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From 1996 to 2006, the amount of national uncompensated care delivered by registered community hospitals went from $18 billion to more than $31 billion per year, according to American Hospital Association. HFMA notes that the rise in uncompensated care is "boosting health systems' bad debt to the point of making a significant dent in their revenue, enough to get dinged by ratings agencies." At the same time, according to the Association, the reporting of charity care and bad debt has come under scrutiny as health systems blamed the influx of consumer-directed health plans, along with growing numbers of the uninsured, for the trend.
However, while both charity care and bad debt are components of uncompensated care and have a negative effect on a provider's bottom line, confusion in the classification of each is at the root of reporting problems. According to HFMA, "the complexities of charity care policies and the difficult task of documenting charity care qualification have generally resulted in many charity care patients being classified as bad debt. The practice of reporting bad debts at gross charge also has led to reported bad debt trends often significantly above revenue or expense growth.
The AHA defines uncompensated care as "an overall measure of hospital care provided for which no payment was received from the patient or insurer. It is the sum of a hospital's "bad debt" and the charity care it provides." Uncompensated care excludes other unfounded costs of care such as underpayment from Medicaid and Medicare. Scott C. Withrow, Esq., Partner in the law firm of Withrow, McQuade and Olsen, LLP, who serves as an advisor to hospitals and physicians on healthcare compliance, sums up the difference this way:
"With bad debt there is an assumption at the time the care is rendered that the debt will be paid, while with charity care the provider knows in advance that payment will not be made, but provides the care anyway. Bad debt happens when a patient presents at a health care facility and requests care. The facility provides the care in good faith and bills the patient, who doesn't pay. The facility tries to collect and is unable to do so. The bill has to be written off as a bad debt."
HFMA's December 2006 "P&P Board Statement 15: Valuation and Financial Statement Presentation of Charity Care and Bad Debts by Insitutional Healthcare Providers," is intended to clarify and address Congressional and legal questions about the charity reporting practices of tax-exempt hospitals and to recommend "best accounting and financial reporting practices for uncompensated care." In the introduction, the document points out that as "the magnitude of unreimbursed care grows, so does the urgency to report uncompensated care-and to distinguish between charity care and bad debt-clearly and comparably [however], the urgency of some treatments, as well as certain federal regulations, often requires the provision of service without consideration of the ability to pay.
The confusion in reporting uncompensated care is complicated by new Internal Revenue Service (IRS) requirements about how such care is reported. In December 2007, the IRS released an updated Form 990 for tax-exempt organizations, with a new schedule designed specifically for hospitals. The IRS is phasing in Schedule H for the 2008 tax year, and will require it mandatory in the 2009 tax year. To comply, hospitals have the 2008 tax year to ready themselves by assessing their charity processes and related reporting in order to meet the 2009 requirement.
According to Bruce Nelson and Jordan Levitt, with the firm of SearchAmerica, a company that predicts payment and provides automated charity, Medicaid, other government program processing, believes the timing of the new schedule is not surprising. On the firm's Web site, they write that, "Hospitals have come under more and more scrutiny by the IRS and the Senate Finance Committee to justify their tax-exempt status by demonstrating how they benefit their community. Many legislatures and government officials are lobbying for tighter standards for hospitals to keep their status."
They go on to note that Senate Finance Committee Chairman Max Baucus (D-Mont) and Sen. Charles Grassley (R-Iowa) have both expressed concern over the overcharging of uninsured patients, the allocation of too few resources to charity care, and overstatements of the amount of free care provided. Baucus believes that hospitals should allocate at least five percent of their annual revenues to free care for those unable to pay.
According to Nelson and Levitt, Form 990 is forcing hospitals to reassess their charity care programs, if they haven't already. "The evaluation should be two-fold, examining the process itself and the measurement of a successful program."
