By Peggy Denness

In an effort to control costs and increase access to health insurance, insurers and employers are offering different types of benefit plans, including high-deductible plans, healthcare savings accounts, flexible spending accounts and other consumer-directed healthcare (CDH) products. While these products give consumers more control over their healthcare spending, patients’ out-of-pocket expenses are increasing.

In fact, a recent report suggests that by the end of 2010 about 35 percent of a provider’s total revenue will come from patients. This shift means that physician practices now face the new challenge of balancing quality care delivery with managing accounts receivable and collecting revenue from patients.

A recent survey of provider offices indicated that many are not prepared for the changes in patient financial responsibility. For example, more than 25 percent did not have a process in place to collect payment – other than co-payment – at the time of service. Of those that did have a process, the majority only collected a portion of the payment at time of service.

The impact of uncollected patient debt is dramatic. In the same survey, 64 percent of respondents indicated they are experiencing an increase in patient-based bad debt, and 76 percent of respondents indicated these increases are well over 10 percent from previous years.

Due to this sweeping industry change and the financial impact on healthcare providers, physician practices should take advantage of every reimbursement opportunity they can to remain financially viable. The informed and educated provider can take advantage of new technology solutions, in combination with best practices, to meet this challenge.

Ongoing changes to payer reimbursement policies can make keeping office staff current more difficult. Perhaps the most important elements of optimally managing practice revenue is collecting co-pays and making patients aware of their financial responsibility at the time of service.

According to a recent report by McKinsey and Company, the probability of providers collecting payment declines dramatically once the patient walks out the office door. The report states that while a provider generally collects 95 percent of patient payment when it is received prior to treatment, the percentage falls to 18 percent of the full balance if collected a month after care. When patients need medical attention, getting care is their top priority; however, when a patient has received that care and leaves the facility, the patient’s financial responsibility for services rendered is not as much of a priority.

Despite the fiscal necessity of collecting patient payments in the office at the time of service, many providers do not have adequate tools in place to accurately estimate the amount a patient will owe at the time of care, or have a conversation about arranging for payment. The typical provider office work flows and technologies support the processes of submitting claims for patients after care, then billing patients for their portion owed. Because collection of those post-care payments is less likely, providers should investigate and adopt cost-effective tools that help them predict patient and payer financial responsibility, collect efficiently from all sources, and understand how to stratify and address patient debt.

Those tools could include features for:

• Patient liability estimation: Patient liability estimators estimate payments and reimbursement based on the patient’s plan and care provided, and are available at no cost from many payers. This is the first step in determining payment owed.
• Integrated patient billing: Once patient financial responsibility is estimated, practices should have in place processes and solutions that support efficient collection from the patient. Some collection will occur at the time of service, such as the standard co-payments most patients owe, but remaining payments may be subsequent. For example, a provider office may arrange to bill a patient for recurring payments over time until the balance is paid off. An efficient billing solution should support these modalities and multiple payment types, and reconcile collected funds.
• Multipayer reconciliation: Patients often have secondary insurers, so practices should be able to process payments from multiple payers as part of the overall payment-reconciliation process.
• Post-adjudication adjustments: Since even the best patient-liability estimators are not always completely accurate, practices should build a payment system to issue refunds (including tax-deferred dollars) to patients and also report and bill additional payments due.

The patient payment challenge is creating increasing financial hardships for providers as the patient-pay portion of healthcare services continues to rapidly rise. There was a 95 percent increase in out-of-pocket payouts from 2000-2007. According to the Milliman Medical Index, healthcare expenses account for nearly 20 percent of the average household’s total spending.

Accelerated adoption of consumer-directed health products in the next few years, combined with increasingly smaller payer reimbursements and more out-of-pocket patient payments, may exacerbate this problem to the point where many practices and specialty offices could become financially nonviable. Practices should take advantage of the range of tools available today to better manage patient self-pay and improve the patient experience.

Peggy Denness is director of provider advocacy for NaviNet.