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The Advisory Board Company Managing Self-Pay in the Current Economic Environment Best Practices and Self-diagnostics February 16 th 19 th, 2010 2010 The Advisory Board Company

The Nation s Preeminent Health Business Solutions Company 2010 The Advisory Board Company 2

Roadmap for Discussion Proactive Management of Self-Pay Patients Gauging Operational Performance Tools and Self- Diagnostics 2010 The Advisory Board Company 2

5 Facilitate Enrollment in Public Services Aiding a Community-Wide Effort Social Services Administration Hospital Jointly-Sponsored Enrollment Fair Medicaid SCHIP 1 Ensuring Appropriate Care Setting Expanding Access to Care Career Counseling Resume Development Unemployment Insurance Information on Importance of Preventive Care Health Coverage NGO 1 State Children s Health Insurance Program. Source: Financial Leadership Council Interviews and analysis.

6 Hardwire Public Insurance Eligibility Screening Processes Funding Source Identification Process 3.1 Minutes 40-60 Minutes 1 Eligibility Check 2 Funding Source 3 Identification Online software tool targeted at uninsured ED patients Tool prompts financial counselor to ask key eligibility-related questions Case in Brief Seton Family of Hospitals Tool produces list of funding sources for which patient is eligible Can integrate with hospital electronic health record Multihospital system based in Austin, Texas Uses screening software to determine self-pay patients eligibility status for multiple public funding sources Can significantly increase cash collection by helping identify Medicaid reimbursement dollars retrospectively Program Enrollment Staff member calls patient to enroll in public insurance program Over 85 percent of screened patients enrolled in a funding program 1 State Children s Health Insurance Program. Source: Financial Leadership Council Interviews and analysis.

Maintain Patient Insurance Coverage Over Course of Treatment Funding Patient Premiums Premium Fund Process March April May Identify Patient Social worker recommends patient for insurance aid 1 Associate medical director approves care, use of donated funds Save Insurance Patient s premiums paid through treatment cycle, usually 2-3 months Philanthropic funds used to pay premiums Receive Reimbursement Patient receives treatment Hospital collects approximately 35% of charges from insurer Case in Brief Gresham Medical Center 2 A 800-bed health care system in the Mid-Atlantic Found that one uninsured cancer patient can exceed $40,000 of unreimbursed care over a three-month period Uses a philanthropic treatment fund to pay premiums and save insurance of cancer patients at risk of losing coverage due to employment problems 1 Recommended that individualized determination of financial hardship based on uniform criteria consistently applied, availability of funds not advertised by hospital. 2 Pseudonym. Source: Financial Leadership Council interviews and analysis. 7

Realizing a Return on Investment Reimbursement for Typical Cancer Patient 3 6 months Two Year Revenue Gains 2001 2003 $17 K $7 K $42 K $756 K $42 K $18 K 18 Surgery Chemo-therapy Radiation Therapy Paying patients insurance premiums at average cost of $600 $900 per patient 1 allows hospital to capture $42 K in average revenue 2 Total Patients with Hospital-Paid Premiums Typical Cancer Patient Reimbursement Total Revenues 1 Eligibility criteria should be uniform, and availability of funds should not be advertised. 2 Legal Caveat: Providers should consult with counsel when considering this practice. 3 Pseudonym. Source: Financial Leadership Council Interviews and analysis. 8

Tie Reimbursement to High-Deductible Exposure Renegotiating Reimbursement Lovett 1 Responds to Increase in HDHP 2 Plans Current Commercial Payer Bands 3 Future HDHP Negotiation Strategy A B C 1.3 (Cost) Payer X 1.4 (Cost) Payer X HDHP 1.5 (Cost) Patient $5 K Deductible D E 1.6 (Cost) Payer Y 1.7 (Cost) Payer Z Case in Brief Lovett Medical Center 1 Two-hospital health system in the East Hospital Responsible for obtaining $2 K Employer At-risk for up to $3 K Significant increase in HDHP patients causing worry over growing bad debt from self-pay population in down economy Negotiated in September 2008 with largest commercial payer to move payer s HDHP to more expensive band to help offset hospital risk Future HDHP negotiations to involve pushing payers to convince employers to retain risk for portion of patient deductibles 1 Pseudonym. 2 High-Deductible Health Plan. 3 Bands based on volume of services. Source: Financial Leadership Council Interviews and analysis. 9

Educate Patients on Appropriate Venues for Care Delivery 12 Promote Convenience and Patient Savings Benefits Guide to Leveraging System Resources 1 Primary Care Practice 2 Best for continuity of patient care, especially pediatrics Same-day appointments often available Select practices open after-hours Retail Health Clinic Usually nurse practitioner-staffed Open extended hours, weekends in convenient locations Low-cost care option for minor ailments 3 Urgent Care Center 4 Physician-staffed Open nights, weekends Handle basic acute care services including x-rays, sutures Emergency Department 24-hour physician coverage Emergency care including trauma, heart attack, stroke Wait time, high expense not ideal for non-acute care 2010 The Advisory Board Company Source: Financial Leadership Council Interviews and analysis.

