MISSION : REVENUE. Enabling Technologies for Achieving New Best Practices in Revenue Cycle Management Automation for Healthcare

Transcription

1 Enabling Technologies for Achieving New Best Practices in Revenue Cycle Management Automation for Healthcare

2 Table of Contents Executive Summary... 3 Growing Financial Challenges - A Call to Action... 4 Regulatory Response and Healthcare Consumerism... 4 The Need for New Technology... 5 Best Practices for Revenue Cycle Management... 6 Best Practice 1: Patient ID Validation... 7 Best Practice 2: Enhanced Eligibility Verification... 7 Best Practice 3: Service Authorization... 9 Best Practice 4: Critical Data Element Validation Best Practice 5: Patient Propensity-to-Pay Scoring Best Practice 6: Screening for Financial Assistance Programs and Charity Funding Best Practice 7: Estimated Patient Financial Responsibility Best Practice 8: Cash Collection and Payment Plan Best Practice 9: Stratification of Self-Pay Accounts Best Practice 10: Proactive Review of Self-Pay Accounts for Coverage Best Practice 11: Proactive Claim Status Monitoring Implementing Best Practices Technology Processes Staffing Adjustments Training Benefits and Return on Investment Case Studies Eligibility Verification - Practical Cost and Value Considerations The Next Step: Community-Based Revenue Cycle Management SM Conclusion Technology Review Acknowledgements HTP, Inc. ( ) (888) HTP info@htp-inc.com

3 Audience: This paper is intended for healthcare providers looking to improve their financial performance while increasing patient satisfaction. Special attention has been given to presenting new best practice revenue cycle processes and clearly identifying those technologies that can be implemented now to deliver an immediate ROI. Contents: 1. The pressing need to address growing financial challenges. 2. Eleven best practices for Revenue Cycle Management automation. 3. An examination of new enabling technologies to make these best practices possible. 4. A case for Community-Based Revenue Cycle Management SM. Executive Summary Collecting from patients requires investment in new technology that accesses: insurance coverage; ability to pay; bill estimation; pointof-service collection; and Financial Aid Program qualification and enrollment. This investment will provide a substantial ROI. With the rising costs of healthcare leading more insurers and employers to shift a greater share of healthcare costs to consumers, revenues directly from patients are becoming increasingly important to hospitals bottom lines. Collecting from patients, however, is significantly different than making an insurance claim. It requires that hospitals invest in new technology to support essential revenue cycle best practices required to thrive in today s financially challenging times. These best practices should begin with the patient s first encounter with the healthcare system at the time of scheduling or registration in order to: Assess the patient s insurance coverage and other financial resources Screen all patients to determine ability to pay vs. those requiring assistance Present the patient with an estimated bill itemizing his/her financial obligations Secure payment from those who can pay at point-of-service (POS) and arrange for payment terms for balance owed based on consistent adherence to the hospital s collection policies Find payment sources for those who cannot afford care (identify potential federal, state, local, private and charity funding sources) and automate the application process Following these best practices boosts hospital efficiency, reduces costs, improves patient satisfaction levels, as well as addresses regulatory requirements for pricing transparency and patient advocacy. Until recently, however, hospitals wishing to implement these best practices needed to patch together a myriad of enabling technology solutions. In addition, the pricing structures for first generation systems that verify eligibility and patient/guarantor demographic data rendered them too expensive for the full utilization required for a material ROI. Now, more comprehensive solutions are available that make it easier and less expensive to implement these best practices on a consistent basis for all patients. This white paper describes best practices enabled by new technology solutions and how they can help hospitals improve financial performance and, at the same time, increase patient satisfaction HTP, Inc. ( ) (888) HTP info@htp-inc.com

