I M P R O V I N G S E L F P A Y A T A L L P O I N T S O F S E R V I C E
R E L A Y H E A L T H W H I T E P A P E R
a
Improving Self Pay At All Points of Service
A RelayHealth White Paper
Abstract
Healthcare providers are expected to provide healthcare, and they must
also collect payment for it. Unfortunately, once patients leave the hospital,
the chances that they will pay their portion of the bill drops dramatically. If
hospitals take a proactive approach, collecting from patients at all points of
service, they can keep this self-pay revenue from falling away.
This white paper will discuss the increase of such self-pay options as consumer
directed health plans. It will explain why the revenue cycle must change to
support this movement, and model an emerging approach for doing so. Finally,
it will discuss the increasing use of technology to improve hospitals’ ability to
collect from patients and present a viable technology solution.
Table of contents
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consumer-directed Health Plans (CDHP) on the rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consumer debt on the rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Providing for providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A new model: Using technology to improve self-pay at all points of service . . . . . . . . . . . . . 4
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
R E L A Y H E A L T H W H I T E P A P E R
I M P R O V I N G S E L F P A Y A T A L L P O I N T S O F S E R V I C Eb
I M P R O V I N G S E L F P A Y A T A L L P O I N T S O F S E R V I C E1
IntroductionU.S. healthcare costs are skyrocketing. As a percentage of GDP, they have increased to more than
17 percent and are expected to top 20 percent in the next nine years.3 The United States spent
$7,538 per person on healthcare in 2008, well over double the $3,000 average of all Organisation
for Economic Co-operation and Development (OECD) countries.4
And the more care costs, the more it costs to insure it. The result? Self-pay is on the rise.
Improving Self Pay At All Points of Service
Executive summary
Businesses of all sizes are struggling with increasing employee healthcare costs.
Increasingly, employers are looking to employees to help shoulder the burden, and one
of the fastest growing ways to do that is by shifting to Consumer-Directed Health Plans
(CDHP). Sixty-one percent of large employers will offer a CDHP, and for 20 percent of them,
it will be their only plan. The result: more consumer debt and less likelihood of payment.1
Large U.S. employers estimate their healthcare benefit costs will increase an average
of 8.9 percent in 2011, up from an average increase of 7 percent in 2010. Smaller
employers project even greater costs. Eighty-six percent of respondents to the
Council of Insurance Agents & Brokers’ 2010 Employee Benefits Market Survey
said prices increased for small employers (those with 50 or fewer employees),
with more than half the increases in the 11–20 percent range. Ninety-three
percent of medium-sized employers (51 to 500 employees) had increases, with
58 percent seeing increases in the range of 6–15 percent.2
Traditional collection methods focus on recouping payment after treatment, after the
patient has left the hospital. With the rise in self-pay, hospitals must adopt a different
approach: Collection at all points of service. Technology will play a pivotal role in making
that possible.
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CDHP on the rise
Healthcare providers are not alone in feeling financial pressures. For employees, insurance costs are
going up. According to the Kaiser Family Foundation’s Employer Health Benefits 2010 Annual Survey: 5
• This year, the average worker is paying nearly $4,000 toward the cost of family health
insurance coverage — an increase of 14 percent, or $482, over 2009.
• This jump occurred despite a 3 percent rise (to $13,770 on average) in total premiums for
family coverage, including what employers themselves contribute.
• Since 2005, workers’ contributions to premiums have gone up 47 percent while overall premiums
rose 27 percent. Wages, however, increased only 18 percent, and inflation rose 12 percent.
• Many employers are also raising annual deductibles. A total of 27 percent of covered workers
now face annual deductibles of at least $1,000, up from 22 percent in 2009. Among small firms
(3–199 workers), 46 percent face such deductibles.
Enter the high-deductible consumer directed health plan (CDHP). Devised to stabilize
employers’ cost structures, CDHPs offload healthcare costs to the employee via higher
deductibles and self-payments.
Nearly a fifth (18 percent) of respondents to a national survey of employer-sponsored health
plans are eliminating high-cost or more generous health plan options as a way to move
employees into lower-cost options, such as CDHPs. 6
According to a survey by the National Business Group on Health (NBGH), in 2011:7
• Sixty-three percent of employers plan to increase employees’ share of premium costs,
compared with 57 percent who did so this year.
• Forty-six percent plan to raise out-of-pocket maximums, up from 36 percent this year.
• Sixty-one percent of employers will offer a CDHP in 2011.
• Twenty percent of employers will offer only CDHPs, twice as many as in 2010.
