Applying the power of data analytics to prioritize and segment accounts is one strategy a four-hospital, not-for-profit health system in Tennessee is using to rein in its billing costs.
Because it can be more difficult to collect from patients than it is from commercial payers, hospital and health system finance leaders are working hard to find ways to reduce the operational expenses involved with receiving payments from their self-pay population.
West Tennessee Healthcare, a public, not-for-profit, four-hospital health system based in Jackson, TN has been successful in reining in these costs by taking a multi-pronged approach to the issue, says Wade Wright, director of hospital billing. He outlines the tactics his organization is using:
1. Handling Collections Internally
As part of its strategy to work more effectively with self-pay patients, West Tennessee brought its collections process in-house a few years ago instead of using a third-party vendor, Wright says.
Prior to this decision, self-pay accounts were handled by a vendor right out of the gate. Now, the system's nine accounts receivable FTEs manage the accounts until or unless they reach delinquent status, at which point they are handed over to a collections agency.
"We felt it was important to maintain the collections process in-house so we have more control over what exactly is being communicated to patients. Our employees know our mission and our culture and are better able to address that patient," Wright says, noting that as of the end of September, West Tennessee had about 35,000 self-pay accounts representing roughly $48.5 million.
"When you look at our billed accounts receivables, up to 25% is self-pay. We have what we feel is a high self-pay payer mix," he says.
By managing these accounts in-house with existing FTEs, West Tennessee has seen its cost to collect drop from 2% to 0.8% in less than two years, Wright says.
"Our self-pay collections have remained consistent," he says. "The big thing that has changed is the cost to collect. We are doing it cheaper and more effectively."
2. Using Data Analytics
One of the biggest factors in this success, Wright says, is the use of analytics to better understand its patients and to target the right collection strategy to each subgroup.
Through its analysis, West Tennessee now knows that 55% of its self-pay patient population is at a low risk of not paying; 25% is at a medium risk; and 5.6% is at a high risk. Data for the remaining 14.4% is unavailable.
"We are using data analytics to prioritize and segment our accounts using different criteria," Wright says. "For example, we can do an analysis of our accounts based on ability to pay or propensity to pay, and we have different methods for reaching out to those segments."
"We don't spend the time or money to send a lot of letters to people we know are going to pay. We may put more resources into people in the middle category, who may need more tersely worded letters or a phone call. For people in the high-risk category, we send a letter to detail how they can apply for charity care."
By pinpointing the right collections effort for each patient, West Tennessee has reduced the cost of collecting on these accounts, Wright adds. "We've built a lot of automation into these processes, which helps us do it at a fraction of what it would cost to use a vendor on a contingency basis."
3. Reaching Out to Low-Income Patients
As a government-owned, not-for-profit organization, West Tennessee is working to meet its mission of providing quality care to low-income patients. Part of that process includes educating these patients about government programs that may be available to them when they present for care.
This is a win-win for the health system, Wright says, because West Tennessee is providing a service to low-income patients while at the same time creating a situation where it has to invest fewer resources to collect payment after care is delivered.
"We have redesigned our finance operations and have patient financial services right in our patient access areas now. Previously, that was all maintained within the walls of our billing office," he says.
"We moved that service to try to get patients qualified for Medicaid or disability, if appropriate, and to combine that with our financial counseling program. This is important to us because it's a big change. We are working harder to try to push education about charity care and other programs to the front end."
4. Communicating Clearly about Payment Options
Making a bigger effort to communicate with patients about their financial responsibility and to educate them on their payment options is also key to improving collection rates and lowering the overall cost to collect, Wright says. West Tennessee has recently reworked its billing statement and is using it as a tool to inform patients about options for paying their bills.
"That has been a big piece of some of the improvements we have had. We used to have an old text output form that would place text on top of a pre-printed statement. Now we include lots of good information for patients on payment options and charity care. It's a big component of where we are at now," Wright says.
"Before, our patients were not made aware of our internal payment plan options, which are interest-free programs. Now, we work with patients as much as possible so that they don't get that sticker shock when they get their bill. We're really stressing the payment alternatives. If they pay the full amount when they receive their bill, we give them a prompt payment discount. Otherwise, we counsel them on how to do a payment plan."
Wright says that by communicating more clearly and directly with self-pay patients about their financial responsibility, West Tennessee has also improved its patient satisfaction ratings—something that is becoming increasingly important in the era of value-based purchasing.
"You can do all these great things when the patient is within the four walls of your clinical area and create high patient satisfaction, but you can also ruin it months later when you are trying to get money out of someone. It's very important to maintain patient satisfaction all the way through the billing process," he says.
"We take a soft love approach to collections. We are not aggressive, but even though we are not aggressive, we still want to collect. It is about being smarter with how we go about it, and it's always a work in progress."