4 Growing Financial Challenges - A Call to Action 67% of hospital chief executives listed financial challenges as one of their top three concerns. Hospitals that provide pricing transparency solely based on average charges may be placing themselves at a significant competitive disadvantage. Hospitals today face growing financial challenges due to a major shift in the way they are compensated. Traditionally, healthcare providers obtained most of their revenue from insurers and government health programs; however, as healthcare costs rose 5.5 times the rate of general inflation between 1999 and 2004, insurance companies, employers, and federal government programs shifted more of these costs to consumers in the form of higher co-pays and deductibles. The percentage of employers offering health coverage fell nine percent between 2000 and while the number of Americans without health insurance coverage rose to 46.6 million people. 2 As a result, self-pay has become the fastest growing hospital revenue segment, jumping from 5% on average in 2000 to more than 10% in With the growing prevalence of highdeductible, consumer-directed health plans, self-pay could easily exceed 30% of hospital revenues by With the growth in self-pay and uninsured populations has come an increase in bad debt. Most hospitals collect between 2% and 8% of charges to uninsured patients. With overall margins averaging only 3% to 5%, hospitals can no longer afford to ignore self pay accounts. Indeed, a January 2006 survey in Modern Healthcare found that 67% of hospital chief executives listed financial challenges as one of their top 3 concerns, with 68% specifically identifying bad debt as one of their biggest issues. 4 Rise in Insurance Premium Costs Rise in Premium Cost to Employees 5.5x 4.0x 2.3x 9.2% Percentage of Self-Pay in Revenue Cycle Inflation Insurance Premium Costs Earnings Insurance Premium Costs Business Income SOURCE: Center for Practical Healthcare Reform Insurance Premium Costs % % % SOURCE: Kaiser Family Foundation Hospitals are under greater scrutiny regarding their tax exempt status. Regulatory Response and Healthcare Consumerism With consumers saddled with an increasing share of healthcare costs, state and federal governments are responding by placing additional demands on hospitals, calling for price and quality transparency, as well as increased financial aid. Price and quality transparency measures come from federal and state governments attempts to introduce a consumer-driven approach to the problem of rising healthcare costs for consumers. On August 26, 2006, President Bush signed an executive order that requires federally financed healthcare programs which represent 40% of the healthcare provided in the United States to gather information about the costs and quality of the medical care funded by federal programs and share it with consumers. Numerous state governments, including Texas, Kansas, and Ohio have passed similar initiatives. By enabling patients to more easily comparison shop for healthcare, these acts are designed to push hospitals to become more competitive HTP, Inc. ( ) (888) HTP info@htp-inc.com

5 Average charges for services have no correlation to a patient s out-of-pocket expense. Ever greater portions of a hospital s bottom line revenue is at risk without efficient patient payment collection practices in place. However, hospitals that provide pricing transparency solely based on average charges may be placing themselves at a competitive disadvantage by misrepresenting the patient s potential financial obligations. Average charges for services have no correlation to a patient s out-ofpocket expense, so any pricing transparency process must take into account two important variables: (1) the applicable contractual allowable charges for the patient based on his/her insurance coverage, and (2) the patient s specific insurance benefits, including year-to-date accumulations. Federal and state governments are also providing relief to patients who cannot afford to pay, as well as placing hospitals under greater scrutiny regarding their tax exempt status. Numerous states have recently adopted legislation in these areas. Illinois House Healthcare Availability and Access Committee recently passed two related bills: (1) The Tax Exempt Hospital Responsibility Act ensures that hospitals with beneficial tax-exemptions invest at least 8% of total operating costs in providing care for poor patients. (2) The Hospital Fair Billing and Collection Practices Act requires all tax-exempt and for-profit Illinois hospitals to avoid unfairly aggressive and harassing tactics when seeking payment from patients. The private sector is also placing new pressures on hospitals, as well as being a key driver in the expansion of healthcare consumerism. First, the introduction of Healthcare Spending Accounts with high deductibles (e.g., $5,000 to $10,000 or more) require hospitals to seek higher reimbursement directly from patients than would normally be collected from the insurance company. For hospitals that do not have efficient patient payment collection practices in place, ever greater portions of the hospital s bottom line are at risk. Second, community coalitions are being formed in many regions, often sponsored by major employers, that are seeking to influence hospital charges, pricing and quality transparency initiatives. Merely responding to these demands by posting average charges for high volume procedures on a Web site may lead to unintended consequences for hospitals because patient liabilities will be misstated. Posting average charges will not satisfy the information demands of consumers and purchasers of healthcare. A holistic and more sophisticated response is required. By deploying the right technology, hospitals can immediately begin to produce financial results. The Need for New Technology Technology has not kept up with the rapid pace of change resulting from consumer-driven healthcare. Payers continue to change the rules as to how hospitals are paid. The complex and constantly changing mix of payer and patient financial responsibility makes it very difficult for providers to understand how much they can be reimbursed and from whom. To that end, today s revenue cycle management technology suffers in the following areas: Health Information System (HIS) vendors have been focusing on clinical systems for many years and therefore their revenue cycle systems lack the functionality necessary to effectively manage the ever-evolving revenue cycle. The architecture and design of current revenue cycle software is nearly always based on a small set of transactions per patient encounter, which breaks down under large transaction volumes. Transaction-based pricing often puts a budgetary limit on the utilization of this technology. Disparate vendor technology solutions are required to successfully span the revenue cycle. Payer data is often inconsistent between the web site and clearinghouse-supplied data. Payer data lacks sufficient detail to eliminate phone calls and manual follow-up. As a result of these challenges, major portions of patient access and patient accounting functions today rely on manual labor and paper. New scalable technology is needed to implement revenue cycle best practices in a comprehensive, automated solution that increases a provider s overall net revenue by improving up-front cash collections and improving overall reimbursement HTP, Inc. ( 5 ) (888) HTP info@htp-inc.com