Develop Funding for Post-Acute Care of Indigent Patients Financing Less Costly Care Moving Uninsured Inpatients to the Appropriate Setting Net Savings from Avoided Uncompensated Days Case manager identifies uninsured inpatient candidates for funding program Contacts post-acute care providers, negotiates favorable rates for patient stay Patient transferred to post-acute care facility, avoiding further unreimbursed costs for hospital Costs of Funding Post-Acute Care ($155 K) $353 K $198 K $319 K Savings from Days Avoided 1 Net Savings Includes $121 K in potential deposits recouped from Medicaid-pending patients Case in Brief Somers Medical Center 2 900-bed health system in the Pacific Northwest Provider-funded, post-acute care offered for selected indigent patients to provide needed care, reduce more costly inpatient days 1 Assumes conservative cost per day of $300. 2 Pseudonym. 2010 The Advisory Board Company 13 Source: Financial Leadership Council Interviews and analysis.

Leverage Physician Network to Accept Needy Patients 14 Facilitating Primary Care Access Safety Net Physician Employment Hospital staffs indigent care sites with physicians compensated with gross charges or flat salaries Goal is to stabilize patient access, manage system costs by maintaining alternative care sites for indigent patients Very expensive option Payer Mix Threshold Hospital mandates employed physicians must accept new patients until minimum charity-care threshold is met Good signal of favorable volume increases, necessity of increased physician recruitment Might elicit physician pushback 2010 The Advisory Board Company Source: Financial Leadership Council Interviews and analysis.

Subsidize Preventive Care Options for Patients An Ounce of Prevention Raitt s 1 Primary Care Subsidy Program 15 Benefits of Program Membership Free or discounted primary care co-pays Enrollment in medical home Access to discounted prescriptions from system pharmacy Details of Program Patient must earn 300 percent FPL or less Eligibility lasts for one year, is renewable Partnership with employed physician practices Income Discount Percentage Case in Brief Raitt Health System 1 <200 FPL 2 100% 201 300% FPL 50% Co-pays range from $15-$25, depending on income 600-bed system located in the Northeast Discovered high percentage of patients with primary care providers still used ED for non-acute care in order to avoid upfront co-payments Offer sliding physician clinic co-pay schedule to low-income patients, which has significantly decreased non-acute ED use 1 Pseudonym. 2 Federal poverty line. 2010 The Advisory Board Company Source: Financial Leadership Council Interviews and analysis.

#8. Partner with Local Providers to Increase Access to Primary Care Leverage Local Resources Local Provider Partnerships Annual ED Visits ED ED uses My Health Direct software to schedule patient appointments in owned physician practices or community clinics 80,000 43,000 Employed Physician Practices Community Health Clinic Before My Health Direct After My Health Direct Case in Brief Aurora Sinai Medical Center 195-bed hospital located in Milwaukee, Wisconsin Wanted to help staff find, schedule appointments for patients coming to ED seeking non-urgent care Implemented My Health Direct software to schedule real-time appointments for patients in owned physician practices, community health clinics Saw 46 percent decrease in ED visits since implementing program 2010 The Advisory Board Company Source: Mackenzie K, E-Referrals: Health 2.0 s Next Big Thing?, Health Leaders Media, October 2008, available at: http://www.healthleadersmedia.com/content/221032/page/2/topic/ws_hlm2_tec/ereferrals-health-20s-next- Big-Thing.html, accessed March 30, 2009; Financial Leadership Council interviews and analysis. 16

Aggressively Discount to Increase Self-Pay Collections Comprehensive Charge Reduction Avoiding Unwieldy Bills Capping Total Charges for Uninsured Patients 1 Uninsured patient accumulates $29,000 in charges 2 Patient s annual family income $48,000 May 2009 Gross Salary $2,200.00 Statutory Deductions Other Deductions Federal Income Tax -385 Pretax Medical -170 State Income Tax -135 401k -140 Social Security Tax -120 Medicare Tax -40 Net Pay $1,210.00 Eagleburger Pay date: 5/31/2009 Pay to the order of: John Smith Twelve hundred ten and 00/100 $1,210.00 3 Patient eligible for hospital s catastrophic protection, limiting patient liability to 30 percent of annual household income 1 4 Patient now responsible for $14,400 1 Balance of account greater than 30% considered charity care. Source: Financial Leadership Council interviews and analysis. 19

