By late 2003, Grady Memorial Health System in Atlanta knew something had to give, and fast. The state's largest public hospital had lost $50 million in the prior two years due to rising bad debt, and could no longer afford to pay its suppliers.
So the two-hospital system started phoning patients scheduled for procedures in advance to notify them that their copayments and deductibles would be due at check-in.
Now, if patients can't afford to pay upfront, their procedures are postponed until they can, says Teresa Finch, who was named Grady Memorial's chief financial officer in September 2003.
"We found that when we weren't enforcing payment at the time of service we ended up collecting an average of just 5 cents on the dollar," Finch says, adding that the new pol-icy has boosted cash collections by $47 million this year.
Thanks to these and other payment-improvement efforts, Grady Memorial has managed to whittle down its annual loss from $20 million in 2003 to an expected $6 million this year, and the facility is back in its suppliers' good graces.
Grady is just one of several hospitals nationwide that is seeking new ways to cut bad-debt expenses, which have been soaring due to increasing numbers of uninsured and changes in health insurance coverage that are forcing patients to shoulder more of their medical costs.
But with the industry under pressure to ease its aggressive collection tactics, most hospitals are focusing on ways to improve their chances of getting paid before services are rendered.
"Hospitals can achieve significant savings by tightening up their front-end or patient-access processes, including registration, insurance verification, authorizations and scheduling," says Kara Atchison, founder and chief executive officer of Managed Care Solutions, a healthcare consulting and revenue-recovery firm in Hollywood, Fla. "If you consider a denial to be any claim resulting in a zero payment, most denials originate well before patient care even begins."
According to Atchison, one-third of denied claims originating on the front end are because patients aren't eligible for coverage. The easiest way for hospitals to ensure eligibility, she says, is to use Web-based verification tools that pull benefit information from insurers' databases.
"It's amazing how many hospitals still don't give their registrars Internet access because they're worried about them surfing the Web or shopping online. But you can block all that," she says.
And although using these Web sites can cost hospitals up to $2 per transaction, it's money well spent because it can prevent more costly claims denials and appeals on the back end after the insurer is billed, Atchison adds.
The Web sites can also help registrars to speed up authorizations for specific services, another essential component to ensuring full reimbursement. Because more than half of claims denials originating on the front end are the result of "no authorization," Atchison says, hospitals should defer nonurgent treatment, such as physical therapy, until proper authorization is received from the insurer. "Authorization should not be confused with eligibility," she says.
Atchison adds that it's common for a claim to be denied because the hospital has tacked on a service that it hasn't contracted to provide. Hospitals, she advises, should track the frequency of denials for noncontracted services and either include them in the contract during renegotiation time or discontinue the billing.
Other simple changes-such as enlarging data entry fields-can lead to big savings, too. In one hospital, for example, a $54,000 claim stayed in denial status for 460 days because the insurer needed an additional two-letter suffix added to the member number, and the internal data field in the hospital's system wasn't big enough to fit the two letters, Atchison says.
She advises hospitals to track even small glitches and correct them right away. If information is often omitted, those data fields should be highlighted in the registration software. "Too often, when it comes to small registration errors, (hospitals) think, `Well, the claim didn't really get denied,' or they call it a `soft denial' and don't bother to correct the error until it happens again," Atchison says. "As I like to say, hospitals can be in denial about their denials."
Another way to reduce denials due to missing or inaccurate data is to have the registration program automatically delete information on patients who haven't been admitted in more than six months. "So the next time (the patient comes in), the registration staff won't just say, `You still have Blue Cross, right?' They'll have to ask, `What's the name of your insurance?," Atchison explains. "That way, you don't pull outdated information into the current registration."
And the sooner patient information is collected, the better. Hospitals should make it standard protocol to automatically transfer all patients making appointments to a pre-registration department to have their benefits confirmed in advance," Atchison says. The goal is to have at least 90% of patients pre-registered before admission with their authorizations in hand.
When it comes to uninsured patients, hospitals can reduce their potential losses by helping them qualify for Medicaid. In many states, Medicaid will reimburse providers retroactively for services provided before the patient qualified for coverage.
Grady Memorial expects to help 4,600 patients get approved for Medicaid this year alone, resulting in $7 million to $10 million in reimbursements for services that otherwise would have likely been written off, Finch says. The health system employs several full-time financial counselors and pays an outside firm to help determine patients' Medicaid eligibility.
Since Jan. 1, Grady Memorial has also worked to trim its bad debt by granting discounts of up to 70% to uninsured patients whose annual incomes fall below 200% of the federal poverty level.
Grady Memorial keeps its front-end employees motivated by rewarding them with a $100 bonus each month when the hospital meets its cash-collection goal. "Each month, we stretch that goal a little further," Finch says.
* Centralize the authorization process across the entire system, including outpatient clinics.
* Automatically transfer patients from scheduling to pre-registration to verify their benefits before they arrive.
* Use Web sites designed to verify patient eligibility.
* Defer nonemergency treatment until proper authorization is obtained.
* Automatically delete information on patients who have not been admitted in more than six months so that their updated information can be requested and entered next time.
* Make sure the data entry fields in the registration software are large enough to enter all information needed.
Source: American Hospital Association