In last month’s issue of O&P Business News, we discussed how an increasing number of patients are reluctant or incapable of paying their rising out-of-pocket health care expenses, placing added economic pressure on the already strained health care facilities where they receive treatment.
Despite carrying the patient’s financial burden, according to our sources for this issue, health care facilities continually implement poor recovery processes. It is widely acknowledged among billing and collection agencies that the patient receivables side of the business ledger is often mismanaged and unorganized. This kind of poor handling can cost health care providers thousands of dollars in potential earnings.
Patient receivables often determine the difference between a practice losing money or a practice ultimately turning a profit, according to Vern Herrington, product specialist at Brightree Inc., a DME/HME billing and business management software company. Because of it’s pivotal effect on the well-being and security of business, patient receivables management has increasingly become a hot topic in many sectors of the health care industry.
Not long ago, many health care practices could afford to write off a small portion of neglected patient payments thanks, in part, to higher insurance company reimbursement rates. In today’s culture of declining reimbursement, that business practice has been completely modified if not ceased entirely. As insurance companies continue to reduce or significantly cut reimbursement rates, it has become unaffordable, to simply ignore patient payments, according to Herrington.
By the end of this year, about 35% of a provider’s total revenue will derive directly from patient payments, according to the McKinsey & Co. report, “Overhauling the US Health Care Payment System.”
Along with the growing problem of decreased reimbursement rates, the percentage of people with high deductible insurance plans is also on the rise, leading to costly out-of-pocket expenses for the patient and increased urgency among providers to collect those outstanding fees, according to Cathie Pruitt, president and chief executive officer of PrimeCare O&P.
“People with high deductible plans have increased tremendously in the past couple of years and that is going to continue to happen,” Pruitt told O&P Business News.
“Finding a way to capture and recover that money becomes a challenge,” Herrington explained. “Whether it is O&P or another industry, many companies now have gone to collect a significant portion of their patient receivables up front as they are getting ready to provide services.”
Laura Smuch, front office manager at De La Torre O&P, explained that an administrative staff that gathers insurance information from the patient before they arrive will have a more efficient collection process.
“When we call ahead and gather that insurance information, we can then check and give them a pretty good estimation as to what their out-of-pocket expenses are going to be,” Smuch explained. “We have tools that we can use to go online ahead of time and check the patient’s benefits and what their expenses may be.”
According to the McKinsey & Co. report, the probability of providers collecting patient payment declines dramatically once the patient walks out the office door following treatment. According to the report, a provider generally collects 95% of patient payment only when it is received prior to treatment. That percentage plummets to 18% of the full payment, if it is collected 1 month after receiving treatment.
“The more you get up front, the better,” Smuch said. “At De La Torre, we offer discounts for private sector insured patients who are able or willing to pay up front for services not covered by insurance.”
Pruitt explained that according to a report by CMS, between the years 2000 and 2007, patient out-of-pocket expenses increased by 95%.
By now, most patients understand that they are responsible for some out-of-pocket expenses, according to Smuch. Many times, patients ask her about their expenses before visiting with the health care provider.
Although most patients anticipate out-of-pocket expenses following such a drastic increase, the question becomes how much of the bill is their responsibility?
“We do have some walk-in patients and if they have a fracture and go to the doctor’s office, most likely they do not know if they will be coming in and needing a walking boot, for example,” Smuch said. “They are not prepared and if they have no coverage for something that will be a high-ticket item, that can be another challenge.”
These conversations between patients and front office staff are becoming more and more common according to Herrington. He explained that patients should be directed to their insurance providers if they have questions regarding their coverage. They should not wait to speak to the administrative staff at a practitioner’s office as there are so many variances among health care coverage.
“Patients have a variety of insurance policies whether it’s Medicare, Medicaid or company-provided commercial insurance and most of the policies out there have limitations,” Herrington said. “Unfortunately, it is the health care provider who has to explain those limitations. Those discussions should have already taken place by the time the patient needs services. Patients often assume ‘coverage’ means unlimited benefits, rather than making a point to be aware of the details of their insurance coverage. When they actually need those services, it is an unpleasant surprise to learn of the servere restrictions on them.”
A patient who makes these assumptive errors of anticipating a smaller copay or deductible may not have the necessary funds to pay for services ahead of time. These kinds of errors can potentially cost the provider hundreds of dollars.
“They can not afford avoid those conversations anymore,” Herrington explained.
“There is this collision of cultures,” Joyce Perrone, practice administrator at De La Torre O&P and consultant for Promise Consulting Inc. explained. “As health care providers, we want to help people, but at the point of service, sometimes it is difficult for the staff to reconcile this with asking for payment for those services.”
Smuch agreed with Perrone’s assessment and said this conflict between goods delievered and reconciling money owed to the company is compounded by the reality of today’s economic uncertainty.
