Consumerism and the Financial Impact for Consumers and Providers

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Consumerism and the Financial Impact for
Consumers and Providers
American Association of Healthcare Administrative
Management Thursday, October 19, 2006 St.
Augustine, FL
Philip Hardin Executive Vice President Product
Management
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Agenda

• Consumer Driven Health Plans (CDHPs)
• Overview Market Issues
• Forecast
• Implications for Providers
• Key Consumerism Strategies for Providers
• Focus- Emerging Market Research for Patient
  Liability Estimates

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Consumer Directed Health Plan (CDHP) Overview
Market Issues

• Benefit plans designed to motivate consumers to
  take personal responsibility for healthcare
  expenditures
• Typical defining features
• Almost always a high deductible - usually
  1000-2500
• Attached to health spending accounts (HSA or HRA)
• Higher deductibles will increase self-pay
  collections
• Contracted discount is similar to providers, but
  patient responsibility increases with CDHP
• Increased need to communicate financial
  responsibility to patient agree to settlement
  plan at or before point of service
• Patient business processes may change
• Increased patient requests for estimates
• Shop based on cost/quality
• Patient may have a healthcare card to reserve
  HSA funds

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Out of Pocket Expenditures are Increasing

• From 1994 to 2004 the CAGR was approx 5.5
• Payment from out of pocket grew from 137B in
  1990 to 237B in 2004

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Employers are Poised to Increase Employees
Participation in the Healthcare Process
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12
million members
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of commercially insured market
2007
year this many people will enroll in CDHP
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Benefit Plan Distribution Trend
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Growth in Number of HSA Accounts
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CDHP Forecast

• More than 2 billion in HSA-related transactions
  is projected to be spent between now and 2007

Source March 7, 2005, Forrester Research, Inc.
Market Overview Will Health Plans Profit From
HSAs?
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Potential Impact of Consumerism on Providers

• Higher administrative costs
• Increased bad debt
• Lower patient satisfaction
• Revenue cycle process changes

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Cost of Billing Insurance Administration

• 150 B annually spent on insurance and billing
  administration
• 44 of healthcare administration spent on billing
  and insurance
• Providers bear 2/3 of the insurance and billing
  costs

Billions
Source Centers for Medicare and Medicaid
Services The Cost of Health Insurance
Administration in California, Kahn, Kronick, ..,
Health Affairs.
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The Financial Impact on Providers

• Hospitals shoulder more than 25 billion in
  uncompensated care annually
• (HFMA, March 2006, Finding the Missing Pieces
  for Payment)
• 6,000 hospitals generate approx 129 billion in
  bad debt.
• Increasingly due to self-pay accounts that have
  lower collection rates than third party payers
• (Collections Credit Risk Magazine, October
  2006)
• 50 Hospitals Days in Accounts Receivables
• 25 of total accounts receivable is over 90 days
  old,
• It takes hospitals more than 11 days to create a
  bill
• Hospitals wrote off 6 of their gross revenue as
  uncollectible in the 1st quarter of 2006
• (Medical Banking Policy Research, Will Banks
  Replace a Healthcare Providers Traditional
  Business Office?, October 2006 (based on data
  from the HARA report))

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The Financial Impact on Providers

• Self-pay receivables as a percent of gross
  revenue increased to 8.25 in 2006 from 6 in
  2005
• (Hospital Accounts Receivable Analysis (HARA)
  report published by Aspen Publishers)
• High-deductible plans would add to the "already
  insurmountable'' complexity in billing and
  collections. Considerable work still needs to be
  done to educate patients, providers and
  employers- William Jesse, president and CEO of
  the MGMA
• Almost 62 of practices that participated in the
  survey said they have patients covered by
  high-deductible health plans
• (Modern Healthcare , n3 , p28 , Monday , January
  16, 2006)

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Best Practices for Consumerism- Revenue
Enhancement

• Price Transparency
• Consumers beginning to shop on cost and quality
• Charge Master review insure competitive pricing
• Pricing based on cost and competition, not
  unrealistic gross charges

Courtesy of David Harris, Price Waterhouse Coopers
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Best Practices for Consumerism- Patient Access

• Greater CDHP awareness via training and education
• Verify both insurance coverage and plan design
• Identify high deductible plans at scheduling and
  registration
• Quantify service specific deductibles
• Integrate into the patient access process
• Estimate a patients financial liability prior to
  care
• Use estimators and/or summary contract
  information
• Improve point of service cash collections during
  admission and registration
• Consider new provider network agreements that
  consider high deductible health plans
• Determine patients ability to pay for
  significant balances
• Integrate credit scoring and address verification
  into patient access process

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Growth in Payer Availability
Payer Connections for Eligibility Benefits
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Historical Sample Response with Limited
Information
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• New Response from Cigna
• Eligibility status
• Co-insurance
• Deductible
• Deductible Remaining
• Coverage details by service type

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Best Practices for Consumerism- Billing Payment

• Make arrangements for patient balances prior to
  discharge
• Reduce the cycle time and improve the accuracy of
  third party payer billing
• Speeding payment from third party payers improves
  ability to quickly bill consumers
• Automate payment posting from payers
• Improves accuracy
• Reduces cycle time
• Captures detail for secondary claims, denial
  mgmt, and patient billing
• Accelerate the timing of patient billing
• As time passes, collection rates decrease

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Best Practices for Consumerism- Billing Payment
(cont)

• Improve patient statement presentation (Patient
  Friendly Billing)
• Explain the insurance payment received
• Patients are more likely to pay when the bills
  are easier to understand
• Consider electronic presentment
• Utilize e-payment solutions for consumers to pay
  via a website
• Self-service improves customer satisfaction and
  collections
• Utilize a lockbox for consistent payment posting

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Proposed Tools for Estimating Patient Financial
Liability

• Providers can retrieve estimates of patient
  responsibility along with eligibility and
  benefits
• Calculation of estimate considers
• Provider contracted rates for specific treatments
  calculated based on paid amounts or specific
  contract
• Place of service
• Co-pays, co-insurance and patient accumulators
  such as deductibles out of pocket limits
• Year to date accumulator status
• Specific benefits
• Providers supply treatment codes and place of
  service in addition to required data for the
  eligibility inquiry
• Available through a variety of access methods
• Emdeon Office
• Emdeon Assistant
• Integrated with Hospital Information
  Systems/Practice Management Systems

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Key Focus Group Questions

• What would you do with the estimate?
• How accurate will you need the estimate to be? 
• What will you need to present to the patient to
  support the up front collection?
• What is your ability to submit procedure /
  revenue codes at the point of service?
• On what patients will you use the service?
• Does it vary by procedure, cost, by plan etc?
• What is your preferred access method, for example
• What type of training/ documentation will you
  need to support your use of the system?

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Focus Group Feedback
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Challenge How Can Providers Thrive in an
Emerging Retail Healthcare Environment?

• Questions?
• Contact us
• Emdeon Business Services
• Institutional Provider Services
• 800.444.4336
• www.emdeon.com
• instsales_at_emdeon.com