From an accounting standpoint, charity care and bad debt cannot be co-mingled. The reporting for each must be documented and reported separately. However, as a practical matter, how uncompensated care is rendered and documented can affect how it is classified, and that sometimes happens after the provision of care. HFMA's Statement 15 notes that Emergency Medical Treatment and Active Labor Act, (EMTALA) regulations requiring the provision of emergency care before discussing patient financial information, combined with the potential for medical indigence that develops after the time of service, make it more appropriate for the provider to define a window of eligibility for their charity care policy, based on community needs and the facility's available resources."
Robert F. Hill, Jr. FACHE, Principal of Health Strategies & Solutions, Inc., a healthcare strategy firm, notes that information provided by a patient or family member at the time of service may indicate that the patient qualifies for a charity care program that allows the bad debt to be reclassified and reallocated after the fact.
The key to being able to take advantage of such reclassification is accurate and timely gathering and documentation of information from patients and their families at the time of service. Hill says the most common mistake providers make is not accurately documenting the date and procedure. He offers the following strategies to avoid this common pitfall:
HFMA's Statement 15 reminds providers that while they should make "every practical effort to make charity care eligibility determinations before or at the time of service (in compliance with state agency and reimbursement requirements regarding them, they can be made at any time during the revenue cycle, and there should be no rigid time limit for when they are made, because in some cases, eligibility is readily apparent, while in other cases, investigation is required, particularly when the patient has limited ability or willingness to provide needed information."
The document also cautions that in gathering information about charity care eligibility, providers should ensure their financial communications and counseling are clear, concise, correct, and considerate of the needs of patients and family members, in accordance with the principles of the PATIENT FRIENDLY BILLING® project, a nationwide initiative to improve financial communications with patients.
Accurate and timely record keeping is just as important for reporting bad debt. HFMA offer the following:
Given the ever-growing numbers of the un-and underinsured, rising healthcare costs, and fewer employers offering their employees third-party health coverage, what trends can providers expect to see in the future? Health Strategies & Solutions' Hill says simply: "There will be more of it, due to a struggling economy and inflationary pressures, unless the government steps in with a bailout."
In the meantime, Withrow, who has written two books for the American College of Healthare Executives' (ACHE's)Health Administration Press (Managing Health Care Compliance and Managing HIPPA Compliance) sees more private foundations bailing out hospitals. "In Atlanta recently, Grady Hospital, a major trauma center, which serves a large population of uninsured, went through restructuring then received $200 million which allowed it to stay afloat."
However, he also predicts that increasingly, patients are seeking to obtain free primary care by going to the emergency room for routine primary care. This coupled with a growing population of uninsured people is creating a deluge of charity care liabilities for hospitals.More on Uncompensated Care...
Publication Date: Thursday, June 05, 2008
In this Business Profile, Bruce Haupt, president and CEO of ClearBalance, discusses how a patient loan program can increase patient collections, reduce bad debt, and speed cash flow.
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
In this Business Profile, Jerry Bruno, principal with Deloitte Consulting LLP, discusses the importance of choosing revenue cycle solutions that help an organization meet the challenges of a quickly evolving healthcare environment.
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
In this business profile, Lane Jackson, a partner in the Grant Thornton LLP Health Care Advisory Services practice, with extensive experience in overseeing system implementations and revenue cycle reorganizations, discusses best practices for elevating revenue cycle performance during an EMR implementation. Grant Thornton LLP is a sponsor of the Large System Controllers Council Affinity Group.
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
In this business profile, Amy Gross, senior vice president of Key Government Finance, discusses the benefits of private placement transactions to support large-scale financing projects.
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
In this business profile, Doug Polasky, executive vice president at Xtend Healthcare, explains the importance of having sound workflow processes in a consolidated business office to ensure optimal performance and reduce costs.
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
In this business profile, sponsored by SSI, Jay Colfer, vice president of sales and marketing, shares how patient access solutions are reversing the trend toward increased bad debt resulting from the rise in high-deductible consumer health plans.
