By implementing a patient-centered financial model for its acquired ambulatory surgery center, a health system in Virginia has increased up-front collections, reduced bad debt and write-offs, and maintained patient satisfaction.
Payment rates are constantly declining, health professional labor costs are increasing, the latest technological equipment requires capital investment, and many patients find themselves struggling to pay their bills in the face of rising deductibles, copayments, and coinsurance—which together can pose a compounded financial challenge for some patients. Meanwhile, for providers, the combined impact of all of these factors underscores the need to collect patient payment, which has never been more crucial.
Once patients have received a service or completed treatment, they are much less likely to pay. A 2009 study by McKinsey & Company found that, after services are rendered, providers collect only 50 to 70 percent of the time from insured patients and 5 to 10 percent of the time from self-pay patients. a Collecting in this manner also costs time and money. Health plans pay twice as quickly as individuals, and a 2013 McKinsey study notes that the average cost of sending an additional bill to patients is $25. b To complicate healthcare finance even further, McKinsey also notes that 15 cents of every dollar spent on health care goes to claims processing, payments, billing and revenue cycle management, and bad debt.
After providers make multiple unsuccessful attempts to collect balances from patients, the balance is either sold to a collection agency at a substantial discount or written-off as bad debt. U.S. hospitals lost out on $45.9 billion in uncompensated care in 2012, and only a quarter of that amount came from self-pay patients. c This loss jumped to $46.4 billion in 2013. d As bad debt increases, providers are forced to make difficult business decisions such as delaying the purchase of new equipment or hiring additional staff, raising their prices for the patients who do pay, freezing staff pay, and the like.
The Case Study
In 2014, Winchester Medical Center, a 455-bed Level II trauma center and the flagship hospital for the Winchester, Va.-based, health system Valley Health, acquired a for-profit ambulatory surgery center (ASC) and transitioned it into a not-for-profit hospital outpatient department (HOPD), called the Surgi-Center at Winchester Medical Center (the Surgi-Center). The HOPD has six operating rooms (ORs) and is the venue for more than 5,300 surgeries each year.
As part of the conversion, the hospital conducted an internal review of the facility’s operations. Through that review, the hospital found that patient eligibility was verified, pre-registration phone calls were made three days in advance, and most patients were asked for a $50 surgical deposit. Patients with coverage by Blue Cross Blue Shield (BCBS) were asked to pay a portion of their out-of-pocket responsibility up front. Uninsured patients were asked to pay half of their surgery cost up front, and patients scheduled for cosmetic procedures were required to pay a flat-rate price in full up front.
To increase efficiency, a new patient access team, comprising five hospital employees, was created to identify opportunities for improvement and implement necessary changes. For example, the HOPD was using information systems that could verify patient eligibility for a number of commercial health plans and government payers, thereby creating an opportunity to provide cost estimates to patients with coverage other than that provided by BCBS.
A review of processes surgeons’ offices were using to post surgical cases to the schedule uncovered another opportunity. In most instances, cases were posted with ample notice, making it possible to make pre-registration phone calls in advance of the standard three-day lead time. The team also found that other areas throughout the hospital were requesting $200 deposits for outpatient procedures, so the amount of the Surgi-Center’s deposit was raised for consistency.
Another opportunity for improvement was to change the way the facility served uninsured patients. Such patients require financial education, payment options, and screening to qualify for hospital financial assistance. To create an incentive for these patients to pay up front, the hospital implemented a 30 percent discount for uninsured patients, and introduced two additional prompt-pay discounts: Patients who pay their estimated out-of-pocket responsibility prior to surgery receive a 10 percent discount, and patients who pay their bill in full within 30 days of receiving it receive a 5 percent discount.
To take advantage of opportunities for improvement and clearly define the role of each team member, the patient access team developed the Surgi-Center Patient Access Model, designating a member of the team for each of the following roles:
- Patient access intake specialist (PAIS)
- Patient access finance specialist (PAFS)
- Patient access authorization specialist (PAAS)
- Patient access pre-registration specialist (PAPS)
- Patient access registration specialist (PARS)
Under the model, although each team member fulfills a specific role in a progressive series of steps, the members are cross-trained on the other members’ roles so that they understand how their parts of the process fit with the others in the progression.
PAIS. Once the operating room (OR) scheduler (who is not a patient access employee and falls under clinical supervision) posts a surgical case, the PAIS creates the patient’s chart. This process involves documenting the correct procedure(s), accurate CPT code(s), and the patient’s current insurance(s). Although the Surgi-Center does use an electronic health record, a paper chart is used to accommodate the need for patients to sign a paper consent form for the anesthesiologist. This physical chart also holds the original surgical consent and copies of pre-operative tests that must be reviewed by the medical team.
PAFS. Once the chart has been created, it is passed on to the PAFS, who researches the insurance benefits and generates the financial cost estimate, based on OR time using a program that allows the estimate to be matched with the facility’s contract rates. The PAFS uses the program to access the facility’s contracts and it averages the charges for all procedures using the same CPT code. These charges include not only OR time but also additional charges such as anesthesia supplies, medications, and ancillary tests performed as part of specific procedures (e.g., pathology tests for biopsies and X-rays for hardware implants).
Because the contract rates are less than the billed charges, patients are quoted a lower expected out-of-pocket amount up front than what they were quoted under the previous system. The lower estimate contributes to improved patient satisfaction and, by extension, a reduced probability that a refund will need to be issued. Smaller, accurate estimates have led to more patients taking advantage of the 10 percent prompt-pay discount. When patients pay before their procedure, the facility receives the payment, on average, about 30 – 45 days earlier compared to the traditional process of waiting for the insurance company to pay and then billing the patient for the remaining balance. From an accounting perspective, the hospital saves money because the account is no longer a receivable requiring follow-up.
