Assuming the technical glitches plaguing the Affordable Care Act's health insurance exchanges are soon resolved, will the exchanges result in new patient volumes? And if so, how can hospitals best prepare to absorb these new patients?
The Daily Briefing's Hanna Jaquith sat down with The Advisory Board's Hamilton Shawn and Zac Stillerman to find out. (Shawn is executive director of New Product Development and Stillerman is general manager of Revenue Cycle Solutions.)
Q: Let's start with the big picture. Say you're an average 150-bed hospital—what might you see in terms of new patient volumes come January?
Shawn: What we're finding is that volume expectations are going to vary by state and by hospital. We recently did a big projection for a multi-state health system, which provides a variety of health care services throughout the West coast. And in each state, it was a different [formula] that we used to estimate volumes.
For example, did the state expand Medicaid or not? Is the hospital located in a market with a large network of physician practices? These factors all play a role. Since volume swings could be large, hospitals need to spend time figuring out how factors in their market will play out.
Q: The uncertainty has a lot of people worried: Moody's and McKinsey have said the exchanges are going to be a "credit negative" for hospitals, while Fitch thinks things will get better. Who's right?
Shawn: That's what we're struggling with now: a large portion of hospital bad debt is basically a factor of patients not paying their bills. The uninsured typically face much larger bills and pay them at much lower rates than the insured.
So from a layperson's perspective, we're about to take a bunch of uninsured people and given them insurance, which should make a hospital's bad debt drastically better—right? Except that it's not entirely clear that will be the case.
Q: Can you clarify what you mean by that?
Shawn: What we do know is that hospitals are going to see a change in the mix of patient balances. These balances can be split into two categories. There are "true self-pay" patients, or the uninsured, and "balances after insurance"—basically, insured patients who have copays, deductibles, and co-insurance.
Come January, the mix will begin to shift. But, while more patients will be "covered,” many of these new plans have high deductibles, copays, and coinsurance and will be held by patients that don’t have a great history of paying.
Meanwhile, in the employer-sponsored market, cost-sharing continues to rise and high deductible health plans continue to proliferate.
So, there is actually a much more subtle shift of patient balances than what appears on the surface.
Moody's: Why the exchanges could hurt not-for-profit hospitals
Q: And what that means for hospital collections is…
Shawn: The real flashpoint here is that hospitals approach balances post insurance very differently than true self-pay and that exchange-covered patients introduce another category with their own idiosyncrasies.
In some ways, we are adding a ton more complexity into the financial clearance process that is going to drive down productivity, thus creating more bad debt, or demand a decent-sized expansion in the revenue cycle budget.
Stillerman: I think the crux of the issue here, to add to what Hamilton was saying, is that it's going to be infinitely harder to collect on these patient balances. On the front end, it's going to be harder to assess a patient's coverage at the point of care.
Therefore, it's going to be that much more difficult to determine where you want to put your collection efforts to squeeze as many of those dollars out of those self-pay accounts.
So even if the dollars are the same, or a little bigger or a little smaller—the characteristics of that self-pay pool is going to be really, really different, and hospitals will need to recalibrate their collection processes and technology to account for this change.
Q: As Hamilton pointed out, self-pay is already huge—it's not like hospitals aren't wrestling with it already and now they must learn how. What's changed that's making it so hard to collect?
Stillerman: Several reasons. First off, there are going to be lots more plans to check—individual exchange plans, Medicaid coverage, and commercial policies.
Second, people in the exchanges are going to churn a lot more than patients with employer-sponsored insurance. So someone who is enrolled in a private exchange plan may forget to pay a premium or renew their policy and be kicked off—without notification sent to the hospital.
Q: What are the key implications for providers—how can they prepare?
Stillerman: Hospitals will need to be really smart about how they check eligibility, and they will need better technology in some cases to do it.
Hospitals don't necessarily need to invest in new technology; they just need to make sure their current systems are up to the job. There are a lot of tools than can help verify coverage—our Payment Navigation Compass, for example, can screen for Medicaid eligibility and exchange subsidies based on the federal poverty level. This can help hospitals deal with patient churning.
Q: Aside from the technology piece, what else hospitals can hospitals do to streamline this process?
Stillerman: We feel that it's in a hospital's best interest to support enrollment for as many people as possible. Under the ACA, hospitals have a greater opportunity to get more people "qualified" for coverage. Many more patients who were previously ineligible for coverage will come to the hospital—especially the ED—who could be insured under an exchange plan or Medicaid.
Financial counselors will be a crucial part of the effort here—they are responsible for helping patients identify the best way to pay for care. The issue is how to enable counselors to efficiently determine coverage and collect on patient obligation.
Left to their own devices, counselors may run the danger of reacting to the new environment by spending more time on everything—that's the wrong answer.
From an executive standpoint, this might mean hiring more staff (which no CFO wants to hear.) In this case, it might be worth it if it gets more people qualified and adds to the hospital's bottom line.
Video: Prepare for the wave of new patients from the exchanges
Q: What should hospitals be taking away from this?
Stillerman: That the issue of patient payments is much broader than just what is driven by the ACA.
Yes, there are a lot of things that hospitals need to get ready for under coverage expansion. But at the end of the day, exchange volumes are not going to be the bulk of your population. Employer-sponsored plans are shifting more and more responsibility to the patient. In essence, it's a double whammy.
So don't take your eye of that ball—what you want to do is deploy patient payment practices that are going to provide a financial return on both fronts.
A Message from Revenue Cycle and Self-Pay Compass: We Can Help
Health insurance exchanges began open enrollment on October 1, yet many providers are still unprepared for the challenges ahead. They must be able to screen potentially eligible patients and proactively reach out to their communities to facilitate registration. While this may be a daunting task, we can help you manage this process.
Join us for a webconference to learn how Revenue Cycle Compass and Self-Pay Compass can help you:
- Anticipate volumes of exchange-eligible patients
- Target community outreach efforts
- Make insightful patient-access staffing and management decisions
- Engage exchange-eligible patients
Billing and Collections,
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