Burns says he had a theory before undertaking the policy, a theory that has proved true. One part of that theory was that it would grease things administratively. We spent a disproportionate amount of time on accounts that paid poorly, and this would allow us to spend more time on commercial and government accountsthe ones we know that do have the ability to pay, he says. Indeed recoveries, especially in the emergency department through which most uninsured patients enter the hospital, went up, Burns says.
The old methodology was an administrative nightmare. We spent a disproportionate amount of time pursuing people who couldnt pay. It didnt make sense, Burns says. This put the focus where it should be. We should be spending our time on the revenue cycle.
A perhaps unexpected dividend is that the policy has increased staff morale, Sisson says, reducing the frustration of employees who are powerless to negotiate equitable rates with patients.
The program has been a win-win for everyone, particularly on the outpatient side, Sisson says. Although Sisson has not been tracking the data, there is the perception on the part of the staff that there are probably more visits by the uninsured to the outpatient clinics. Sisson notes that many of these are patients caught in between who do not yet qualify for Medicare, such as a widow living on a limited trust fund who comes often to University Medical Center for outpatient services. Thats a plus because it means that preventive care is more affordable for the uninsured, and thats the type of care that benefits the entire community by engendering a healthier population, she says.
To illustrate the rates, under this policy the charge for measuring a persons clotting factora common test for patients taking the blood-thinner coumadinis $32.40, but under the Medicare fee schedule the patient pays only $5.49, Sisson says.
The new billing policy increased collections, reducing the hospitals amount of bad debt. One year after the program was implemented, Sisson reported in the newsletter of the Arizona chapter of the HFMA that self-pay patients accounted for approximately 3.5% of the hospitals patient volume compared with 3% the previous year. That represented a 14% increase in volume, she noted at the time. However, over the same period, overall self-pay collections increased by 100%, and the level of effort required to follow up on self-pay accounts has been substantially reduced. Sisson says those numbers reached a plateau in the two years since. Financially, the hospital is doing better than it was four or five years ago with a 4% operating margin on net revenue of $450 million in its fiscal year ended in June, Burns says.
On average, Sisson says UMC provided the discount to 35 patients a dayhalf of those for emergency services. Subsequently, one-third of those patients eventually qualified for government-sponsored programs.
Although the hospital hasnt made a secret of the policy, it hasnt really caught on elsewhere. Debra Draper, associate director at the Center for Studying Health System Change in Washington, happened to just return from a visit to nearby Phoenix where the healthcare think tank is involved in a community tracking study. Hospitals are trying to clarify and institute policies around the uninsured or low-income, but policies vary from hospital to hospital and market to market, Draper says. Some hospitals have tied discounts to the same rates that the lowest-paying commercial plan pays. The problem with tying rates to Medicare, she adds, is that health plans are already complaining that they are subsidizing government programs.
UnitedHealthcarethe hospitals largest commercial payerhas no issue with the policy in place. The fact that UMC is willing to look at a policy that is fair and easy for consumers to understand is a positive thing, says Tyler Mason, a spokesman for UnitedHealth. If it helps consumers meet their obligation and hospitals to keep their revenue streams going, thats good because it potentially avoids cost shifting.
If it is good for the community, its good for the hospital.
Burns doesnt see a problem if every hospital were to adopt the same policy. We are always going to have uninsured folks in need of healthcare. We want people to contribute because we offer a highly skilled service, but we dont want people to go into bankruptcy as a result, he says. Once it is set up, it would make operations easier and the community appreciates it. Its feel-good stuff maybe, but from a CFO perspective, it gives our organization real dollar savings in administration of the revenue cycle, and we have seen better collection rates from the self-pay and uninsured.