Of the many types of health plans available to employers, CDHP is the only one that is growing,
taking share away from HMOs and PPOs while increasing out of pocket payments for healthcare
by employees. There’s one big problem, however: some individuals can’t (or won’t) pay for
healthcare without employer subsidies.
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3
Already, hospitals
bear $29 billion to
$33 billion of the
industry’s bad debt.
Consumer debt on the rise
According to a recent survey, consumers were more likely to pay the mortgage, insurance, loans
and utilities before their healthcare bills. They’re also more likely to pay for cable TV, Internet,
lawn care and the newspaper. And this bill prioritization is not income driven — patients’ income
levels do not relate to how likely they are to pay their healthcare bills.
Employers shifting healthcare costs to consumers that won’t pay them has created a dangerous
cycle (Figure 1). Rising healthcare premiums, the recession and unemployment mean larger out-
of-pocket liabilities and bad debt for consumers. Consumer bad debt means lower revenues
and yields for providers. Providers must renegotiate contracted network discounts with payors
(health plans) to remain profitable. Payors, in turn, increase premiums charged to employers and
individuals, completing the cycle of rising consumer bad debt.
Providing for providers
Hospitals already bear $29 billion to $33 billion of the industry’s total $45 billion to $65 billion
healthcare industry bad debt. 8 Healthcare reform is the great unknown. It would extend
coverage to as many as 30 million more uninsured; 3 million to 6 million in a public option.
While this influx of new patients expecting coverage will increase costs and reduce margins for
the healthcare system overall, it exacerbates an existing challenge facing hospitals: receiving
payment before the patient leaves the facility.
Figure 1: Healthcare Cost Pressures Increase Self-pay
Health PlanNetwork Discounts Threatened
Increased Health Plan CostsImpact Employers
and Individual ConsumersRise in CDHP Plans
ProviderRevenue Yields Decline
Rate IncreasesIncreased Deductibles
Higher Co-pays
ConsumerBad Debt Grows
Self-payand rate increases
lead to higher consumer bad debt, perpetuating
the cost pressureon providers
$$
$ $
$
Source: “U.S. healthcare payments: Remedies for an aging system.” Finn, Singhal, Pellathy for McKinsey on payments, March 2009.Graphics ©2011 RelayHealth and/or its affiliates. All rights reserved. HCCPISP20100921
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Traditionally, hospitals did not collect patients’ self-pay obligation until after discharge. This old
model relied on collecting only the co-pay at time of service, then determining and attempting
to collect the balance post-service. But, the likelihood that patients will pay their portions of the
bill drops dramatically once they leave the hospital .
In an industry plagued with rising costs which are increasingly shifted on patients who are
increasingly unwilling or unable to pay, hospitals must take a proactive approach to securing
payment: collecting from patients at all points of service.
A new model: Using technology to improve self-pay at all points of service
The emerging model addresses key phases of the revenue cycle: three points of service —
pre-service financial clearance, point of service interaction and post-service settlement —
and a fourth phase, performance analysis.
Pre-service financial clearance
In an effort to improve collection rates, hospitals have begun shifting to the left, moving from
post-service patient accounting on the right (Figure 2), to pre-service financial clearance at
patient access, on the left (Figure 3).
In this emerging model, registration staff performs all financial clearance functions before
services are rendered. Demographic, financial and clinical data capture the move to pre-service,
along with identity verification, eligibility verification, authorization, referral management and
payment collection. Patient financial education and counseling also happen much earlier in the
process. Functions addressed at this point in the revenue cycle include:
Pre-Service Point-of-Service
P A T I E N T A C C O U N T M A N A G E M E N T A C T I V I T I E S
P A T I E N T A C C O U N T M A N A G E M E N T A C T I V I T I E S
Post-Service
Pre-Service Point-of-Service Post-Service
The traditional revenue cycle model focuses on most patient
account management activity occurring AFTER services have
been provided, when it is more difficult to collect,
leading to bad debt.
The emerging revenue cycle shifts the bulk of patient account management
activities, such as patient identification, payment estimation
and collection, to PRE-SERVICE, when it is easier to
collect and identify alternative sources
of payment.
©2011 RelayHealth and/or its affiliates. All rights reserved. ERCM20100921
©2011 RelayHealth and/or its affiliates. All rights reserved. ERCM20100921
Figure 2: Revenue Cycle — Traditional
Figure 3: Revenue Cycle — Emerging
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1. Stratifying payment potential. A recent study found as much as 31 percent of self-pay
revenue written off to bad debt collection actually met provider charity-eligibility guidelines.9
Using technology, successful organizations empower front line agents to conduct
pre-registration charity screening interviews. Providers are integrating this step with current
pre-registration workflow and applying it to all self-pays for quick, consistent application
of financial aid, charity screening and enrollment across all patients. In doing so, they can
determine earlier in the revenue cycle if a patient should be placed on a financial assistance
pathway rather than the patient payment pathway (Figure 4). This enhances the hospital’s
ability to collect payment for services rendered.
