Financial Policies for Uninsured and Underinsured Patients: Tools and References

These are references and tools that support the report from the PATIENT FRIENDLY BILLING Project: Hospitals Share Insights to Improve Financial Policies for Uninsured and Underinsured Patients. HFMA does not endorse, approve, certify, or control these external Internet addresses and does not guarantee the accuracy, completeness, efficacy, or timeliness of information located at such addresses.

Read the report

Worksheet for Reviewing Financial Assistant Policies

This tool seeks to help hospitals consider the myriad aspects of discounting and collection policies for uninsured and underinsured patients. It can help ensure that your organization has a clear, sustainable policy for meeting the needs of your community. It is structured to also help you create the basis of a work plan for ensuring that the policy decisions are disseminated and implemented throughout your organization.

Studies on the Uninsured and Underinsured

“Tough Trade-offs: Medical Bills, Family Finances and Access to Care,” Center For Studying Health Systems Change, June 2004  

"Paying for Health Care When You're Uninsured: How Much Support does the Safety Net Offer?" the Access Project,January 2003

"Medical Debt and Access to Health Care," Kaiser Family Foundation, September 2005

"It's the Premiums, Stupid: Projections of the Uninsured Through 2013," Health Affairs, Todd Gilmer and Richard Kronick, April 4, 2005

Employer Cost Shifting

“Employers Shift Rising Health Care Costs to Workers: No Long-term Solution in Sight,“ Center for Studying Health Systems Change, May 2004

Affordable Insurance

"Health Benefits in 2005: Premium Increases Slow Down, Coverage Continues to Erode," Health Affairs, Jon Gabel, Gary Claxton, Isadora Gil, Jeremy Pickreign, Heide Whitmore, Benjamin Finder, Samantha Hawkins and Diane Rowland, 2005

“Is Health Insurance Affordable to the Uninsured?” National Bureau of Economic Research, May 2003

Medicare Issues

Medicare Implications of Discounts to the Uninsured,” hfm, August 2004 

Cost Shifting to Other Payers

“Cost-Shifting: New Myths, Old Confusing, and Enduring Reality,” Health Affairs, Michael A. Morrissey, October 8, 2003

“Government Regulations Contribute to Medical Debt of Uninsured and Underinsured,” The Commonwealth Fund, June 4, 2003

Gross Charges and Uninsured Patients

"Making Prices Makes Sense: A Balanced Approach to Defensible Prices," hfm, July 2005

HFMA Roundtable: A Strategy for Defensible, Sustainable Prices," hfm, May 2005

"Strategic Price Setting: Ensuring Your Financial Viability Through Price Modeling," Healthcare Financial Management Association, June 2004

Testimony on trends in hospital pricing, presented during the House Ways and Means Health Subcommittee hearing on hospital pricing and the uninsured by Glenn Melnick, PhD, Director, Center for Health Financing, Policy and Management, University of Southern California, School of Policy, Planning and Development, March 09, 2004

“Hospital Billing Practices for Uninsured Patients,” Medical News Today, November 9, 2004

The IHSP Hospital 200: The Nation’s Most–and Least–Expensive Hospitals, Institute for Health and Socio-Economic Policy, June 2003

Uncompensated Care Policy Guidelines

State hospital associations, consumer organizations, and other groups have created guidelines and recommendations for the development of uncompensated care policies and procedures. Links to these documents are listed below, as well as examples of publicly available charity care policies from hospitals around the nation.

State and Regional Organizations

State hospital association links, the American Hospital Association web site

Hospitals

HCA

Provena Health

Rush University Medical Center

 
Federal Poverty Guidelines

HHS Poverty Guidelines, Measurement, and Research web page, with links to the most recent HHS poverty guidelines and frequently asked questions.

HUD income limits webpage

Example Policies for Underinsured Patients from Five Surveyed Hospital Systems 

1. Underinsured patients can qualify for charity care, payment plans and prompt  payment discounts on the self-pay portion of the bill. 
2. Underinsured patients under 100% FPL can qualify for discounts on self-pay portion of the bill
3. Patients can qualify for discounts when self pay portion due equals 70-90 percent of the patient’s annual income.
4. Current policy applies only to the uninsured but the system is in the process of expanding the same discount policy to the underinsured
5. Written policies apply to uninsured only but underinsured patients may be covered using different hospital funds.

                                                                                                                                                   Example Policies on Establishing Patient Ability to Pay from Six Surveyed Hospital Systems

1. Uses a credit-reporting agency to evaluate assets and liabilities. Policy does not vary by income level or the or cost of services.
2. Requires asset test on inpatient admissions and high dollar outpatient procedures. Credit reports are the main source of information used in evaluating a patient’s overall financial ability to pay for medical services.
3. Liquid assets (savings, stocks, bonds, money markets, etc) above $2500 are assumed available to pay for hospital bills. This does not apply to patients under 100% FPL.
4. Currently requires asset test for accounts over $5,000. For smaller accounts, rely on income attestation forms. Considering dropping asset test requirements for non-Medicare population.
5. Uses asset test in three circumstances: (1) Medical hardship determination, (2) income is greater than 400 percent FPL, and (3) Medicare patients.
6. No assets tests are required, even for Medicare patients (this system does not file for Medicare bad debt reimbursement).
   

