Finding the missing pieces for payment: as hospitals shoulder more than $25 billion in uncompensated care annually, new, automated tools are improving collections by ensuring that each account has the correct patient demographic and financial information

Healthcare Financial Management, March, 2006 by Jeni Bell

For Allina Hospitals and Clinics, one of the most basic requirements for collections was also one of the system's biggest challenges: getting the bill to the right address.

Sound like a simple fix? Not exactly. Consider that this Minneapolis-based health system, like many large health systems across the country, used to receive hundreds of return mail items per month, most of which were patient bills that had not found their home. And at a time when the number of uninsured and underinsured patients is skyrocketing, making sure those who can afford to pay for their care receive their bills is critical. Sometimes, the address would be off by a single digit, whether in the street address or the patient's zip code. Other times, the address was so completely off base that it left patient financial services employees wondering whether the patient had intentionally supplied an incorrect address in hopes of eluding payment.

That was before Allina implemented an automated tool that electronically verifies the patient's demographic information, including the patient's mailing address, during the registration process--and within seconds, so that inconsistencies can be addressed immediately. Since the tool was put in place in 2004, the health system has dramatically reduced its return mail rate and improved collections efforts in the process.

"We've probably saved about $4 million in gross charges over a two-year period," says Tom Gavinski, vice president, revenue cycle, Allina. "A large portion of that savings is in the reduced cost to collect payment. By enhancing our ability to locate patients after discharge, we've also been able to reduce the number of claims that previously might have been written off as bad debt."

Today, Allina is adding two other automated tools to its preregistration and patient financial services departments. One tool will enable Allina to quickly determine during preregistration whether patients qualify for the health system's charity care plan, for other financial resources, or for discounted rates for services. The other tool will use patient demographic and credit information to determine the probability of collection for each individual patient. Allina also has expanded its charity care guidelines as well as discounts for the uninsured.

"What we're trying to do is move the financial counseling up front, during the preregistration and registration process, to make sure that we are properly screening and working with patients who need financial assistance to cover the cost of their care," Gavinski says. "It's so simple that you sometimes can't even grasp it, but it's just a matter of making sure that we're asking patients for their insurance information and for information about their financial situation up front, instead of worrying about it after services are provided. The use of automated tools to expedite this process has enabled us to reduce costs on the back end simply by having better information up front."

The need for better patient financial and demographic information poses a significant challenge for hospitals nationwide. More than 45 million Americans are without health insurance, and an estimated 16 million are considered underinsured--and that number is rising, as employer coverage rates continue to decline. Many hospitals are now updating their financial policies in response to the growing number of patients who have a limited ability to pay for their care.

As hospitals absorb more of the burden of uncompensated care, it is critically important that they be able to effectively identify patients who need assistance in paying for their care--and establish payment expectations for those who are able to pay. New, automated tools are helping hospitals do just that.

Holes in the Puzzle

Some of the challenges in getting the correct patient information--both demographic and financial--are common among healthcare organizations. Others vary according to the size and location of the health system.

For example, public hospitals must often battle the mindset that because they are public hospitals, they must accept whatever terms of payment the patient is comfortable with, financially speaking. "The biggest challenge, and I think it's true of any public hospital, is the perception by the public that our services are free--that you just show up, get your services, and you're on your way. And that isn't the case," says Daniel Tapia, associate director of patient financial services, Parkland Health & Hospital System, Dallas, a 983-bed facility whose mission is to provide care for residents of Dallas County. "We have to diligently sort through the patient's circumstances to make sure that the money that the taxpayers of

Dallas County provide to us is indeed used for patients who are qualified for our financial assistance programs and are indeed Dallas County residents. We also have to make sure, if the patient qualifies for another funding source, that we pursue that funding opportunity."

Hospitals with large and/or diverse patient populations also face unique challenges in getting the correct demographic and financial information for each patient. "We struggled with getting good demographic information, and it really had to do with our volumes," says Jim Perry, vice president, revenue cycle, Parkland Health & Hospital System. "We have a very diverse population. Sometimes there are language barriers involved, so we don't always get good demographic information. And with such a large emergency department, and being a trauma hospital like we are, we didn't have the benefit of always getting good information. So we needed more tools."