How healthcare consumerism is changing the way hospitals do business

Retailers provide their products or services to customers only after obtaining payment or the assurance of payment.  You don’t have to remind Wal-Mart, Best Buy, Cracker Barrel, the grocery store or car repair shop that they should make their prices apparent, or to expect payment before giving us the service or goods we want.  In fact, if the consumer fails to provide payment or a commitment to payment, it’s usually considered stealing.  Healthcare is different, but it has to catch up.

The consumerism of healthcare is forcing providers to operate more like every other industry.  As the US government enforced widespread insurance redistribution, the insurance industry responded by shifting payment responsibility to the patient.  So we all have higher deductibles, copays and co-insurance thanks in large part to the ACA.  Providers now have two major financial challenges; capturing 30% or more of revenue from patients, and adjusting to shrinking payer reimbursements based on value rather than visits.  Without adequate systems to adjust to these major financial shifts, providers will experience higher bad debt and unsustainable margins in the next 5 years.  Most industries could not tolerate an average 6% write-off rate, which is the current average for hospitals in the US.   Greater than 1% is the danger zone for most industries.  What will happen when the average write-off rate reaches 10%? 

The good news is that most write-offs are preventable at the front door of the hospital.  Patient Access has by far the greatest leverage in the revenue cycle to identify and resolve payment risks.  We put far too much into doing it after service.  The "bill me later" culture is not only risky, it is easy to take advantage of.  Payers are expert at it.  So are patients who know most hospitals will eventually write off the part they don't pay, hence the 6%.  Most hospitals (or their agents) have cubicles full of people pursuing payment after service. Providers must learn to play this game better if they want to win.  What will change the game for them are front-end verification and screening processes such as identity, eligibility, benefits, authorization, necessity, accuracy, estimation, collection, assistance and charity screening.  Done during registration and pre-registration, these processes significantly reduce back-end costs and the risk of non-payment.  Simply put, if you capture a payment (or a payer's requirements for payment) up front, there is nothing to "cycle".  You provide medical care for a patient and you get paid for it.

The revenue cycle industry is just starting to realize the extraordinary opportunity to de-risk and remove cost and waste through better front-end processes.  The wonderful aspect of this shift to the front is that patients are the real beneficiary of greater efficiency and lower costs.  If providers get the front-end right, patients will have less wait times and financial stress.  

We talk a lot about price transparency these days, but what about price reduction that comes from the removal of RCM system waste and cost?  By 2020, healthcare providers that shift RCM waste and cost from back-end to lower cost front-end will win not just by capturing more revenue, but by being more competitive for price-conscious consumers.  

Hospitals that want to reduce revenue cycle cost and waste should think beyond achieving price transparency.  The next phase is full financial clearance during scheduling, pre-registration and registration.  Providers can capture revenue or the assurance of revenue before patients receive service rather than after.  This concept is not new to healthcare leaders, but the practice is.  Every finance and RCM leader understands that a dollar is only worth a dollar prior to service because it loses value with the time, cost and reduced likelihood of collecting. We are so accustomed to billing and resolving accounts after service that it may seem foreign to estimate, collect, assist and resolve prior to service.  It is different, difficult, and requires new systems, training and culture change.  But it is possible.  It's also a fraction of the cost and a boost to consumers who would rather know how the bill will get paid than worry about it and wait for the surprise reveal afterward.  

Retailers realize that the moment BEFORE the consumer obtains the service or product is the ONLY time to give them price transparency and secure payment or the commitment for payment.  But most providers today still do not have the technology, processes or culture to support pre-service clearance and payment capture prior to service.  Providers have begun the journey by making price transparency a priority from 2010 to 2015.  The next phase is to create systems and cultures that capture payment or resolve payment risks before service.  The key is, like retailers, is to do it while the consumer still needs the service, not after they get it.  This will be a major shift in thinking and disruption to the aging back-end retrospective revenue cycle model.

Let’s be clear that registering a patient in a hospital’s computer system does not provide this assurance.  Neither does signing a guarantor form.  Multiple critical processes must take place AFTER an account is created but BEFORE service to remove the risk of non-payment or find appropriate financial assistance for the patient.  One of the problems is that each critical pre-service process has traditionally been handled by multiple, separate manual processes or automated technologies that don’t coordinate or flow well together.  Fortunately there are technology partners like AccuReg who are solely committed to innovating fully integrated systems into a simple, exception based front-end workflow.  Supported by experienced trainers and change managers, this is the only way providers will reach the stage of consistent account resolution and assurance of payment prior to service delivery.

Let’s also be clear that front-end estimation, collection and screening does not mean healthcare organizations will no longer meet their charitable mission.  In fact it means the opposite.  If done right, the patients who truly need charity care will be more likely to get it.  And patients with high deductibles will be offered discounts, payment plans and even loans that make their care affordable.

AccuReg is in the business of creating these kinds of efficiencies and assurances for healthcare organizations.  As a company committed to innovating for hospitals and patients, we help our hospital clients make these important shifts. It’s not easy for hospitals today, but it’s wonderful to bring changes that matter for them and their patients.

On the journey to improving the Patient Access Experience™, 

Paul Shorrosh, MBA, MSW, CHAM
CEO, AccuReg