Example Steps to Check Eligibility for Financial Assistance

“Charity Care in Wisconsin Hospitals,”  State of Wisconsin Consumer Guide to Healthcare. See Section “How do hospitals check on eligibility?”

Example Policies for Patient Responsibilities from Three Surveyed Hospital Systems

1. Patient must supply income verification information before discounts are granted.
2. Patient must supply documentation for financial statement, notice of denial for public aid, copy of outstanding medical bills, prior year tax return.
3. Patient must provide all requested documentation.

Example Policies on Determining Medical Indigency from Surveyed Hospital Systems

Surveyed systems take the following factors into account in determining medical indigency:

• The amount owed by the patient in relation to his/her total means.
• The medical status of the patient or of his/her family.
• The employment potential of the patient in light of his/her medical condition and/or skills in the job market.
• The likely emotional and medical impact of financial indebtedness upon the patient and family.
• Whether the patient lives on a fixed income.
• Existing liabilities such as a mortgage, school tuition, or automobile or college loan.
• The effect a catastrophic illness has on the ability of the patient to work.

Example Definitions of “Medically Necessary” and "Eligible Services"

Medically Necessary Services

• A service that is reasonably expected to prevent, diagnose, prevent the worsening of, alleviate, correct, or cure conditions that endanger life, cause suffering or pain, cause physical deformity or malfunction, threaten to cause or to aggravate a handicap, or result in illness or infirmity. Medically necessary services shall include inpatient and outpatient services as mandated under Title XIX of the Federal Social Security Act. Medically necessary services shall not include: (a) non-medical services, such as social, educational, and vocational services; (b) cosmetic surgery; canceled or missed appointments; (d) telephone conversations and consultations; (e) court testimony; (f) research or the provision of experimental or unproven procedures including, but not limited to, treatment related to sex-reassignment surgery, and pre-surgery hormone therapy; and (g) the provision of whole blood; provided, however, that administrative and processing costs associated with the provision of blood and its derivatives shall be payable.
  
• Any inpatient or outpatient hospital service that is covered by and considered to be medically necessary under Title XVIII of the federal Social Security Act. Medically necessary services do not include any of the following: Non-medical services such as social, educational and vocational services, or cosmetic surgery.
• Physician ordered standard-of-practice care that is required to treat an illness or condition, and is not cosmetic or experimental in nature.

Eligible Services

• “Non-elective and medically necessary”
  
• “Inpatient, emergency, and other non-elective care”
  
• All medically necessary services (undergo a clinical approval process) for state residents, emergency/urgent services for out-of-state residents. Service limits defined in regulations governing the state’s Uncompensated Care Pool (UCP).

Examples of How Hospitals Determine Charges to the Uninsured/Underinsured

• Bill patients based on discounts from gross charges.
  Discounts vary by income level
• Use Medicare rates or other price points.
• Package plans offered to uninsured patients for elective services (not dependent on income).
• Fixed rate prices and elective price packages negotiated up front for some services.
• For inpatient services, the lower of charges or discounted Medicaid rates. Flat rate for clinic visits based on income level.

Communicating Charity Policies

“Communicating with Patients,” AHA 

Four Examples of Patient Education Brochures

Georgetown Hospital System

Clear Lake Regional Medical Center 

Fletcher Allen Health Care

Advocate Good Shepherd Hospital

Other Patient Communication Resources                                                    

Patient Communication Examples, The Patient Friendly Billing Project

Patient Friendly Billing Focus Group Research Summary, November 2001

 Communicating Community Benefits

“Community Benefit Reporting - Guidelines and Standard Definitions for the Community Benefit Inventory for Social Accountability,” VHA and Catholic Health Association, 2005 from the HFMA Internet Guide for Uninsured Billing & Collections organizations.

Example Communication Methods and Cultural Competency of Surveyed Hospital Systems

Communication Methods

• Brochure in English and Spanish and signage in patient access areas (English and Spanish). The HIPAA patient consent form will be updated to contain language about financial aid.
• Brochures and information packets including financial responsibility and contact numbers. Includes information necessary for financial assistance.
• Full page ads in newspaper related to charity care.
• Press releases put out when the new charity care policy was announced - no advertising or signage for policies.
• Signs and general information letters but no formal educational materials because programs and eligibility criteria are complicated - encourage patients to contact the Patient Financial Services.
• Signs are posted in inpatient, ambulatory, emergency admission/registration areas and in business office areas used by patients. Notices are printed on the back of all statements. Massachusetts Free Care regulations require signs to inform patients of availability of free care and where to apply for such care.

Cultural Competency

• Translator services are available at the hospital. Collection agencies are required to have translators as well. Bills and signs are in multiple languages. 
• Financial assistance application, financial assistance eligibility determination form, and approval and denial letters are available in Spanish.
• Use call line to handle multiple languages.

