The Self-Pay Conundrum: How to Balance Margin and Mission

Applying hospital collection policies fairly

An automated approach to self-pay collection has several advantages over ad hoc methods that rely on staffers' understanding of hospital policies. First, use of the latest advanced technology can greatly reduce the amount of staff time required to do the job properly. Second, automation makes it possible to apply hospital policies fairly and consistently across the board, minimizing the possibility that staffers will treat patients in a manner inconsistent with hospital policy or not deal with some of them at all. And third, patients are more satisfied with their hospital experience when they understand their financial responsibility before services are provided or before they are discharged. That way, they don't undergo "sticker shock" upon receiving their bill in the mail.

If a patient has the ability to pay, today's technology can create a pre-service estimated patient bill. The bill estimation process should take into account the payer's contractual allowable charge for services, as well as the patient's current benefits (i.e., deductible and out-of-pocket status, copays, and coinsurance). This ensures the maximum credible estimate and prevents collection problems that result from an estimated bill being significantly different than the patient's final bill.

The size of the deposit that a hospital requests will vary according to hospital policy and each person's ability to pay. The propensity-to-pay classification can also play a role in calculating the deposit amount. For example, if an affluent patient has avoided paying medical bills in the past, the counselor might be prompted to ask for a larger deposit before the service is rendered. Again, technology can be used to calculate the recommended deposit automatically.

Many patients will not be able to pay off their balances all at once. An advanced self-pay collection program can calculate an appropriate monthly payment amount based on the patient's ability and willingness to pay. Again, each hospital should set its own payment schedule parameters, using its knowledge of local conditions. For example, the amount that patients with a certain income can pay might vary from region to region, depending on differences in the cost of living.

After determining the appropriate amount to collect, the hospital should make it easy for the patient to pay. When hospitals provide multiple payment options, both up-front and post-service, including credit and debit cards, e-checks, payment plans, and online payment, they increase the self-pay collection rate and lower the costs of collecting. Wherever possible, monthly payments can automatically be processed by debiting the patient's bank account or credit card.

Finally, after all insurance payments have come in, the hospital billing staff must reconcile them with the estimated bill that has been presented to the patient. Hospitals need to establish internal policies on how and when a bill estimate will be adjusted. For example, they might not revise the estimate if the insurance payment is 10% to 20% less than the estimate, but will change it if it's more than 20% less. If the payment is more than the estimate, the hospital has to send the patient a new statement and adjust the monthly payments.

Automation can determine charity and aid status

Many hospitals lack adequate staff to identify patients who might qualify for charity or other financial aid opportunities. For some hospitals, this is both a significant revenue issue and a community relations problem. Use of a propensity-to-pay score and other automated screening solutions can help flag those patients who should be evaluated for other sources of coverage, such as Medicaid, victims-of-crime programs, disability insurance (part of Social Security), or other state or private programs. Nationally, about a quarter of the uninsured—about 12 million people—are eligible for public health insurance programs but are not enrolled, according to the National Institute for Health Care Management.

Technology to automate this patient advocacy process should be adopted as part of the pre-service and point-of-service registration processes. For example, registration staff should be alerted so that they know when to gather information on household composition and income for an automated charity status determination. If the system determines the patient to be charity-eligible, a charity form can be automatically generated for the patient's signature prior to service.

When a hospital seeks to improve its self-pay collection policies, automation is the key to ensuring that hospital policies are followed and that the burden on staff is minimized. This does not eliminate the human interaction that is indispensable to achieving the desired outcome and to ensuring patient satisfaction. But it does make the process much easier for both patients and staff. And, by helping patients pay their bills, hospitals can actually improve their community image while boosting their self-pay collections.