Patients are being increasingly held responsible for larger portions of their healthcare bills. Find out ways that healthcare organizations can navigate this challenge in the face of increasing economic pressure.
Why is Patient Responsibility on the Rise?
A large portion of the revenue cycle is concerned with billing and insurance claims to receive money from payers. The portion of the bill that is left after all of that work is termed “patient responsibility” – and is the most difficult to collect.
High-Deductible Health Plans (HDHPs) are a way to reduce the monthly cost of health insurance, and as prices rise they are often the only affordable option for consumers. The IRS defines an HDHP as “any plan with a deductible of at least $1,400 for an individual or $2,800 for a family.” However, this isn’t total for yearly out-of-pocket expenses. The limit for out-of-pocket on an HDHP, which includes deductibles, copayments, and coinsurance, is $6,900 for an individual and $13,800 for a family. This amount can increase drastically for out-of-network services.
Increasing Healthcare Costs
Wages have not risen nearly as fast as healthcare costs have, leaving those costs to take a larger bit out of the monthly budget. These rising costs can be attributed to a lot of factors – the aging population, a rise in chronic illness and healthcare utilization, increasing rates of obesity, and higher pharmaceutical costs.
As the pandemic has drawn to a close officially, the extra money that was injected into the healthcare system from the federal government ends. Eleven different federal payment programs are at some stage of reduction in payment rates to hospitals, totaling 218.2 billion by 2028.
Most recently, doctors are seeing a 4.4% reduction in Medicare reimbursements under the 2023 Physician Fee Schedule.
In the past, where Medicare goes, private insurances go also. In other words, it will not be surprising for commercial insurers to also lower their reimbursement rates for similar services.
The More is Owed, the Less is Paid
Hospitals tend to collect significantly less money from patients with higher out-of-pocket costs, which is becoming increasingly common. In fact, as amounts owed go up due to high-deductible plans, the payment collection rates go down.
- Patients who owe less than $1,200 for inpatient services had an average payment rate of 40.1%.
- Once patients owe more than $1,200 in out-of-pocket costs, collection rates drop by 17.6%.
- Among patients that owe balances greater than $5,000, collection rates are four times lower than average.
The Medicare deductible amount is now near $1,200 – spelling trouble for hospitals that struggle to collect. With the trend for HDHPs going up each year, it will be difficult to reverse the trend of difficult patient responsibility collections, but not impossible!
Best Practices from High-Performing Hospitals
An Illinois-based hospital implemented practices that improved their point-of-service patient collection rate by a whopping 300%! Their initiative centered around a patient financial responsibility education strategy.
- The first step of the campaign focused on educating the revenue cycle management staff by training them on the ins and outs of patient financial responsibility.
- Front-end staff armed with a better understanding then spent time helping patients understand their financial responsibilities and why they owed.
A recent HFMA survey of hospitals points to several best practices that hospitals can deploy in patient collections to improve their rates:
Use patient portals to increase engagement. While most organizations have some type of portal in place already, there is an opportunity for improvement in how that platform is used to accept patient payments. For example, those that deliver patient estimates at the time of scheduling, along with several payment options and plans, have better success in collecting before the visit. Some organizations are finding that this type of flow is difficult due to disparate data sources and a lack of interoperability, which is hindering progress.
Ask for up-front payment. More than half of organizations are now trying to collect 100% of the patient’s responsibility in advance. One key driver of the success of this plan is the offer of incentives or some sort of payment plan if taken care of prior to service.
Restructuring the collections process. While payment on the back end is notoriously harder to collect, some entities are having better success by revamping it into a more patient-friendly process, leveraging financial counselors and third-party agents to help patients find a solution.
Using technology and data. To truly make significant strides in patient collection, successful organizations are analyzing their data to pinpoint the biggest pain points and better direct their efforts.
Rise empowers organizations with the tools to attain financial health and stability. The suite of solutions offered by the Rise family of companies is designed to optimize the revenue cycle and pave the way for innovation. To learn more about our solutions, contact us for a conversation about your organization’s needs.