“It is a difficult job that is learned over time,” Smuch said. “I think great leadership and the proper training would certainly benefit any practice.”
Great leadership, however, involves more than just training your staff to properly bill patients and follow billing procedures. Business owners must show that they value their staff and appreciate the work they are doing.
“If you take care of the employees on the administrative side, then you will see an improvement,” Pruitt said. “If they feel valued and well paid, then you are going to have a lot better luck with collection and recovery.”
An appreciated and properly trained staff will work harder and ultimately bring in more patient receivables for the company, according to Pruitt.
“The administrative staffs are the people collecting the money and I think they need as much training as they can possibly get,” Pruitt added. “They will have the tools to manage how they talk to the patient and go the extra mile for the company.”
In her work, Perrone has uncovered one common problem that plagues most provider’s offices — a lack of cohesion among staff.
The administrative staff at any provider’s office must be a well-organized unit and they must work well together. While the practitioner may be recognized as the face of the company, the support staff is the heartbeat, according to Perrone.
Administrative staff will work with patients and implement payment agreements in order to ease their financial burden. A trained, experienced and consistent staff likely has a collection and recovery system in place that plays to their strengths.
A practice with a revolving door of administrative staff members lacks unity and structure that could lead to the mismanagement of payment collections. This kind of collapse of cohesion is sure to also effect other administrative systems within the office environment, as well.
“We encountered a person who did not collect anything from the patient and over time that caused a problem,” Pruitt explained. “We were shocked by that.”
This is only one example of how poor processes have the potential of costing health care practices thousands of dollars. Imagine the true loss a problem like this could incur if left undiscovered. Situations like this can be avoided with the right training, processes and personnel in place.
“There are companies that have high turnover in staff with a lackadaisical attitude toward collecting and recovering money for the practice,” Pruitt explained. “It’s a high level of complexity to have a fully wholesome environment, where people are completely integrated into the company and doing the best they possibly can. Only then will you get the best outcomes.”
An absence of chemistry among staff makes an already complicated job much more difficult. Consistency among all members of the team is vital but difficult when team members are coming and going frequently.
“Because our employee turnover is so low, we have longevity and a continuity that many other companies do not have. High turnover is a problem we hear a lot. The problem is definitely out there,” Smuch said.
Staff leaders who are not satisfied with their patient receivables management capabilities should immediately begin laying the groundwork for change. These processes take time to develop, not to mention to train to other members of the staff. These initiatives can not be established overnight.
One way companies learn to streamline patient receivables management is to create a patient care coordinator position, according to Pruitt. Patient care coordinators fill a role similar to that of case managers within the facility in that they work with assigned practitioners to control a smaller group of patients.
“The administrators who are in the billing department are teamed up with the practitioners,” Pruitt said. “If I am in the billing department and I am the patient care coordinator, I may have two or three practitioners who are assigned to me, along with their patients.”
The patient care coordinator would have regular meetings with the practitioners to review their patient cases. They would then relay the payment information to the patient to keep them informed about the process as well, according to Pruitt.
“Not only is the patient informed on the cost aspect, but they know that they are being taken care of and that makes it easier for them when they have to pay the large expenses due to their policy,” Pruitt explained. “This way, the patient is not finding out their deductible is $2500 or $5000 at the end of the process. A lot of people do not realize that when they sign on for these high deductible plans that it is cheaper for their monthly payment, but then on the back end, it will severely cost you.”
Smuch’s facility has implemented a system that includes giving a ‘noncovered co-insurance deductible form’ routinely to every patient with private sector insurance — whether they have out-of-pocket expenses or not. The form lists the specific item for which the patient is being billed and what the patient’s insurance reimbursement currently is, including co-insurance and deductible, if applicable.
Other process suggestions include prioritizing accounts in chronological order or from high dollar to low dollar amounts. Perrone, however, is not keen on the idea of her staff prioritizing her accounts in dollar amounts.
“Do I work less hard to collect $50 as I do $100?” she asked. “Generally, you are going to go after those big ticket accounts, but is it harder to collect ten, $100 payments or one $1000 payment? That one $1000 payment will take a lot more time and energy. If you have the right processes in place, you should be collecting those $100 payments all the time.”
As long as your staff is approaching billing and patient receivables in a serious manner, the provider’s patient receivables management should improve over time.
“There are several different ways to incorporate process development, but it is essential to have a written flow in place and the people who are part of that process help develop that flow. It must be organic and grown from within the company, often with the help of a trained facilitator,” Perrone said. — by Anthony Calabro
For more information:
- Pavlou SZ. Put it in writing to ensure copayment receipt. O&P Business News. 2010;19(9): 36.
- The McKinsey Quarterly. Overhauling the US health care payment system. Accessed Aug. 2, 2010.