Daily Briefing

More hospitals want patients to pay in advance. Is that radical transparency—or unfair to patients?

Advance payment for certain services is common practice at many hospitals, but some patient advocates argue the practice is unfavorable for patients and make it harder for them to pay for care, Stephanie Goldberg reports for Modern Healthcare.

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Asking for payment in advance is common practice for many providers

According to Goldberg, more hospitals and surgery centers are asking patients to pay for nonemergency services in advance, and the practice could become even more common as hospitals struggle to deal with financial challenges from the pandemic.

For instance, most large hospital systems in Chicago—including Advocate Aurora Health, Northwestern Medicine, Amita Health, Rush University System for Health, and NorthShore University HealthSystem—ask patients to pay before providing certain services. According to the hospital systems, the practice promotes price transparency and prevents surprise medical bills, especially if a service isn't covered by insurance or is from an out-of-network provider.

Many hospitals say they only require advance payment from out-of-network or self-pay patients for elective procedures, Goldberg reports, but it can also depend on the procedure, such as whether it is cosmetic or medically necessary.  

Richard Gundling, SVP of health care financial practices at the Healthcare Financial Management Association, said hospitals providing patients with an estimated cost and asking them to pay in advance is "very common, if not the norm."

And the practice extends beyond just hospitals—North Shore Endoscopy Center, which is part of ambulatory surgery center management company Amsurg, requires that all patients pay in advance.

According to Gundling, the practice has become more widespread amid a push for price transparency in health care and an increasing number of patients with high-deductible health plans.

Patient advocates argue against advance payment practices

However, Goldberg writes that asking for advance payment increases patients' out-of-pocket costs, as well as the possibility they won't be able to cover the cost of care.

Many consumers are uncomfortable paying for expensive surgeries and diagnostic tests in advance, based only on estimates and without a chance to evaluate the quality of care provided, Goldberg reports. Some also question why hospitals should collect payment upfront when most other service providers bill customers only after a service is provided.

"Expecting a patient to come up with money upfront when it hasn't even been put through insurance, that doesn't seem right to me," said Carrie Espinosa, a benefits consultant and insurance adviser who paid in advance for a colonoscopy at North Shore Endoscopy Center.

"There are so many people with so much medical debt," Espinosa said. "The cost of care, to me, is the fundamental issue."

Moreover, according to Goldberg, patient advocates say hospital cost estimates don't consider other insurance claims that have not been processed, meaning that the estimates may not accurately reflect a patient's deductible at the time of a procedure.

In addition, advocates say the estimates often exceed the actual cost of care, leaving patients who pay in advance in wait weeks or months for refunds. Although hospitals say overpayments are either automatically applied to any outstanding medical bills or automatically issued as a refund, advocates argue that patients are the ones responsible for checking for refunds.

"The practice is not very favorable to consumers," said Courtney Hedderman, AARP Illinois' associate state director of advocacy and outreach. "You don't realize that you could and should say no, because you're already in a very vulnerable state."

However, Venanzio Arquilla, a managing director at Claro Healthcare, said while it might be irritating for patients to be asked to pay in advance, "in reality, it's supposed to make it better for [them] as well as the health system."

"I don't want to see seven bills [from a hospital] … It's expensive to continue to bill people," Arquilla added, "and, ultimately, it really raises the cost for people who are paying by shifting costs." (Goldberg, Modern Healthcare, 10/8)

Advisory Board's take

Are POS collections your Achilles heel? Here’s 3 ways to fix that.

By Lauren E. Robinson

Rising health care costs and increasing out-of-pocket obligations have made sticker shock an inevitable experience for too many patients in health care today. Although providers are unable to magically reduce costs, they should have a formalized point of service (POS) collections policy to improve price transparency and the patient financial experience. So why does research indicate that 51% of hospitals have no formal policies or procedures for POS collections? It seems that the even in the age of price transparency the health care industry still has room to improve the patient financial experience.

90% of patients want to know what they owe upfront, and hospitals need to collect faster. Upfront conversations about money aren’t easy, but they are a value-add (for both parties) when properly carried out. Providers can collect their dues, and patients are not unknowingly thrown into medical debt. That said, hospitals are bound by medical ethics and federal laws on emergency treatment and should ensure they are abiding by them.

Media attention on this topic is not new. This practice, referred to as POS collections, has been commonplace at many hospitals and health systems for years. I recall reading an article from 2014 citing similar practices and patient frustrations. Few hospitals will state on record that they deny patients care or require them to reschedule elective care if they are unable to pay, but some do. Most organizations consider the service and relative patient severity. With all of this in mind, what can organizations do?

  1. Expand charity care policies and proactively screen for eligibility

    While charity care has historically been reserved for low-income patients, such policies leave out a cohort of middle-income consumers who may struggle to afford services and procedures that can cost thousands of dollars upfront. As such, health systems have begun to adjust their policies to meet the rising underinsured population. For more information, review our in-depth research report on uncompensated care in the high-deductible era.

  2. Create a clear, flexible, and empathetic POS collections policy

    Create a formal POS collections policy that is applied consistently across the entire health system that meets your patient population’s unique needs and update it regularly to account for economic stressors. The five key components in optimal POS collections are:

    1. Be mindful of the care setting;
    2. Provide a price estimate prior to the appointment, and improve accuracy by partnering with a vendor;
    3. Use the opportunity to explain insurance coverage and general hospital collection practices (refund process), and provide patients with the relevant codes and information to call their payer to confirm preliminary obligations;
    4. Don’t be afraid to direct the patient to a financial counselor who can inform them of multiple payment options such as discounted payments, payment plans, and zero interest loans; and,
    5. Ensure coordination between patient access and the business office.

  3. Train and coach staff to consistently use the policy
  4. Before staff can accurately discuss the policy with patients, they need to be as informed as possible. Provide ongoing staff training on the benefits of POS collections, how and when staff should ask for payment, and scripting scenarios to practice responding to patient objections. Ultimately, patients want honesty and transparency, and a well-trained staff can confidently navigate difficult conversations. How should staff make the ask?

    • Before engaging the patient, prepare all necessary patient information. This includes a patient price estimate and information about the patient’s individual insurance plan;
    • Next, verify the patient is not visibly distressed or in emergency condition; and,
    • Finally, ask for payment in a confident and warm manner.

Parting thoughts

Upfront collections have tangible benefits. Pre-payment can lower bad debt, improve the likelihood that a patient pays their full balance, reduce accounts receivable days, and get patients the assistance they qualify for upfront. Change takes time, and patients should be given options that are reflective of their personal financial and medical situation. If done well, we can move towards a future where both providers and patients are satisfied.

Andrew Mohama contributed to this article

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