2. Verifying eligibility is important at every phase of the revenue cycle. Successful hospitals
employ technology and workflows that check eligibility for every patient, at every point of service,
including post-service. By incorporating eligibility discussions before and at the point-of-service,
patient-access staff can have meaningful conversations with patients about what is owed.
This requires technology that extends beyond the traditional verification of insurance
coverage. To ensure the most complete and accurate eligibility verification, providers need
FinancialAssistanceScreening
FinancialAssistanceEnrollment
CharityManagement
EstimatedBill
RecommendedPayment Plan
Point-of-ServiceCollection
Patient Payment Pathway
ADTOR
RegistrationOR
Physician Order
Every Patient
UNABLE TO PAY
ABLE TO PAY
©2011 RelayHealth and/or its affiliates. All rights reserved.PP20100921-0910
Financial Assistance Pathway
Figure 4: Payment Pathway
Verify Eligibility
Patient Identification
Propensity to Pay
Medicaid Screening
Charity Screening
Pre-Service Point-of-Service
P A T I E N T A C C O U N T M A N A G E M E N T A C T I V I T I E S
P A T I E N T A C C O U N T M A N A G E M E N T A C T I V I T I E S
Post-Service
Pre-Service Point-of-Service Post-Service
The traditional revenue cycle model focuses on most patient
account management activity occurring AFTER services have
been provided, when it is more difficult to collect,
leading to bad debt.
The emerging revenue cycle shifts the bulk of patient account management
activities, such as patient identification, payment estimation
and collection, to PRE-SERVICE, when it is easier to
collect and identify alternative sources
of payment.
©2011 RelayHealth and/or its affiliates. All rights reserved. ERCM20100921
©2011 RelayHealth and/or its affiliates. All rights reserved. ERCM20100921
Figure 2: Revenue Cycle — Traditional
Figure 3: Revenue Cycle — Emerging
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complete and accurate eligibility responses from a combination of EDI and web-based
searches. Successful providers also use a combination of real time eligibility checking to
ensure the latest information, and batch, which ensures ongoing checks for changes or
updates in patient eligibility.
With the increased deductibles, co-payments, co-insurance and out-of-pocket maximums due
to the shift by employers to CDHP, patient-access staff must stay abreast of the latest coverage
to estimate bills correctly and manage patients’ expectations.
Regular eligibility checks also allow management and registrars to catch errors or updates
earlier, reducing denials and rework. In one organization, improving financial clearance
procedures led to 84 percent compliance with pre-registration eligibility verification and
lowered days in A/R by five.
3. Verifying patient data and identity. Half of all required billing elements on a claim
originate at the point of access, so correct information at registration is vital to an efficient
revenue cycle. Verifying patient identification earlier helps prevent data fraud and identity
theft. Using technology to assign an appropriate propensity-to-pay score further identifies
patients who can pay versus those that might need financial assistance, and helps determine
appropriate payment plans and collection strategies.
4. Estimating patient responsibility. More than half of providers responding to an
HFMA study said estimating charges is a significant barrier to collecting at time of service.10
Intuitive technology used to estimate patient billing allows staff to calculate the patient’s
financial obligation for service and his/her ability to pay. Informing patients of their financial
responsibility earlier (including asking for a deposit and setting up a payment plan) increases
patient satisfaction while increasing the organization’s collections and reducing self-pay.
Point-of-service interaction
In a study by MasterCard, 82 percent of hospitals said their bad debt was increasing or staying the
same.11 However, 10 percent saw a decrease in bad debt, which they attributed to implementing
collection policies at the point of service. Although several pre-service activities — verifying
eligibility, updating charity status and estimating patient bills — should be repeated or completed
at point-of-service, the most important tasks in this phase include:
In a study by
MasterCard,
82 percent of hospitals
said their bad debt was
increasing or staying
the same. However,
10 percent saw a
decrease in bad debt,
which they attributed
to implementing
collection policies at
the point of service.
