An Uncomfortable Truth About Hospital Revenue and an Overlooked Way to Gain It Back
By Crystal Ewing
Crystal Ewing is manager of data integrity at ZirMed.
In a video message from last year that he surely never intended for public and regulatory scrutiny, Mayo Clinic CEO John Noseworthy, MD appeared to advise employees to prioritize patients with commercial insurance in order for the famed hospital to remain financially strong.
Months later, Mayo is still explaining exactly what Dr. Noseworthy meant. Many healthcare leaders need no further explanation, even if they personally dislike any suggestion of favoring the commercially insured over Medicare and Medicaid patients. With government reimbursement continuing its decline, most hospitals are straining to hold on to their profitability.
Still, placing hope in commercial insurance to make up the difference is misguided, especially with the rising dominance of health plans that are not only high deductible, but also require high co-payments and high co-insurance. Touted as a means of covering more Americans, these plans often put more of the financial burden on patients than simply paying for healthcare in cash at a discount.
As such, many patients with these plans may claim they have no coverage when it comes time to pay for a procedure or service. It’s hard not to empathize with their motivation for doing so, but it’s a practice that can put the hospital in a precarious position.
With self-pay patients, things become more complicated, especially since there can be a lag of 30 or more days between the time that they are treated and the time the invoice comes due. When faced with a choice between paying for housing, utilities, food for their families, auto repairs, etc. – all of which affect the present and future – or paying a hospital bill for an event that occurred in the past, the decision is easy.
When this thinking is spread across a large patient population, bad debt accumulates quickly. Additionally, patients are unlikely to pay medical bills that are greater than 5 percent of household income, according to the Advisory Board, a consulting firm for hospitals. Median household income in the U.S. is at about $53,000, suggesting that when out-of-pocket charges exceed $2,600 hospitals can forget about collecting, according to Spencer Perlman, an analyst with Height Securities in Washington.
Given the above realities, more hospitals are using automated coverage detection technology, which also finds insurance coverage that patients legitimately aren’t aware of or are unable to communicate. When patients are brought to the hospital in the grips of a heart attack, for example, or while unconscious, they’re hardly able to convey their levels of coverage. Some fully conscious patients even may forget they have coverage, or provide information on secondary rather than primary coverage, or become confused about which carrier covers them. This isn’t uncommon with elderly patients.
No matter the reason it is problematic , it is imperative that coverage verification becomes a more streamlined process at our nation’s hospitals. It can be done in a way that respects the patient and in a timely fashion to protect the hospital’s finances. The most feasible method is to pair automated coverage detection with automated eligibility verification, the latter of which is already in place at many hospitals. However, coverage detection can also be an independent, standalone process. Either way, it makes quick work of checking with thousands of healthcare payers to determine if any are the primary or secondary insurer for a given patient.
Often, as much as 15 percent more instances of billable insurance are uncovered with superior processes and technology. Even just some quick mental calculation can see how this would recoup millions of dollars for many large hospital systems. It’s also significantly over the 1 to 5 percent rate achieved by manual and legacy coverage detection.
Much of this improvement is due to the huge data sets that now power some business intelligence engines, encompassing billions of historical health insurance transactions for millions of Americans. As these insights are tested against a pre-identified set of payers, algorithms can match the key data attributes that confirm coverage and the information needed to file the claim.
What has yet to be quantified but surely exists is the reduction in future collections activity with patients. Despite jargon that describes these patients as “empowered consumers,” the reality is they are struggling to pay their bills and rely on hospitals to help them navigate this uncertain terrain. In turn, hospitals must be fully informed about all of a patient’s sources of payment, including if commercial insurance coverage exists.
There is nothing unethical about seeking such information, only for using it to prioritize patients who it turns out are commercially covered. Clearly hospitals should be setting their sights on treating all patients, regardless of source of payment. The ability to do so is greatly enhanced when hospitals can identify all sources.