6 Best Practices for Revenue Cycle Management Over the past few years hospitals, consulting firms, and trade organizations have developed new revenue cycle management best practices to address today s requirements. These groups include the Healthcare Financial Management Association, the Governance Institute, and the World Congress, as well as industry publications such as Healthcare Informatics Online, Health Data Management, Consumer Directed Healthcare and Healthcare IT. This paper discusses these best practices and the required enabling technology that must be put in place in order to be successful HTP, Inc. ( ) (888) HTP info@htp-inc.com

7 Nearly one-third of patient registrations include serious demographic errors. Best Practice 1: Patient ID Validation Having the correct patient demographic information is vital for a wide range of downstream processes that include - The ability to successfully verify patient health plan eligibility. Filing clean claims and receiving appropriate payer reimbursements. Reducing fraud when patients attempt to provide false identity or inaccurate street address and phone numbers. Historically, nearly one-third of patient registrations have included serious demographic errors. By verifying all demographic data prior to service, hospitals can improve downstream processes and reduce administrative back-office costs for correcting errors. Enabling Processes and Technology for Patient ID Validation PROCESS Verify accuracy of patient s and guarantor s demographic information within HIS at time of scheduling and registration. Screen all patients for potential identify fraud. TECHNOLOGY Verify with a third-party source every patient registration (at least every 90 days) for correct name, address, and core demographic information. Process should be integrated with HIS and user approved corrections should automatically be applied to HIS. Screen patient with trusted third-party sources for possible patient-identity issues. Provide user with online real-time alerts to potential Patient ID issues. Hospitals artificially limit their use of current automated eligibility solutions because of per transaction fees. Best Practice 2: Enhanced Eligibility Verification In most hospitals today, insurance verification is still performed manually by telephone, by going to payers Web sites, or by using automated third-party services that charge on a pertransaction basis. The huge volumes of transactions that hospitals typically process result in manual verification processes being impractical. With automated systems, per-transaction costs add up too quickly. As variable costs, automated systems are difficult to budget for. Most hospitals artificially limit their use of current automated eligibility solutions because of per-transaction fees. Moreover, because payers do not return data in a consistent format, it is difficult for admissions staff to interpret benefits and engage in meaningful dialog with patients regarding their financial obligations. These limitations result in: Many encounters never have insurance verified prior to billing Verification is done only once on accounts that are checked for eligibility A large percentage of denied claims are denied because of eligibility issues and payerhospital data discrepancies Eligibility is applied incorrectly to accounts (e.g., regular Medicaid vs... Medicaid HMO) Incorrect financial class and incorrect HIS plan code assigned Missed point-of-service (POS) cash collection opportunities 2007 HTP, Inc. ( ) (888) HTP info@htp-inc.com

8 Correct eligibility determination up-front during scheduling and registration is the single most important factor impacting back-end reimbursement and cost of collection. Having correct eligibility determination up-front during scheduling and registration is, arguably, the single most important factor impacting back-end reimbursement and cost of collection. A recent HFM feature story, From a Ripple to a Wave, Why Eligibility Matters, considers eligibility verification the most critical step in driving the revenue cycle. Zimmerman s Patient Payment Blueprint considers automated insurance eligibility a key for enabling patient payment. Enabling Processes and Technology for Enhanced Eligibility Verification PROCESS Every encounter should be checked for eligibility at time of scheduling. Scheduled services re-verified hours in advance of service. Every patient encounter checked for eligibility during registration interview. Every patient encounter re-verified postregistration daily, for data quality related to insurance status applied to account. Eligibility verification should check for coverage with multiple payers in addition to primary coverage indicated by patient (or patient indicates no coverage). Eligibility verification should be performed for both patient/guarantor and spouse. Eligibility verification to be performed even if patient does not present insurance card or payer identification is not immediately known. Assignment of HIS plan code should be subjected to a 100% QA for all new patient registrations. TECHNOLOGY Real-time eligibility verification integrated with scheduling system. Provide user with consistent display of eligibility and benefit data across all payers, and provide user with online alerts to eligibility issues. Nightly batch re-verification of scheduled services. Daily exception reports of accounts with eligibility issues. Real-time eligibility verification integrated with registration system. Provide user with consistent display of eligibility and benefit data across all payers, and provide user with online alerts to eligibility issues. Daily automated QA review (re-verification) of every patient encounter with exception report listing eligibility issues. Automatically check for multiple payers at the same time with the different groups of payers processed determined by different situational conditions (e.g., financial class or employer). Automatically perform eligibility verification for patient/guarantor and spouse at the same time. Provide multiple ways to identify payer or find potential coverage, such as linking payer identity to employer, or allowing search against most common payers based on payer volumes. Analyze the payer s eligibility response against the user assignment of HIS plan code for every account and provide user with real-time alerts for possible errors. Besides the initial point-of-service (POS) eligibility checks, patients should be checked for eligibility throughout the revenue process. Automatic checks at scheduling, registration and periodically throughout the revenue cycle continually identify potential payer sources, reducing the number of denied claims and staff hours and increasing revenue through improved collection rates HTP, Inc. ( ) (888) HTP info@htp-inc.com