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1. Setting up payment plans. Leading providers use technology and propensity-to-pay
scoring systems to make the appropriate deposit and payment schedules. In addition, health
systems increasingly employ retail consumer tactics to collect payment, including:
Deposits
Payment contracts that clearly set out payment schedules and expectations
Card-on-file (secure storage of credit cards), which improves future point
of service collections
2. Requesting payment. Organizations now can equip registrars to conduct financial
discussions with patients — discussions that, in the past, might have been reserved for
dedicated financial counselors. This may also include educating staff on the goods and
services your patients receive and an understanding of what your facility needs to be
profitable. Another best practice: collecting patient payments at point of service anywhere
in the hospital with an e-cashiering method that posts patient payments directly to the
patient accounting system. One hospital that did this now receives credit card payments for
85 percent of all point of service cash collections and 97 percent of online payments, which
reduced A/R by 11 percent (five days).
3. Evolving your point-of-service policies. Many organizations have made the move
toward point-of-service collections, but have taken limited or low-risk approaches which
often focus on co-pay, fee schedule and flat-rate collections. The barriers to expanding point-
of-service collections to include co-insurance and deductible amounts commonly include
challenges in accurately calculating the amount due, balancing patient satisfaction and
higher collections, avoiding collection of the wrong amount and preventing credit-balance
situations. Through the use of more complete, credible and defensible estimates, providers
can expand their collection activities and address many of these barriers by providing patients
with precise understanding of their responsibility which is specific to their plan of care.
Post-service financial settlement
When most of the collections work is done pre-service, post-service now becomes the point
at which an organization ensures accuracy, patient account management consistency and
efficiency in collections.
1. Confirm before billing. As employers change the coverage they offer employees and
move to CDHP, hospitals must vigilantly monitor changes in such things as plan enrollment,
data collection, coverage limits, and dependent coverage. Constant enrollment changes in
governmental plans like Medicare Advantage and Medicaid HMOs only increase the likelihood
of errors and rework. With 27% of all payor denials and delays resulting from coverage issues,
providers cannot afford to skip steps that affect final adjudication. Enabling technology
incorporated into a claims management solution, allowed one hospital to prevent delayed
adjudication of almost $14 million in billed charges. Another hospital incorporated post-service
eligibility checks and recouped $500,000 in additional Medicaid revenue each month.
Enabling technology
incorporated into a
claims management
solution, allowed one
hospital to prevent
delayed adjudication
of almost $14 million
in billed charges.
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2. Patient account management. HFMA’s Patient Friendly Billing Guidelines, and billing
information that is consistent from the final bill to the patient statement, sets patient
expectations for financial responsibility. Easy-to-read statements improve patient satisfaction
and increase willingness to pay earlier in the revenue cycle. Consolidating a family’s
outstanding payments up to a single guarantor view helps the guarantor better manage his/
her accounts overall. Plus, it is important for health systems to adopt a consolidated approach
to billing, by combining multiple bills from the lab, physician and hospital in order to present a
cohesive financial billing picture to the patient.
Online account management reduces patient billing questions and phone calls, lowering
costs, improving patient satisfaction and accelerating post-service payment collection.
Online payment plans are good for both patients and providers: Evidence across hospital
systems shows online bill payment lowers self-pay days in A/R by 10 percent and processing
costs by $10 per transaction.
3. Efficient collections. The highest return comes from bills paid in the first 30 days.
Predictably, the longer a receivable is outstanding, the less its value (Figure 5). At 60 days, the
value of overall hospital receivables drops to 75 percent of the bill.12 At 90 days, it drops to 60
percent. After six months, the value is a mere 25 percent.
On a per-patient basis, it costs less to collect from a large insurer with millions of patients than
to bill a single individual. On average, consumers pay more than twice as slowly as all payors
but Medicaid. Not surprisingly, uninsured patients’ collection rates are substantially lower than
insured patients are — at just 5 percent to 10 percent. What is surprising is that patients owing
less than $500 are willing and able to pay 92 percent of the time — but healthcare collection
rates are just 65–75 percent.13
Today 30Days
60Days
90Days
120Days
6Months
1Year
$1.00$0.95
$0.75
$0.60
$0.50
$0.25
$0.05
©2011 RelayHealth and/or its affiliates. All rights reserved. CoCIOT20100923
$0.20
$0.40
$0.60
$0.80As receivables devalue,
cost increases
Figure 5: Cost of Collection Increases Over Time
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Self-pay accounts often are segmented by account age, size, propensity to pay, alphabetical
order, payor or self-pay categories. Providers design collection approaches for each self-pay
segment. A key question: How much should be outsourced?
Retaining high balance, low risk accounts may seem a good idea, but technology, training,
telecommunications staffing and overhead may erode any potential margin. Many leading
providers find it better to outsource post-service accounts for maximum collection potential
of their portfolio.
