More Patient Financial Responsibility Shouldn’t Mean More Bad Debt

June 8, 2020

A lot has changed in healthcare over the past two decades. Medical records are stored in computers, patients can video chat with providers from home, and it only takes a few seconds for physicians to send test results from the hospital to their office.

Beyond technological advancements, social movements and significant regulatory changes have fueled major shifts in the practice of medicine and the business of healthcare over the past 20 years.

A profusion of new reimbursement and care models have guided hospitals, health systems and other providers toward reducing healthcare costs and improving quality of care. More recently, healthcare organizations started reaching beyond cost and quality to incorporate more patient engagement into their strategic goals. Addressing all three dimensions simultaneously is challenging and requires constant communication and coordination across multiple departments.

Initial conversations about improving the patient experience were primarily focused on clinical care, but more and more hospitals are expanding the discussion to include financial services. Hospital and health system reimbursement is more closely tied to patient satisfaction than ever before, which makes it vital for providers to examine how their billing and payment processes affect the overall patient experience, according to T. Scott Law, founder and CEO of Zotec Partners, a leading healthcare revenue cycle management services provider.

Mr. Law founded Zotec Partners in 1998 as a specialized revenue cycle provider for radiology practices. Over the past two decades, the company has expanded its services to hospitals and health systems across the nation and evolved to help these organizations smoothly adjust to changes in the industry. Zotec Partners is currently assisting medical providers with an issue that is top of mind for many healthcare executives: the increasing connectedness between the patient experience and the financial well-being of hospitals and, health systems.

Patients as payer

Traditionally, provider organizations centered their revenue cycle management strategies on commercial and government payers, but that has changed with the rise of high-deductible health plans.

Patients are now in charge of more healthcare dollars than ever before, and they are one of the fastest growing payers. In fact, a 2017 report from Black Book revealed patient healthcare costs — including deductibles and out-of-pocket maximum payments — have soared nearly 30 percent since 2015.

Revenue cycle performance in healthcare is challenging due to many factors, including the complex nature of services billed, and different reimbursement rates and contracts for each insurance company and government program. The process has become more complicated as patients have evolved into primary payers. This trend requires hospitals, which have historically received only a small fraction of what they are owed from patients, to engage with patients in new ways and to update their billing and collections practices, according to Mr. Law.

“The biggest evolution of Zotec is we used to be a business-to-business transaction set. Now, it’s business-to-business-to-consumer,” he said. “We’ve added a third level of collection techniques.”

The business-to-business model was pretty straightforward: a provider organization would electronically submit a claim to an insurance company, and the insurer would adjudicate the claim and pay the provider for services rendered. That transaction model has since evolved in complexity.

Under the new model, provider organizations still submit an electronic claim to an insurance company, expecting to get reimbursed based on contracted rates. However, the insurer may come back and say coverage has not kicked in because the patient has not reached his or her annual deductible. In these cases, which are becoming more common, the hospital or health system is tasked with trying to collect from the patient.

Rising deductibles create financial risk for hospitals and health systems, as many patients are unable to afford the high out-of-pocket costs associated with these plans. However, there are many steps provider organizations can take to prevent increasing patient financial responsibility from causing bad debt to rise.

Elevate the patient financial experience

Because relying heavily on payments from patients is a whole new ball game for healthcare organizations, hospitals — even hospitals that offer exceptional clinical care — struggle with the shift to patient-as-payer. Provider organizations could ignore subpar patient collection rates in the past, as they were traditionally supported by reimbursement from government and commercial insurers, but that is no longer the case.

Patient collection rates now have a significant effect on medical providers’ financial positions, making it critical for hospitals and health systems to adopt a modern approach to billing and broaden their understanding of their patients, according to Mr. Law.

He said one of Zotec Partners’ fundamental jobs in the past was to collect money for healthcare providers, much of which came from commercial insurers. However, the company’s role has evolved along with the rise in patient payment responsibility.

“We’re getting involved in the patient flow,” Mr. Law said. “We’re in the patients’ lives like we have never been before.”

From pre-registration through post-discharge, it is crucial for hospitals to engage patients in financial conversations. Having these discussions at every point of contact prevents patients from being surprised by an unexpected medical bill after services are rendered.

Zotec Partners offers technology solutions hospitals and health systems can use to determine whether a patient has met his or her annual health insurance deductible and to calculate out-of-pocket costs. Once these costs are established, hospital and health system revenue cycle staff can help the patient understand how he or she can meet those financial obligations. By educating patients on the front end, hospitals and health systems not only improve the patient experience but also increase the likelihood of getting paid. “[It] benefits the hospitals and benefits the patients,” Mr. Law said.

Engaging patients early on and keeping them informed throughout the process are two key ways hospitals can increase patient collections without damaging the patient relationship. Creating a positive financial experience for patients also involves giving them a variety of payment options and keeping them engaged in the billing process, according to Mr. Law.

Zotec Partners uses technology to make billing and payment more convenient for patients. Zotec Partners uses text messages to keep patients informed of balances owed. The technology also allows patients to submit payments via text message, online or through an interactive voice response system. For less tech-savvy patients, or patients with billing questions, Zotec Partners has customer service representatives available to assist over the phone.

Giving patients the ability to make payments through multiple channels simplifies the process and can translate to a higher propensity for patients to pay. However, patients may still fail to satisfy their full financial obligation.

The percentage of patients who fail to pay their hospital bills in full has steadily risen in recent years. Nearly 70 percent of patients with hospital bills of $500 or less did not pay off the full balance in 2016, up from 53 percent in 2015 and 49 percent in 2014, according to a report released last year.

One reason patients are not paying is that they are unsure of how much they owe. After receiving numerous bills and benefits statements after hospital visits, patients become frustrated when they are unable to determine how much they owe, and some ultimately choose not to pay the bills. To avoid this, some hospitals and health systems are moving to simple, consolidated billing statements.

Mr. Law said one of the reasons hospitals ask Zotec Partners to take over their self-pay receivables is to ensure patients receive easy-to-read statements that clearly show the amount owed and when payment is due.

Make patient billing and payment a strategic imperative

The healthcare industry has undergone many changes over the past two decades, and one of the most consequential trends for providers has been the rise in high-deductible health plans and the corresponding increase in patient financial responsibility.

As patients shoulder more of the costs of their medical care, the financial fate of hospitals and health systems depends on the ability to deliver high-quality clinical care and a positive financial experience to patients. Hospitals and health systems are implementing more effective and consumer-friendly payment and billing processes to remain financially viable. Many are partnering with experts, like those from Zotec Partners, who can help these organizations navigate modern revenue cycle challenges. 

Learn more about Zotec Partners here.