Example Collection Procedures from Eight Surveyed Hospital Systems

• The hospital attempts to contact patient, followed by mailing two letters from either the hospital or an eligibility vendor. Then the early out/extended business office cycle of 3 letters and 2 contacts is completed. Collection agencies cannot take legal action to collect without written consent. 
• The hospital attempts to work with the patient to resolve their debt through a letter and call series using internal resources. If the patient cannot get financial assistance, establish acceptable payment arrangements or resolve the debt, the account is placed with an external collection agency. The placement timeframe is typically around 150 days after services are rendered.
• For inpatient accounts the process of referring an account to a collection agency is subjective and is based on the number of statements sent to the patient and the patient's willingness to cooperate with the process. Outpatient accounts are referred to collections after 5 letters are sent to the patient.
• Accounts are sent to collections after the dunning cycle is completed and accounts are at least 120 days old.
• Send patient two letters in 30 days; if there is no response the account is sent to collections. The collection agency sends 2 pre-collect letters within 10 days.
• The hospital sends 2 additional patient statements and final notice advising the patient that the account may be referred to a collection agency. The hospital attempts to contact the patient by telephone, personal contact notices and/or collection letters. Patients qualifying for full, partial or Medical Hardship are exempt from collections. Accounts under $500 are written off to bad debt.
• Patient accounts are placed with a collection agency 220 days after the account is assigned to the extended business office agency. Accounts of patients working to obtain charity care or Medicaid eligibility are not placed with an outside collection agency during the review process.
• Patient accounts are placed with a collection agency after 120 days, though under certain circumstances it may be less than 120 days. The hospital does not initiate billing to patients until all insurance resources are exhausted. Once the initial bill is generated, the hospital follows up at 30, 60, 90 and 120 days.

Examples of Allowable Legal Actions from Five Surveyed Hospital Systems

• The hospital places liens on high dollar self-pay accounts in 3rd party liability or workers compensation cases. Liens on patient property based on judgments are only used as a last resort with patients who are determined to have the resources with which to pay their medical bills, but refused to cooperate with the hospital and collection agencies to make good-faith efforts to settle their debts. No legal actions are taken against patients cooperating with process to apply for aid.

• Do not seek wage garnishments but do occasionally place liens on homes.

• The hospital files suit and attempts to obtain judgment on accounts meeting specified legal suit criteria if the collection agency has been unable to resolve the debt. The hospital sometimes obtains a lien on homes valued over $300,000.

• No liens on primary residences.

• Hospital places liens on high dollar self-pay accounts when a third party liability is involved.                                                                                                                             

Examples of Hospital System Oversight of Collection Activities

• The hospital trained its contracted collection agencies in its new charity policies and procedures, requires its firms to have translation assistance and forms and letters in multiple languages, approves all attorneys used by its collection agencies, verifies licensure and compliance status of all agencies and attorneys, encourages agencies to identify charity patients and implemented a standardized lawsuit authorization screening form.

• Collection agency procedures are subject to review by and require approval from the hospital business office. Agencies found to use unethical or unorthodox collection tactics are contractually subject to termination of their vendor relationship. The system requires direct linked access to collection agency files and systems in each agency vendor agreement.

• The hospital must give its collection agencies permission to take legal action.

• Collection agencies have authority to pursue legal action without hospital approval.

• Collection agencies are under strict instruction to refer potentially eligible patients to the hospital's free care department.

Examples of Staff Training

• Very detailed training process for registrar and front line staff was completed to train staff about new policies
• Training provided for hospital staff as well as staff who process free care requests in the business office. Customer Service staff and Collections staff are instructed to refer cases for free care when appropriate.

Legal References

HHS Questions and Answers on Discounts and Collections to the Uninsured, February 17, 2004

Letter from the Secretary of Health and Human Services to the President of the American Hospital Association, February 19, 2004

Guidance on Hospital Discounts Offered to Patients who Cannot Afford to pay their Hospital Bills, HHS Office of Inspector General, February 2, 2004 

“Medicare Implications of Discounts to the Uninsured,” hfm, August 2004

Commonwealth Fund: Unintended Consequences: How Federal Regulations and Hospital Policies Can Leave Patients in Debt, June 2003

Other Charity Care Resources and Studies

"Today's Charity Care Challenges: What Should You Be Doing?" Healthcare Financial Management Association, September 2005

"Acts of Charity: Charity Care Strategies for Hospitals in a Changing Landscape," PricewaterhouseCoopers, May 2005

"Stresses to the Safety Net: The Public Hospital Perspective," Kaiser Family Foundation, June 2005

Ready-To-Use Presentations

PATIENT FRIENDLY BILLING® Focus on the Uninsured
Use this presentation to brief your institution's executives or board on the February 2005 Patient Friendly Billing Project report on improving financial policies for uninsured and underinsured patients, plus updates through June 2005 PowerPoint.