PAAS. After the financial estimate has been generated, the PAFS passes the chart on to the PAAS, who is charged with verifying the surgical authorizations. Fulfilling this role is complicated because the surgeons’ office staffs ultimately are responsible for obtaining the authorizations but are not accountable to the Surgi-Center’s policies and procedures because the surgeons are not employed by the facility. This situation is further complicated by the fact that some patients need both surgeon and facility authorizations.
Although the Surgi-Center is not charged with obtaining surgeon authorizations, it is responsible for ensuring patients do not get through their procedure without authorizations, which could result in costly financial write-offs. Hence, the PAAS is charged with calling each patient’s insurance company and asking a company representative to check the CPT code to determine if pre-authorization is necessary or with looking online to determine whether this requirement exists. The PAAS also is charged with contacting the surgeon’s office if a discrepancy is found or if the surgery date is within the next few days and no authorization request is currently on file.
Occasionally, an authorization is still pending or is not obtained prior to the surgery date. In such a scenario, the PAAS informs the patient, giving the patient a choice to postpone the procedure or to sign a financial waiver if the patient’s health plan contract allows for such an approach. Financial waivers, when permissible, are signed on the day of surgery, allowing patients to undergo procedures with the understanding that the patient will pay for the surgery out-of-pocket should a pending authorization be denied or if the surgeon’s office cannot obtain approval from the insurer after clinical review and/or peer-to-peer review.
PAPS. Once the chart has passed the pre-authorization checkpoint, it then moves to the PAPS, who registers the patient by phone, verifying demographic and insurance information, obtaining emergency contacts, and advising the patient on what to bring on the day of surgery. Patients also are advised of their estimated financial responsibility and what options they have to meet it during this phone call. PAPS use a financial script to ensure that every patient receives this pertinent information and to guide the PAPS on how to continue the financial conversation if a patient expresses an unwillingness to pay. Further, the PAPS explains that the estimate provided is for the Surgi-Center only and that the patient will have a separate responsibility to pay the anesthesiologist and surgeon.
If a patient expresses concerns about being unable to pay for surgery, the PAPS explains the hospital’s financial assistance policy and sends the patient an application. The completed application is sent to a financial counselor in the Valley Health Corporate Business Office and is rush-processed so patients know before surgery whether they are eligible for assistance. The Surgi-Center has found this process to be extremely helpful in boosting up-front collections and reducing bad debt. Patients also are very pleased to get this information early, rather than weeks after their procedures. This financial screening helps the Surgi-Center collect payments but also helps patients make informed choices about moving forward with their care.
PARS. On the day of surgery, the PARS activates the hospital account record and obtains a signed facility consent form. This person also fully registers anyone who did not complete a pre-registration by phone. The PARS also collects pre-payments (documenting whether the patient should receive the prompt-pay discount) and ensures that a financial waiver is signed by patients who lack a pre-authorization.
Since implementing the Surgi-Center Patient Access Model in April 2014, third-party denials, write-offs, and bad debt have decreased without affecting patient satisfaction scores. Most significant, however, has been the increase in up-front collections. Actual collection amounts from April 2014 to June 2016 are shown in the exhibit below.
Up-front Collections After Implementing the Surgi-Center Patient Access Model
When the Surgi-Center operated as an ASC, internal reports showed that average monthly upfront collections ranged from $18,000 to $23,000. Since implementing the model in April 2014, monthly collections have been in this range only twice; all other months have exceeded this range by no less than 25 percent (May 2014) and by as much as 530 percent (March 2016). Average monthly collections more than doubled from April to December in 2014 with a mean of $44,439.89. The average has continued to climb significantly: it was $75,638.49 in 2015, and it reached $94,110.64 in the first six months of 2016. Over the 27-month performance measurement period (April 2014-June 2016), the cumulative monthly average was $69,343.88, which is more than triple the average monthly collections the ASC experienced before being acquired by Winchester Medical Center.
Cumulative total up-front collections for the 27-month time period were $1,872,284.73. If one considers that as an ASC, the facility collected $23,000 per month for 27 consecutive months, that would have yielded a cumulative total of $621,000. Therefore, the net gain in cumulative collections has been, at a minimum, $1,251,284.73. These dollars are up-front collections only and do not include insurance payments or payments on account after surgery.
A Continuing Trend
As the growing trend of increased patient out-of-pocket responsibility continues, hospitals and health systems will be under increasing pressure to collect money up front as a means of managing their revenue cycle. Each dollar that is not collected up front will turn into a dollar of accounts receivable (A/R), and A/R collections have associated costs, with the potential that every dollar could turn into bad debt. By implementing a comprehensive patient access strategy, healthcare organizations can focus on up-front collections and thereby substantially reduce the need to chase after payments on the back end of the revenue cycle.
Jeffery B. Dallas, Jr., MBA, CHAA, is patient access team lead at the Surgi-Center at Winchester Medical Center, Winchester, Va.
a. Finn, P., Pellathy, T., and Singhal, S., “U.S. Healthcare Payments: Remedies for an Ailing System.” McKinsey on Payments, April 2009.
b. Bayley, M., Calkins, S., Levine, E., and Machado-Pereira, M., Hospital Revenue Cycle Operations: Opportunities Created by the ACA , McKinsey & Company, May 2013
c. Heckler, C., “How Much Are You Paying Your Collection Agency?” Valify, May 19, 2015.
d. American Hospital Association, “Uncompensated Hospital Care Cost Fact Sheet,” January 2015.