Generous Discounts Drive Cash Collections Self-Pay Collections After Expanding Charity Discounts Self-Pay Cash Collection Bad Debt Charity Care $1.5 M $1.8 M Increase of 20% $6.9 M $5.8 M Decrease of 16% $7.2 M $8.1 M Increase of 13% 2005 2007 (E) 2005 2007 (E) 2005 2007 (E) Case in Brief 1 Pseudonym. Keller Health 1 250-bed hospital located in the Northeast In 2006, hospital expands its discount program for patients with household incomes up to 900 percent of the federal poverty level Steep discounts lead to increased cash collections as a greater volume of patients pay their obligations In some cases, adjusted patient obligation exceeds state medical assistance program reimbursement rate Source: Financial Leadership Council interviews and analysis. 20

Augment POS Collections at Patient Access Points Four Essential Practices 1 2 3 4 Hardwired ED Checkout Hardwired Payment Prompts Informed Financial Consent Standardized Patient Deductibles Emergency department patient flow redesigned to collect payments at discharge and encourage patient compliance Increases the likelihood of capturing patient obligations at point of service Multiple payment prompts embedded into patient encounter experience to increase likelihood of upfront cash collection Pre-registered patients with no outstanding obligations walk through express registration upon arrival Price estimate of patient s post-insurance financial obligation integrated into patient access process Price transparency facilitates increased cash collections Standard deductible charged for specified service when actual deductible is not immediately apparent Collecting fixed deductible at point of service expedites and increases likelihood of patient payment collection 1 Point-of-service. Source: Financial Leadership Council Interviews and analysis. 22

Informed Financial Consent Going Beyond a Simple Signature Advance Beneficiary Notice Price Estimate Limited explanation of why procedure not covered Estimates use gross, rather than net charges; gives no estimate for professional fees Advance Beneficiary Notice (ABN) Items or Services: Lumbar and Lumbrosacral fusion Because: Failed Medical Necessity Estimated Cost: $60,000 Please choose one option. Check on box. Sign & date your choice. Date Option 1. YES. I want to receive these items or services. Option 2. NO. I have decided not to receive these items or services. Signature Price Estimate Patient Information Patient Name John Doe Patient Phone (336) 555-1234 Account Number 1234 5678 8899 Plan Health Plan A, PPO Patient Type Inpatient Date of Admission 05/01/09 Date of Discharge 05/02/09 Service Type Services: Amount Lumbar and Lumbrosacral Fusion $46,307.90 Posterior Technique Spinal Fusion Except Cervical W CC Financial Responsibility Insurance Responsibility $43,339.50 Patient Deductible $1,000.00 Coinsurance $9,061.58 Estimated Total Patient Responsibility $2,968.40 Total Expected Patient Liability $2,968.40 Date Signature Procedurespecific estimate Estimate takes into account out-of-pocket maximum Financial Counselors Meet with All Patients Clear explanation of price estimate Opportunity for patients to ask questions Review of options available 24 Source: American Medical Association, available at: http://www.ama-assn.org; Financial Leadership Council interviews and analysis.

Roadmap for Discussion Proactive Management of Self-Pay Patients Gauging Operational Performance Tools and Self- Diagnostics 2010 The Advisory Board Company 2

Patient Segmentation Protocols Practice Description: Efficient patient collection and counseling based on early, comprehensive patient classification; effective segmentation ensures financial counseling efforts are highly leveraged and successful in increasing payment capture Practice Assessment: Highly effective practice for maximizing reimbursement, patient collections, and counseling staff efficiency, and particularly useful for managing EDs and outpatient areas; practice is widely applicable but may require additional staff resources Financial Leadership Council Grade: A 2010 The Advisory Board Company 58

Front-Loaded Outpatient Collections Practice Description: Insurance verified and patient notified of payment obligations prior to scheduled care; explaining patient obligations and setting expectations prior to care increases and expedites point-of-service collections Practice Assessment: Highly effective practice for all hospitals looking to improve and expedite patient collections; widely applicable, but requires staff training and performance tracking Financial Leadership Council Grade: A 2010 The Advisory Board Company 59

Expansive Sliding Scale Discounts Practice Description: Augmented charity care guidelines raise upper limits for income-based free care and discounts; expanded thresholds reduce expenses incurred in attempting to collect from patients with limited ability to pay and improve public perception Practice Assessment: Highly effective practice for counteracting negative public perception and easing burden on uninsured patients without adversely affecting hospital finances; highly recommended for stand-alone hospitals and for health systems whose facilities serve socioeconomically incomparable markets Financial Leadership Council Grade: A 2010 The Advisory Board Company 62

Key Contact Information If you have any questions or concerns about this document, please feel free to contact us. James E. Green Principal GreenJ@advisory.com 202-266-5443 To contact James please see: Hunter Sinclair Management Associate 202-266-6450 2010 The Advisory Board Company 67