Examples of post-service technology that helps secure the highest collections return include:
• Online payments and payment plans: Promote the payment website on paper statements
and automate patient payment posting to the HIS via a single patient payment feed
(including cash, e-cashiering and online web payments in a single feed)
• Re-verification of eligibility for accounts greater than $500 through Medicare, Medicaid
• Using an outsourcing partner that can offer automated call distribution systems with predictive
dialer: This system eliminates inefficient dialing and waiting for an answer — improving
collection efficiency. By placing a telephone call to the next prioritized account in the queue and
awaiting an answer, the call is instantly transferred to the reimbursement specialist when the
telephone is answered. The dialer uses artificial intelligence to determine the timing and volume
of calls it makes and to monitor staffing and productivity. This system is used to contact patients
and guarantors, as well as third-party payors
Performance analysis
After improving self-pay strategies through all points of service, analyzing performance allows
an organization to identify trends and optimize revenue streams. Drilling down into self-pay
data helps hospitals better understand:
• Which patients are most likely to pay (for example, OB/GYN patients are most likely to pay
given the need for repeat services)
• Which physicians bring the highest — and the lowest — yield patients
• Which zip codes have patients that pay bills by the second statement
• Which referring doctors have patients with the highest propensity to pay
This information is valuable to hospital executives looking to expose root causes, understand
performance trends and optimize revenue streams.
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Conclusion
Healthcare reform notwithstanding, the cost of providing care in the U.S. will continue to grow.
Employer costs to provide it will continue to escalate. Employees will be forced to take on larger
portions of that expense.
The answer for providers? A new revenue cycle model that supports a new approach to
collections. The enabler? Technology.
Notes1 National Business Group on Health (2010) Large Employers’ 2011 Health Plan Design Changes. Accessed 13-Sep-10
at http://www.businessgrouphealth.org/pdfs/Plan%20Design%20Survey%20Report%20Public.pdf
2 Council of Insurance Agents & Brokers (2010) Council Survey Shows Group Health
Rates Rising And Employers Looking For Ways To Cut Costs. News release dated 2-June-10.
Accessed 13-Sep-10 at http://www.ciab.com/LinkClick.aspx?fileticket=sOfsREMwP4Y%3D&tabid=75
3 Associated press (2010) Gov’t: Spending to Rise Under Obama’s Health Care Overhaul.
Accessed 13-Sep-10 at http://www.foxnews.com/politics/2010/09/09/spending-rise-obamas-health-overhaul/
4 Organisation for Economic Co-operation and Development (2009) Growing health spending puts
pressure on government budgets, according to OECD Health Data 2010. News release issued 6-Jun-10.
Accessed online 13-Sep-10 at http://www.oecd.org/document/11/0,3343,en_21571361_44315115_45549771_1_1_1_1,00.html
5 The Kaiser Family Foundation and Health Research & Educational Trust. Employer Health Benefits 2010 Annual Survey.
Accessed online 12-Sep-10 at http://ehbs.kff.org/pdf/2010/8085.pdf
6 Mercer (2009) Tough economy leads employers to cut health benefit cost increases in 2010.
News release issued 10-Sept-2009. Accessed online 13-Sep-10 at http://www.mercer.com/press-releases/1357570
7 National Business Group on Health, op. cit.
8 Finn P, Pellathy T, Singhal S (2009) U.S. healthcare payments: Remedies for an ailing system. Accessed 13-Sep-10 at
http://www.mckinsey.com/clientservice/Financial_Services/Knowledge_Highlights/Recent_Reports/~/media/Reports/
Financial_Services/US_healthcare_payments_Remedies_for_an_ailing_system1.ashx
9 Ledue, C. (2009) Study: 31 percent of patient bad debt misclassified, should be charity. Healthcare Finance News.
Accessed online 13-Sep-10 at http://www.healthcarefinancenews.com/news/study-31-percent-patient-bad-debt-
misclassified-should-be-charity.
10 HFMA (2009) Changing Face of Self-Payment in Hospitals. Healthcare Financial Pulse. Accessed 13-Sep-10 at http://www.hfma.org/
HFMA-Initiatives/Healthcare-Financial-Pulse/Surveys-and-Special-Reports/The-Changing-Face-of-Self-Payment-in-Hospitals/
11 Mason D. (2009) In Pursuit of Self-Pay: Pursuing self-pay through all points of service. Accessed 13-Sep-10 at http://sites.mckesson.
com/hfma/documents/McKesson%20RelayHealth%20Self%20Pay%20HFMA%20Audiocast%2012%202%2009.pdf
12 HFMA (2009) op.cit.
13 2008 McKinsey consumer healthcare payment surve
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