Increased Deductibles Create More Revenue Cycle Challenges

The ability to collect payment from patients has changed dramatically with the recent proliferation of high deductible health plans (HDHPs). Increased deductibles mean more revenue cycle challenges.

There has been a significant increase within the past several years in the number of HDHPs. Patients carrying a higher debt load are simply less likely to pay their medical bills, as medical bills are often the bills at the bottom of the pile.

What defines “higher debt load?” In 2013, the average insurance premium for an employer-sponsored family ranged variably according to state, from $13,400 to $20,700, as RevCycleIntelligence.com reported. As RevCycleIntelligence.com also reported, the average number of citizens with a minimum annual deductible of $1,250 for individual coverage – and $2,500 for a family – has risen by over 16 million between 2005 and 2013.

Mark Owen, Director of the Division of Emergency Medicine for Payor Logic, spoke with RevCycleIntelligence.com about how the evolution of the transformative high deductible spike is dramatically impacting multi-faceted matters of revenue cycle.

According to Owen, someone with a high-deductible engaging in what can be considered pure self-pay has no insurance and is not eligible for Medicaid, even as the number of those covered by Medicaid increases.

“It used to be very common in indemnity plans that a patient had a low deductible of anywhere from $500.00 to a high of $1,500.00 or $2,500.00 and they had an 80-20 policy. Their portion of responsibility was relatively low. With higher deductibles, it's not just that the amount they're going to owe is more, it’s the relationship to the debt,” states Owen.  

Prior to the high deductible spike, it was common practice that a patient came in, received services, insurance was billed, and even though the amount owed was generally unknown, it was generally a reasonably small amount of money owed shortly after service, explains Owen.

“Now with high deductibles, because many more people are forced into a situation where they owe far more money than they used to for the same services, their share has grown so significantly that a lot of providers have decided we need to try to collect this money at or near the time of service,” Owen says. “But we need to know what that amount is in order to do that. With the insured patient, we didn't really used to need to know this information about what they owed because it wasn't a significant amount and a very high proportion of the patients paid when they received their bill,” he adds.

Although the ability to collect from the individual has changed dramatically, he says what has not yet changed is the patients’ understanding. “They're buying high-deductible plans to benefit from the lower premiums in an attempt to control their cost. But they don't lock in on the fact that the cost still exists. They're just going to have to pay it down the road on a per-service basis,” he says. “The high-deductible doesn't necessarily change the total out-of-pocket amount, but it changes when you owe it and when we should try to collect it.”

What is especially problematic is that despite such widespread revenue cycle change, the public is yet to be educated about what this means regarding their high medical bills, he says. “What it's done is created this huge burden on providers to educate the public and provide timely billing, which is not something we're routinely set up to do. We're having to change the way we do billing.”

To minimize such challenges, knowledge about information that was not necessary to obtain is key, says Owen. Although the percentage of patients with large patient-responsible balances was once relatively small, a much larger dynamic of those patients exists today. Knowing more about a beneficiary’s financial responsibility and his or her ability to pay, available discounts, or eligibility for financial assistance is imperative, he says.

Patients with significant patient balances in urban areas, such as Miami, St. Louis, and Dallas, used to be in the neighborhood of between 15 and 20 percent of a patient population. This number is rapidly growing to exceed 50 percent of a patient population, as high deductibles result in large balances due after point of service, Owen confirms. This creates new problems for those who are responsible for keeping the revenue cycle short and resulting in either near or full payment, he says.

To address such challenges, healthcare providers are embracing the ability to utilize technology so they can acquire needed beneficiary information in real time, Owen states. Getting this confidential data about individuals that is now needed to have an effective revenue collection process is not something where you just go online and find information that was missing at the time of service, such as deductible insurance, or social security information. It requires certification and authorization, which creates additional revenue cycle hurdles and produces related obstacles, says Owen.

“We have further complicated the whole collection process by saying not only do you now need more information faster than you used to, you now have to qualify to get the resources that provide that information. Once you get data, it's about the ability to consume that data. Data doesn't just turn into money,” he states.

Regarding the Affordable Care Act (ACA) and high deductible connection, while the ACA is providing access to coverage for many people who didn't have it before, it complicates their ability to pick appropriate coverage because the shopper's not qualified to use the ACA website, Owen says. “If I didn't know this business for 35 years, I would have needed to seek professional assistance from some sort of an insurance broker to help me wade through all the plans that the ACA is offering. The ACA is creating an environment where many more people have insurance with much higher deductibles.”

Getting accurate data on the front end is going to be more of a challenge than it's ever been. The other very important thing is pursuing the responsible party, be it the patient or guarantor in a more time efficient basis than ever before, he maintains.

“It’s now critical that that first claim be a clean claim with all the appropriate required data and it get to the right party the first time and that that first bill that goes to the responsible individual, that it also gets to where it needs to be with the right information as quickly as possible. It's so much more important than it's ever been before,” he says.

Situations that are going to become super critical involve needed to rework errors, such as a social security number being off by one digit or a date of service being off by a day. In light of upcoming ICD-10 implementation, which is a completely different dynamic, getting it right the first time and getting paid on the first bill or claim is absolutely essential, Owen claims.

“The amount of cost associated with rework is going to put a lot of people out of business because they're not going be able to afford it anymore. The ones that survive are the ones with the best technology and the best front-end processes,” says Owen. “If you're capturing the data correctly the first time at the front-end and you've got good processes to access the appropriate outside, or third party, databases using the core data that you get at the point of contact, process it to those databases, get the additional information that you need, and then process one bill one time clean to the right parties, it's makes all the difference in the world.”

Businesses choosing to replace manual labor with well implemented systems is instrumental for industry-wide sustainability; EMRs play a significant role in this, says Owen.

“EMRs are the sharpest dual-edged sword in our business.  But the difference between a good EMR and a bad EMR kills providers,” Owen says. “Interactive EMRs that have the ability to validate information by pinging data sources in real time are the winning combination. EMRs need to be interactive with other systems – with 6,500 different insurance companies – to verify the insurance information collected 60 seconds ago from an individual. Being able to validate information you're putting in on the front end is critical to avoiding rework,” he adds.  

Without EMRs capable of validating every bit of information, it’s merely garbage in and garbage out, says Owen. “The biggest problem for emergency medicine going forward in this new environment is the inability to do real-time coding, the inability to know what the codes are associated with the services that were rendered in a real-time or near-real-time basis. They haven't figured out an economic way to do that.”

“If we can't do the coding, if we don't know what the right CPT codes are that need to be on that bill, then no matter how good a job we did with all the other data elements, it's going to wait on that information,” Owen says. “Increased self-pay is going to mean more bad debt than ever before. We're gonna have even less money to provide these high-quality safety-net services. It’s critical that we save money in the process.”

The increase of bad debt that is going to be associated with these higher deductibles is going to force the healthcare industry to find better, more-efficient, more-automated ways to execute the revenue process, says Owen. “Processing is going to have to become more efficient. The only way to do that is through technology. We can't totally eliminate people, people put the care in health care, but we can use people differently.”