With the changing healthcare landscape, health systems are feeling the squeeze of reduced cash flow and a rise in bad debt write-offs, the result of decreasing reimbursements and increased patient costs associated with rising premiums and co-pays.
- Nearly 20 percent of consumers have unpaid healthcare bills in 2014, with 17.4 million consumers enrolled in high-deductible plans – a 12 percent increase over the previous year, according to InstaMed’s 2014 Trends in Healthcare Payments.
- Out-of-pocket payments for insured patients are expected to reach $420 billion in 2015, up from $250 billion in 2009, a 68 percent increase in five years, from estimates by America’s Health Insurance Plans (AHIP) Center for Policy Research.
While financial health is critical to every organization, for healthcare it can be a challenge to maintain or increase margins, even though that sometimes is viewed as running counter to the notion that the mission of healthcare organizations is to help people. As such, health systems are challenged with balancing the business of healthcare with their missions.
In light of these new challenges, health systems are struggling to capture every cent possible. As they seek out ways to improve cash collections and reduce bad debt write-offs, many are turning to processes and tools used outside of healthcare. Propensity to Pay (P2P) tools are one such solution. These tools are vital in other industries such as banking, and help organizations determine where to focus their resources.
The work required to implement P2P products varies depending on the sophistication of the products. Each implementation requires a load of historic claims data in order to achieve more accurate scoring and segmentation. In addition to implementing the software, health systems have to determine what to do with the results – on which patients they will focus collection efforts, which accounts they will outsource for collections, and which accounts they will write off as uncollectable or as charity care.
While implementing a P2P solution can be a straightforward process, there are some best practices and tips health systems should consider:
- Know the cost to collect, and where high dollar and low collectable accounts are, including write offs, and then pilot test high-priority areas.
- Determine workflows for each segment.
- Determine how it will treat accounts with a high, medium and low P2P score and, in each scenario, establish a process through which it will determine whether it will outsource those accounts, make outbound calls, or establish how statements will be sent before writing off or sending to collections.
- Turn on P2P as early as possible in the revenue cycle. It shouldn’t wait to score accounts until after services are provided or insurance has paid. Upfront collections and payments received prior to services are easier and cost less.
- Gain access to the historical claims data feed of new accounts. More historical data results in a more accurate P2P score. For example, if a patient has a poor credit score but over the years has paid medical bills in a timely manner, that patient will receive a more favorable P2P score. There can be challenges in loading historical data especially if the organization has been using its billing system for an extended period of time – the initial data load can be large and take time to load into the P2P software. A large amount of historical data can also pose challenges with data validation.
- Access the data that resides within its billing systems. Implementing a P2P solution will be more challenging if an organization has multiple billing systems with different keys. Some health systems do not have both hospital/inpatient claims and professional claims data in the same database, in which cases there may be challenges in matching records. Other systems have their data stored by location or region, and those may be in different systems, which also may result in record matching challenges. A John Doe in one system may not be the same John Doe in the other system so determining how to match the records is essential to getting sufficient data loaded into the P2P solution.
- Know its self-pay collection KPIs, such as POS collection, cost to collect, average days to collect, and write offs (bad debt and charity). It’s important to know baseline scores in order to gauge improvements.
- Know which lines of business will benefit most from P2P. There are many P2P offerings, including products that not only provide credit scores and account segmentation, but also customize workflows to help collections. An organization needs to select a product that meets its needs and adds value.
- Conduct a cost-benefit analysis. An organization may not need to implement the entire suite of P2P software to realize benefits. Some solutions are very expensive, so understanding the opportunity and implementing the solution that obtains benefits at the right price should be part of the implementation.
P2P is just one strategy for improving self-pay collections. As organizations consider implementing a solution, they must examine surrounding workflows and be sure to balance their efforts with their missions.