9 New best practices in the area of service authorization rely heavily on new technology to improve accuracy, ensure greater compliance, and perform this process with fewer staff. Best Practice 3: Service Authorization Financial penalties for improperly obtaining service authorizations can be significant, taking money directly from the bottom line. At minimum, the financial impact can be reduced reimbursement, and, in many cases, a complete write-off of an account. In today s environment, the best practice goal for a hospital is to have zero service-authorization penalties. Today s service-authorization processes often involve multiple FTEs of a high pay scale, significant operational inefficiencies (e.g., on the phone for hours with payers), and requires a great deal of manual decision making by individuals about when pre-authorization is or is not required. New best practices in service authorization rely heavily on new technology to improve accuracy, ensure greater compliance, and perform this process with fewer people. Enabling Processes and Technology for Service Authorization PROCESS Screen every service for pre-authorization requirements at time of scheduling and/or at registration. Automate process to request service authorization and retrieve payer s authorization determination. Integrate results into HIS. TECHNOLOGY Utilize a payer specific Pre-Authorization Rules Engine to determine whether a service requires authorization. The solution must: A. Provide non-clinical registration/scheduling users with a Procedure Coding Wizard to ensure high accuracy in coding services. B. Automatically examine the payer s eligibility response to ensure that the correct HIS plan code is selected so the system can apply the applicable service authorization screening rules. Utilize X transaction or automatically access payer s web site to submit service authorization and obtain payer determinations. Automatically post results into applicable data fields within HIS HTP, Inc. ( ) (888) HTP info@htp-inc.com

10 Inaccurate Critical Data Elements remain the Number One cause for claim rejection or denial. Best Practice 4: Critical Data Element Validation A persistent problem for hospitals is the high percentage of claims that payers reject due to basic data that was incorrectly gathered during registration. For many hospitals, these inaccuracies remain the Number One cause for claims being rejected or denied. Additionally, a finite number of incorrect Critical Data Elements (CDEs) result in returned mail and make it difficult to perform routine collection activities with the patient. Some of the Critical Data Elements that are frequently in error include: Patient name on claim not matching patient name on file with payer Incorrect or missing Member ID Claim submitted to wrong payer (e.g. regular Medicaid vs... Medicaid HMO) Incorrect address Missing or incorrect phone number(s) Confirming that this information has been collected and is correct at time of registration eliminates many downstream issues associated with billing payers and collecting from the patient, and increases patient satisfaction. Enabling Processes and Technology for Critical Data Element Validation PROCESS Review every encounter to make sure that all CDEs have been obtained and validated by a third party. Provide registration with regular QA feedback regarding success with gathering and validating CDEs. TECHNOLOGY Allow hospital to define the specific CDEs the system should validate. Compare CDE information contained in hospital s HIS with payer and other third-party vendors, and provide user with data discrepancy alerts. Allow the user to easily update HIS CDEs with data obtained from payer or third parties. Provide QA reports that monitor individual user s compliance with reviewing and resolving system generated CDE discrepancies HTP, Inc. ( 10 ) (888) HTP info@htp-inc.com

11 The key to reducing self-pay receivables is to utilize healthcare-specific risk scoring. Best Practice 5: Patient Propensity-to-Pay Scoring Despite all efforts to collect a patient s share of the financial responsibility at the time of service, self-pay receivables often end up as bad debt. The use of standard consumer credit scores often does not predict the risk for payment of medical bills. Patients treat medical debt differently than other debt because it can occur unexpectedly and, in some cases, their medical condition may render them unable to pay. Even collection agencies only recover about 20% of bad debt transferred to them in a timely manner. Multiple sources should be used to assess the patient s ability and probability to pay his/her bill. In addition to using traditional third-party credit bureaus, a hospital should tap into its own historical experience with the patient, as well as that of other providers within the community. Using these resources, the key to reducing self-pay receivables is to utilize healthcare-specific risk scoring to stratify patients into one of four Propensity-to-Pay categories and provide registration staff with model workflows for these patients: High Ability High Propensity Low Ability High Propensity High Ability Low Propensity Low Ability Low Propensity Patients that have ability to pay, and likely will pay Patients that have ability to pay, but may not pay Patients that have limited ability to pay, but will likely pay something Patients that have limited ability to pay, and probably will not pay anything By providing this information in a discreet, summarized format, it enables the registration staff and financial aid counselors to have the most appropriate dialogue with the patient regarding his/her financial obligations. Enabling Processes and Technology for Propensity-to-Pay Scoring PROCESS Stratify all patients into one of four propensityto-pay categories based on ability and probability of paying. Establish hospital registration interview scripts and model workflow for patients, based on patient s propensity-to-pay scoring. For example, patient A might be requested to pay X prior to discharge, and patient B might be referred to a financial aid counselor to pursue financial assistance. TECHNOLOGY Blend healthcare risk score, community risk score, and hospital-specific history with patient income to stratify patient into one of four risk categories. Provide propensity-to-pay score for all patients, and give registration staff the workflow recommendations based on patient s classification HTP, Inc. ( 11 ) (888) HTP info@htp-inc.com

