right message and approach for each individual. For example, the last thing any organization wants is for staff to have a point-of-service collections conversation with a patient who may qualify for a support program due to indigence.

Measuring the Success of the Initiative

What is the risk of implementing technologies that support point-of-service collections? There are typically few unintended consequences. In fact, many health systems have noted that the use of such technologies has resulted in improved employee and patient satisfaction. One key to success is extensive training on the art of collection discussions. Continuous training and refinement of the processes surrounding the technology also will ensure that the appropriate outcomes are achieved.

There is a proven financial impact of point-of-service technologies and strategies in health care: Health systems that implement such technologies and tactics have the potential to move the rate of point-of-service collections from 1.2 percent to 1.8 percent, resulting in revenue that might otherwise have been lost. For example, the health system highlighted above has already experienced a reduction in bad debt and an increase in use of its charity care program, resulting in more positive patient experiences.

To highlight the value of point-of-service technologies and approaches, it is important to establish qualitative and quantitative benchmarks and to report on them frequently. These metrics may include the following.

Point-of-service collections as a percentage of total payments received from the patient. Collections should include patient payments posted within three days of the date of service/admission.

Accuracy of estimates. Compare the estimate history with total patient payments received for an account; compare total payments received and estimates against patient responsibility amounts in an electronic remittance advice/explanation of benefits for the account.

Cost to collect. Measure the total cost to collect on self-pay accounts before and after implementation. Include business office staff, overhead allocations, agency payments, postage, letters, and telecom.

Patient satisfaction. Use surveys to assess the sentiment of consumers before and after implementation.

Associate satisfaction. Measure employees' satisfaction with the new process. Gain suggestions from employees on how to improve the technology, training, and processes.

Physician satisfaction. Gauge the sentiment of physicians and collect the anecdotal feedback they are receiving from their patients before and after implementation.

ROI. Track the financial results and compare them with the investment made.

Reduction in the cost to collect. By moving the process to the front end of the revenue cycle and making it part of the preregistration/registration process, the number of collectors and the amount of agency expenses associated with collecting balances on the back end of the revenue cycle both can be reduced.

Overall, investment in and successful implementation of point-of-service collections technologies and strategies can have a lasting impact on a health system's core way of doing business. In fact, some health systems that rely on point-of-service technologies and strategies are using their investment as a competitive advantage over health systems that have not adopted this approach. Changes to the point-of-service collections process can result in improved front-end collections and streamlined processes that have a positive impact for patients, employees, and the organization.

Jim Bohnsack is vice president, TransUnion Healthcare LLC, Chicago, and a member of HFMA's First Illinois Chapter (jbohnsa@transunion.com).

Scott Hawig, CPA, is COO, Duke University Health System, Durham, N.C., and a member of HFMA's North Carolina Chapter. Formerly, he was vice president, finance, for Shands HealthCare at the University of Florida (scott.hawig@duke.edu).


Publication Date: Monday, September 03, 2012

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