Utilizing Revenue Cycle Platforms Benefit Both Patients and Hospitals

Healthcare costs are rising. There is no debate. PricewaterhouseCoopers estimates that medical costs will rise 9.9 percent this year and 9.6 percent in 2009. Rising costs inevitably mean an increase in debt and delinquencies, especially given the current recessive economy. How to fix the healthcare system is on the minds of many, especially since it is an election year. That is not an easy fix and it will take time and creative thinking. However, there are major steps that hospitals and healthcare systems can take now to address the rising amount of bad debt and uncompensated care.

According to a recent report from the Commonwealth Fun, 75 million working-age adults in 2007 were either uninsured or underinsured, up from 61 million in 2003.  This is a major reason healthcare providers around the country are searching for new methods to effectively manage their accounts receivable and patient billing issues.  This is complicated by the fact that next year will see a major change in how not-for-profit hospitals classify their spending for bad debt and charity care (IRS Form 990, Schedule H).

Innovative ways to streamline the process of accessing patients’ financial options are needed. Currently, hundreds of solutions to assist hospitals in solving payer, self-pay, billing and charity issues exist.  However, in today’s economic climate, it may make most sense for hospitals to utilize revenue cycle self-pay solutions. These solutions offer three key benefits for healthcare organizations, including:

• Verifying patient identity and insurance information. This allows for the streamlining of the admissions process and helps prevent fraud while ensuring patient safety by verifying patient identity, self-reported information and insurance coverage.
• Qualifying patient capacity to pay and determining eligibility for financial assistance programs. This process also properly segments accounts into appropriate workflows such as self-pay, uninsured, insured co-pays and deductibles. 
• Collecting patient receivables more cost-effectively.  The collection process is improved at both the front-end and back-end of the revenue cycle with such a solution.

Many hospitals are beginning to use revenue cycle self-pay solutions to reduce bad debt through more rigorous collections processes, focusing on point-of-service to reduce collection costs, but also taking into consideration back-end collections. This process helps determine whether a patient is eligible for financial assistance, assists hospitals in reviewing charity care write-offs, and also improves cash flow potential (deductible and co-insurance fees). This step confirms the patient’s financial status and eligibility for charity care, further validating or correcting the information provided by the patient. Aside from reducing fraud, it also allows hospitals to use an automated process to increase the accuracy of information with up-to-date data.

Thousands of examples highlighting the benefits derived from using healthcare revenue cycle platforms exist throughout the country.  For instance, one West Coast hospital increased its time of service cash collections by $95,000 per month.  On an annualized basis, this represented more than $1.1 million of additional cash flow.   A Mid-Atlantic healthcare system reduced its time to qualify charity care by 95 percent in just six months after the implementation of a revenue cycle system.  And a Southwestern hospital improved its efficiencies by determining that of its 154,000 annual self-pay patient registrations, 56 percent of those were repeat visitors.   

Healthcare revenue cycle systems are particularly important because they verify information and identify charity care programs at the point-of-service rather than after services have been provided.  This helps in two ways: first, in collecting payments by prioritizing accounts via a patient’s ability to pay and second, providing fact-based payment planning.  Revenue cycle solutions utilize healthcare financial aid information associated with federal, state, and local assistance plans to help appropriately determine both patient eligibility for assistance and patient responsibility for costs related to medical treatment.

In addition, metrics or measurable indicators can be established such as a percentage improvement in segmentation of bad debt versus charity, reduction in days revenue outstanding, increases in reimbursement, use of public programs and private insurance, and of course patient satisfaction.  These metrics can help hospitals answer the big question of whether the revenue cycle steps are reducing costs and increasing efficiency.

Challenges will always exist in the management of the healthcare revenue cycle.  However, the steps that hospitals can take today in improving efficiencies can only help support and advance their internal systems and processes to meet the dynamic needs of the market. Second, healthcare collections will become increasingly important and will require a greater focus, given the shift to point-of-service payments in addition to the traditional collection follow-ups to patients. Finally, a proactive revenue cycle program can effectively and efficiently help manage self-payment and collections, both of which are critical for hospitals to reduce costs and enhance the quality of their service.

Rod Bazzani is executive vice president of healthcare for TransUnion. He can be reached at rbazzani@transunion.com.