12 The IRS is cracking down on hospitals that do not offer sufficient charity care to justify their tax exempt standing. New technology can help hospitals identify qualified patients, find appropriate assistance programs and automate the process of enrolling in these programs. Best Practice 6: Screening for Financial Assistance Programs and Charity Funding Some hospitals have recently been challenged regarding their level of charity care. In an in-depth study of 10 charity hospitals, Senate Finance Committee investigations found that although hospitals offer free care, they often fail to inform patients that financial assistance is available. Now, the IRS is cracking down on hospitals that do not offer sufficient charity care to justify their tax exempt standing. For example, the Illinois Department of Revenue recently moved to strip Urbana, IL based Provena Covenant Medical Center of its tax-exempt status, contending that it neither provides enough charity care nor makes it clear that charity care is available. New technology can help hospitals identify qualified patients, find financial assistance programs and automate the process of enrolling in these programs. As a result, hospitals can better meet community and IRS expectations for charity care. Additionally, most hospitals are missing significant low-hanging fruit reimbursement opportunities for many self-pay patients that are qualified for various federal, state, local and private funding sources. By helping patients enroll in various financial aid programs, hospitals can enhance revenue and reduce write-offs. Enabling Processes and Technology for Financial Assistance and Charity Screening PROCESS Universally screen all patients at time of scheduling or registration via a brief screening interview to determine if patient might qualify for any financial assistance program or hospital charity program. Detail interview of patients that were screened as potentially qualified for one or more financial assistance programs or hospital charity financial aid. TECHNOLOGY Provide users with a brief online interview that will examine answers and recommend applicable financial assistance program or charity programs that should be explored with patient. Online detail interview will further evaluate patient s qualification for various financial assistance programs and hospital charity funding sources. Information gathered during interview should pre-populate appropriate financial aid enrollment forms for the patient to eliminate duplicate entry and support electronic form submittal when possible. A recent study of uninsured patients by the Access Project at Brandeis University found that 60% of respondents needed help paying their bills, and 46% said they could not pay them at all. Yet 70% of these patients reported receiving no assistance from hospital staff in applying for financial assistance. Patient Payment Blueprint, Zimmerman 2007 HTP, Inc. ( 12 ) (888) HTP info@htp-inc.com

13 For over twenty years, dental providers have been able to obtain an accurate predetermination of benefits in advance of services. This has been a pipe dream for hospitals. Best Practice 7: Estimated Patient Financial Responsibility Historically, most hospitals up-front collection efforts have focused only on patient s co-pay and perhaps his or her deductible. Today s financial challenges see more hospitals attempting to take the next step and determine estimated charges for services at time of registration. Others are working to present the contractual allowable charges based on the payers contract with the hospital. However, the ultimate approach is to take into account the patient s benefits plan and the current year-to-date accumulation status for deductibles, co-pays, and out-of-pocket maximums. This seemingly straightforward idea of presenting the patient with an accurate estimate of his/her financial responsibility before discharge is fraught with problems due to three specific challenges: Hospital staff must determine the contractual allowable charges for services rendered Hospital staff must determine patient s current benefits and year-to-date benefit accumulations Non-clinical, front-end hospital staff must accurately code services before they are rendered in order to properly determine contractual charges, apply patient benefits and calculate an estimated pre-service bill Using new technology, registration staff and financial aid counselors are able to have dialogue with patients regarding the most accurate possible estimate of the patient s financial responsibility. This has several positive effects: Patients are more likely to pay their bills and cooperate with enrollment requirements for financial aid programs when they know their financial obligations before services are rendered. Hospital staff is able to design more reasonable and accurate payment terms. Patients are more satisfied with their hospital experience when they understand their financial responsibility pre-service rather than experiencing sticker shock when they receive their patient statement weeks or months after discharge. Enabling Processes and Technology for Estimated Patient Financial Responsibility PROCESS Present patient with estimate of patient financial responsibility prior to rendering services, or prior to discharge. This estimate will be used as basis for engaging the patient regarding POS payment, future payment plan, and potential use of various financial aid programs. Reconcile actual bill and payer s final payment with POS estimate of patient financial responsibility. Establish internal policy to define when the patient s estimate will be adjusted based on the payer s actual payment. TECHNOLOGY Three automated steps are required to automatically calculate estimated patient financial responsibility: (1) Procedure Wizard to enable non-clinical front-end staff to accurately code services to be performed; (2) Automatically identify appropriate payer contract using HIS Plan Code or some other automated identifier and determine estimated contractual allowable for services; and (3) Automatically obtain from payer description of the patient s benefit plan and year-to-date accumulations. Compare payer s remit information with estimate of patient financial responsibility to determine if variance exceeds hospital specified delta. Provide daily report listing outlier accounts and automatically re-calculate patient balance payment plans based on re-stated patient responsibility HTP, Inc. ( 13 ) (888) HTP info@htp-inc.com

