Collection reform: build stronger relationships with self-pay patients: looking to avoid bad debt, complaints, and bad publicity due to poor handling of self-pay accounts? Let better training and technology help you identify and serve patients eligible for financial assistance before their accounts can become delinquent

Healthcare Financial Management, Sept, 2005 by Geoffrey J. Hakel

Does the following scenario sound familiar? After a devastating auto accident, an uninsured father of three spends several months recovering at your hospital. Somewhere between the balloons and best wishes accompanying him as he finally walks out the door, a registrar mentions that his bill will be mailed to him shortly. The patient blanches, everyone assumes from lingering pain. A month later, the bill arrives, Panicked, the patient does nothing. Three months go by and your collections department gets involved. From the patient, silence. Another six months and the case gets turned over to a collection agency. You finally hear from the patient: He's filed a complaint with a patient advocacy group.

No hospital is immune from the dilemma. Whether you call them uninsured or self-pay patients, there are nearly 44 million Americans without health insurance. Many of them end up in hospitals at some point, and many cannot afford to pay their medical bills.

Some financial officers attempt to handle these accounts internally. Others turn them over to collection agencies. When aggressive strategies backfire, as when patient advocacy groups sued a number of hospitals and medical groups last year for their efforts to collect from uninsured patients, your reputation takes a hit along with your cash flow.

There are resources available to help fund medical care of the uninsured--self-pay discounts, charity care, Medicaid, State Children's Health Insurance Program, and other public assistance programs. The problem has been identifying patients who qualify for these resources and accessing them in a timely, cost-efficient way-before that first bill goes out.

Now some financial managers are finding new ways to tackle this tough issue. Leveraging the power of new technologies, they are revamping their processes to provide up-front financial assistance guidance for the self-pay population.

Impractical Policies

Industry experts agree that a big part of the problem is that hospital front-line staff lack the necessary resources to properly categorize patients into the appropriate financial classifications (charity, public assistance, potential bad debt). The unfortunate, and avoidable, result is unnecessary bad debt. It's not that staff lack the will to do the job; they lack the time, energy, and know how. And the reason, in large part, is the complexity of the financial assistance identification and application process.

For example, many hospitals are unable to accurately identify the true amount of the charity services they deliver, thanks to age old policy guidelines that often, inadvertently, work against the very people they are designed to help. Trying to prove that a patient is eligibile for financial assistance under these guidelines can be like asking an unemployed person to verify his or her income using tax returns and pay stubs--impractical.

According to standards of the Financial Accounting Standards Board and HFMA guidelines, here is what is needed to determine eligibility for charity care:

* The applicant must complete and sign the application.

* The hospital must screen to see if there are any public assistance programs such as Medicaid and SCHIP available for reimbursement.

* The applicant must fill out a financial statement.

* The applicant must sign an income attestation that his or her household's annual income is less than 200 percent of the federal poverty guidelines.

This cumbersome and document-laden process is both time-consuming and complicated for registrars to carry out. Even the first step isn't as simple and straightforward as it sounds, because registrars are sometimes unaware of the application policy and, all too often, insurance eligibility is not checked until after the services are provided. After such a delay, it can be difficult to locate or even identify the patient, who may refuse to cooperate after the fact when you finally are able to make contact. Also, determinations of eligibility for charity care are based on the patient's stated--not verified financial condition at the time of treatment.

The challenge, then, is how to simplify the process and make it more efficient, while at the same time making it more flexible and scalable i.e., tailored to the specific circumstances of each patient.

Training and Technology

One simple, low-cost method involves sitting down with your registrars and explaining the problem. Chances are good that, if they understood the issues facing the collections department, they would want to help. Offering monetary rewards for behavior that helps reduce bad debt can be very effective, especially in small and mid size organizations with receptive employees.

Of course, wanting to help is not the same thing as knowing how to help. Do your registrars have the necessary training to deal with the complex financial assistance process? They need to know how to ask the probing questions necessary to determine a patient's true financial situation. Assessing staff needs for training is a vital component of reforming your collections process. Experts suggest that you supplement education programs with printed aids that registrars can reference when meeting with patients.