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
In this business profile of Deloitte Consulting, Matthew Hitch and David Betts explore the potential benefits of elevating the customer experience and outline strategies to change service delivery.
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
TriMedx helps health systems control costs and uncover savings opportunities by optimizing the clinical engineering function.
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
A leader from McKesson discusses how healthcare reform is forcing hospitals and health systems to take a different approach to capacity management and patient flow.
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.
Announcements from several commercial payers and the Centers for Medicare and Medicaid Services (CMS) early in 2015 around increased efforts to form value-based contracts with providers seemed to point to an impending rise in risk-based contracting. Rather than wait for disruption from the outside in, health care providers are now making inroads on collaborating with payers on various risk-based contracting models to increase the value of health care from within.
Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.
Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.
As the critical link between patient care and reimbursement, health information enables more complete and accurate revenue capture. This 5-Minute White Paper Briefing shares how to achieve cost-effective revenue integrity by your optimizing HIM systems.
Speedier cash flow starts with better CDI and coding. This 5-Minute White Paper Briefing explains how providers can improve vital measures of technical and business performance to accelerate cash flow.
Qualified coders are getting harder to come by, and even the most seasoned professional can struggle with the complexity of ICD-10. This 5-Minute White Paper Briefing explains how partnerships can help improve coding and other key RCM operations potentially at a cost savings.
The point of managing your revenue cycle isn’t just to improve revenue and cash flow. It’s to do those things effectively by consistently following best practices— while spending as little time, money, and energy on them as possible.
How Lucile Packard Children’s Hospital Stanford increased payments received within 45 days by 20% and reduced paper submission claims by 70% by using ZirMed solutions.
The reasons claims are denied are so varied that managing denials can feel like chasing a thousand different tails. This situation is not surprising given that a hypothetical denial rate of just 5 percent translates to tens of thousands of denied claims per year for large hospitals—where real‐world denial rates often range from 12 to 22 percent. Read about how predictive modeling can detect meaningful correlations across claims denials data.
Emergency Mobile Health Care (EMHC) was founded to be and remains an exclusively locally owned and operated emergency medical service organization; today EMHC serves a population of more than a million people in and around Memphis, answering 75,000 calls each year.
Since the Physician Quality Reporting Initiative (PQRI) introduction, CMS has paid more than $100 million in bonus payments to participants. However, these bonuses ended in 2015; providers who successfully meet the reporting requirements in 2016 will avoid the 2% negative payment adjustment in 2018, so now is the time to act! Included in this whitepaper are implications of increasing patient responsibility, collections best practices, and collections and internal control solutions.
Getting paid what your physician deserves—that’s the goal of every biller. Yet even for the best billers, achieving that success can be elusive when denials stand in the way of success, presenting challenges at every turn. Denials aren’t going away, but you can learn techniques to manage and even prevent them.Join practice management expert Elizabeth W. Woodcock, MBA, FACMPE, CPC, to: Discover methods to translate denial data into business intelligence to improve your bottom line, determine staff productivity benchmarks for billers, and recognize common mistakes in denial management.
From payment incentives to value-based purchasing penalties, the national focus in healthcare is on improving patient care and lowering costs. Coordinating care for patients as they move from one care setting to another can help meet these goals, but the greatest success will come when the patients healthcare providers work together. By enhancing a team approach to care and providing cost efficiencies, partnerships between acute and post-acute settings benefit patients and the healthcare providers taking care of those patients.
Physician practices must improve organizational efficiency to compete in this era of reduced reimbursement and escalating administrative costs.
Many healthcare organizations are pursuing next-generation health information systems solutions. Learn more about Navigant's work with University of Michigan Health System.
HFMA's print, email, online, and mobile opportunities provide you maximum reach and impact. We will work with you to build a plan that meets your needs. Contact a sales rep.
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Drive down costs while improving quality in a reform environment.
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