14 Technology enables hospitals to present staff with the patient s recommended POS payment amount, as well as recommended monthly payments, based on hospital policies. Best Practice 8: Cash Collection and Payment Plan After determining the patient s estimated financial responsibility, the next activity is to request an appropriate payment from the patient at time of service, or before discharge, as well as establish payment terms for the remaining patient balance. Conversations with patients must consistently reflect the hospital s collection and recommended payment-amount policies. These policies can take into account a number of factors, such as: Patient s propensity-to-pay score Total income of the patient s household Financial obligations of the patient s household Additional medical expenses associated with patient s episode of illness Estimated patient financial responsibility for services provided Technology enables a hospital to present the patient s recommended POS payment amount to its staff, as well as recommended monthly payments, based on hospital policies. To perform this task, systems must analyze the patient s income, resources, and liabilities, as well as evaluate his/her credit history to assess the probability of the patient s adherence to agreed-upon payment terms. In addition to providing a tool to guide registration staff and financial aid counselors through their financial advocacy discussion with patients, these technologies ensure that a hospital s collection policies are uniformly and consistently applied, which is critical if a hospital s collection practices are scrutinized by the public or regulators. Enabling Processes and Technology for Cash Collection and Payment Plan PROCESS Provide every patient with a recommended payment amount prior to rendering services, or discharge, as well as a recommended future payment plan for any remaining balance. Recommended payments should be based on the hospital s collection policies. Provide flexible payment options for POS and future payment(s). TECHNOLOGY Based on estimated patient financial responsibility, automatically calculate POS collection amount and present user with recommended options for collection. Provide user with a payment plan calculator that will assist with preparing the payment plan. Optionally, present to user available lines of credit for use by patient for payment. Integrated ecashiering should accept credit and debit cards (with card present and card not present options), and echecks. A web portal should be available for patients to pay for scheduled services in advance of treatment, as well as post-service. Additionally, recurring payment plan payments should be auto processed (e.g., auto debit of checking account every month) HTP, Inc. ( 14 ) (888) HTP info@htp-inc.com

15 Best Practice 9: Stratification of Self-Pay Accounts Hospitals have historically been challenged to evaluate their self-pay accounts receivable (both full and residual self-pay) and efficiently identify accounts that staff collectors should work, those they should refer to an early-out vendor for collections, as well as those that they should write off after 90, 180, or 365 days. A better approach is to stratify self-pay accounts by two key variables, the patient s propensityto-pay score and account balance. Based on the categorization of these accounts, the hospital can place accounts into stratification groupings and establish specific collection workflows for each category. Below is an example of four groupings into which accounts might be stratified and workflow options: STRATIFICATION GROUPING High-dollar account high-probability to pay High-dollar account low-probability to pay Low-dollar account high-probability to pay Low-dollar account low-probability to pay SAMPLE HIGH-LEVEL WORKFLOW Accounts to be aggressively worked by staff collectors until paid in full or written off to bad debt. Accounts to be worked by staff collectors for days, then turned over to collections. Accounts to be retained in-house, but worked by an automated collector application. Accounts to be immediately referred to early out vendor. High $ Low Probability Low $ Low Probability High $ High Probability Low $ High Probability Hospitals can then implement a more detailed workflow to specify, by day, what activity should be taken on the account (phone call script, letter content, refer to collections, etc.). Hospitals can also deploy automated collection applications, such as autodialers and auto-unattended-messaging, to keep in-house low-dollar accounts with a high probability-to-pay, resulting in higher collection rates and lower agency fees HTP, Inc. ( 15 ) (888) HTP info@htp-inc.com

16 Best practice calls for various data pulls of self-pay accounts on a regularly scheduled basis. Best Practice 10: Proactive Review of Self-pay Accounts for Coverage One of the most cost-effective best practices is to frequently re-verify coverage for self-pay accounts. In spite of rigid adherence to front-end eligibility verification best practices, some accounts will slip through the cracks and be incorrectly classified as self-pay (e.g., emergency department services not verified, payer response not properly updated in HIS, or payer makes a retro-effective coverage change). Best practices call for various data pulls of self-pay accounts on a regular scheduled basis. At minimum, every self-pay account should be touched every days and re-verified for a possible change in eligibility status. Below is a sample schedule of batch processing for eligibility verification of self-pay accounts: FREQUENCY DESCRIPTION EXPECTED BENEFIT Weekly Weekly Weekly Re-check eligibility for accounts pre-listed to be referred to early-out vendor or collections. Re-check all pending Medicaid eligible accounts. Re-check all Disability Assistance Medicaid accounts. 1-2% increase in revenue Decrease outstanding Medicaid AR by 30 days or more Increase revenue and decrease billing errors Monthly Re-check all bad debt accounts. Increase revenue Monthly Re-check all charity accounts. Increase revenue Quarterly Re-check all Medicare accounts for dual- Medicaid coverage. Increase revenue by.5% or more You want to have your vendor cap your costs, not your transactions. Eligibility verification solutions based on a per-transaction pricing model can quickly wreak havoc with operational budgets. When using an integrated eligibility service at the point-of-service combined with large-volume batch processing, it is critical to have an eligibility verification vendor with a subscription-based fee. This allows you to process an unlimited number of transactions for a fixed monthly cost. When following these best practices, a hospital may average between 5 and 10 eligibility inquiries per patient encounter. In short, you want your vendor to cap your costs, not your transactions HTP, Inc. ( 16 ) (888) HTP info@htp-inc.com

17 Focus on payment management, not denial management! Best Practice 11: Proactive Claim Status Monitoring Hospitals have traditionally created follow-up worklists for claims based on payer, claim amount, and number of days since the account was billed. This process has inherent inefficiencies that cause collectors to waste considerable time on accounts merely to obtain status from the payer. A better approach is to provide collectors with a follow-up worklist of claims upon which they can take immediate action to facilitate clearance and payment. This best practice involves two enabling technical capabilities: Starting 3-5 days after claim submission, continuously generate automated claim status queries to payers (e.g., auto check two times per week) Create payer-specific worklists of claims pending for actionable reasons Payers will use HIPAA 276/277 claim status transactions differently, depending on which pend codes they use, so any claim follow-up worklists must be payer specific. This approach will enable collectors to focus their efforts on accounts they can influence, also allowing them to gather claims released by payers days or even weeks sooner than current processes. Claim status monitoring can also be used to quickly identify denied claims and payer-specific exception worklists can be created to enable collectors to focus their appeals activities with payers on accounts where there is greater likelihood that the denial will be reversed. One example of how proactive claim status monitoring works is an electronic claim for $30,000 submitted for a patient who is a 20-year-old dependent. When the claim loads into the payer s claim system and auto adjudicates, it will check to see if full-time student status for the patient has been updated within X number of days. If not, the claim system will automatically pend the claim with a reason code indicating Updated Student Status Required. When this claim appears on the collector worklist 2-3 days after submission, they can work directly with the guarantor to submit the required full-time student status confirmation so the payer can release the claim HTP, Inc. ( 17 ) (888) HTP info@htp-inc.com

18 Technology allows a hospital to do more itself, reducing its reliance on third parties or outsourcing vendors to collect what it is owed. Implementing Best Practices To effectively implement these eleven best practices, hospitals need a combination of the right technology infrastructure, business process re-engineering, possible staffing adjustments and a commitment to retrain staff. Technology Experience has shown that the optimal technologies for implementing these best practices are web-based, open, easy-to-integrate with current systems, scalable, and user-friendly. Web-based technologies simplify distribution of the solution to the people who need it. Instead of having to install software (and perform any necessary upgrades) on every PC, IT departments can simply a web site address to an authorized user. This dramatically reduces the time and cost of implementation. Open technologies that support industry standards enable hospitals to easily exchange data between the system and other applications. Easy two-way integration with current systems enables hospitals to deploy the system more quickly and see a faster return on their investment. Scalable technologies allow hospitals to continue to use the system as the organization grows. Usability enables hospitals to train end users more quickly, thereby achieving a faster return on investment. Processes Modern technologies enable hospitals to eliminate manual processes or perform tasks impossible to consider otherwise. However, technology by itself will not achieve desired results. Hospitals must re-engineer their workflows to take advantage of this improved efficiency, which can be a costly and significant undertaking. Hospitals must keep in mind the inefficient reality of past practices in order to resist the temptation to cut corners, and to fully implement the changes necessary to ensure their financial health. Staffing Adjustments Many hospitals will find that existing front-end staff are not qualified to perform all the recommended financial best practices. As a result, they will need to consider staffing patient access areas with onsite financial aid counselors. Some hospitals will choose to have registration staff assume new financial counseling duties. Others will distinguish registrar and financial aid counselor duties along the following lines: SCHEDULER/REGISTRAR Traditional scheduling/registration tasks Critical data element validation Brief financial aid screening questionnaire FINANCIAL AID COUNSELOR Estimate patient financial responsibility POS collection Prepare payment plan for patient balance Conduct detailed financial aid interview Financial aid/charity enrollment Training With more sophisticated intake processes comes the need for hospitals to retrain their staff to collect the right data from patients and to interpret and act on data from payers. Hospitals also need patient counseling staff trained to proactively counsel and advocate for patients to help them meet their financial obligations, including being comfortable with asking the patient for payment. With such training, staff can improve collection rates and enhance patient satisfaction HTP, Inc. ( 18 ) (888) HTP info@htp-inc.com

19 Benefits and Return on Investment (ROI) By following these best practices, hospitals gain benefits in insurance verification, patient advocacy, claims processing, improved collections, lower staff costs and increased patient satisfaction. Insurance Verification Gains Gathering patient demographic and insurance information prior to the patient s appointment streamlines downstream processes and reduces administrative costs for correcting errors, and results in faster payment from payers. Better eligibility management of critical data helps hospitals minimize claims denials. Checking eligibility for all self-pay patients, and continuing to do so after service, helps identify patients who are in fact covered, enabling hospitals to recover more revenues. Patient Advocacy Gains The ability to request payment at the point of service increases likelihood of collecting the patient s financial responsibility. Stratifying patients by payment risk level allows hospitals to more effectively focus their collections efforts, improving productivity and revenues and reducing outside collection costs. Accurately determining eligibility for financial assistance and automated enrollment processes enable hospitals to better meet their obligations for patient advocacy and financial assistance as well as improve patient satisfaction. Claims Status Monitoring Gains Proactive claims status monitoring addresses problems early, enhancing the likelihood of payment, accelerating reimbursement from payers, and reducing AR days. Actionable claims follow-up worklists maximize collectors productivity and focuses their efforts on the most productive accounts for intervention. ROI Case Study Results: The Ohio State University Medical Center Medicaid Batch Processing Impact Benefits to OSUMC # of Accounts Result Self-Pay Accounts with Found Coverage Charity Accounts with Found Coverage Bad-Debt Accounts with Found Coverage Medicaid Pending Accounts Billed 1 to 6 Weeks Earlier than with Previous Vendors $1.7M Paid New Revenue 660+ $1.5M Paid New Revenue 770+ $550K Paid New Revenue $11.6M ROI Case Study Results: Healthcare Provider Impact Analysis Review of Outstanding Self-Pay Against Medicaid for Previous 6-12 Months Hospital Eligibility Hit % Total $ Eligibility Estimated Reimbursement A 5% $20,464,000 $5,116,000 B 8.6% $9,983,000 $1,996,550 C 15.4% $4,159,000 $832,000 D 6.4% $4,123,000 $1,031,000 E 3.9% $2,044,000 $511,000 F 16.7% $1,610,000 $322,000 G 7.1% $1,472,000 $368, HTP, Inc. ( 19 ) (888) HTP info@htp-inc.com

20 Eligibility Verification Practical Cost and Value Considerations The vendor s pricing model is a key consideration when selecting an eligibility verification product. There are two basic options: per-transaction or fixed-fee pricing. Per-transaction pricing makes it very difficult to gain the full benefits of a verification service, regardless of features or functions. In effect, hospitals pay a penalty each time they use the eligibility service. FIXED-FEE ADVANTAGES Predictable monthly expenses Staff encouraged to maximize use Multiple checks to minimize leakage Maximize ROI Enables adherence to best practices PER TRANSACTION DISADVANTAGES Unpredictable monthly expenses Artificial self-imposed usage limits Significant missed revenue opportunities Reduced ROI * Are You Paying Hidden Charges? Many payers allow multiple search types to identify patients in their system (three to five search options is common). As a valueadded service, many vendors send multiple queries for the same patient using these different search types. However, each search entails an additional per transaction fee. As a result, the hospital might think it has spent $0.25 for an inquiry, but the actual cost might be $0.75 to $1.25. Current Per Transaction Model (See Chart A) Until recently, per-transaction pricing was the only option available to hospitals. It is hard to predict the monthly cost of a solution that charges for each transaction. As a result, hospitals have been reluctant to use these services, generally sending a single eligibility inquiry for each patient encounter. They seldom re-check open self-pay accounts. Even when management encourages broader use of eligibility services, front-line staff members often artificially limit checking due to their concern over accumulating unnecessary costs. Self-imposed limits on usage, variability of monthly fees and unexpected costs* are very real issues for hospitals paying a fee for each eligibility transaction. Although this model can deliver a positive return on investment, most hospitals using it miss out on an opportunity to collect thousands or even millions of dollars in revenue each month. Fixed Fee Pricing Model (See Chart B) Current industry best practices suggest that eligibility should be checked at least four times prior to the final bill, and that self-pay accounts should be re-checked aggressively on a regular basis 5. Eligibility inquiry volumes could average five to 10 transactions per patient encounter. With fixed-fee pricing, cost is not an issue. As a result, hospitals minimize leakage, accelerate reimbursement and maximize collections, generating a much-higher return on their investment in eligibility services. Chart A Current Per Transaction Model Chart B HTP Fixed-Fee Pricing Model Cascade Search Payer Groups Monthly Self-Pay Review Pre-Charity Pre-Bad Debt Pre-Collection Pending Medicaid 2007 HTP, Inc. ( 20 ) (888) HTP info@htp-inc.com