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Consumerism Spurs Need for Patient Credit Checks

Analysis  |  By Christopher Cheney  
   April 25, 2016

As out-of-pocket costs for patients continue to increase with no end in sight, healthcare providers are stepping up efforts to assess patients' financial resources and their propensity to pay their hospital bills.

The rise of consumerism in healthcare is boosting a practice common in other pricey sectors of the economy: credit checks.

"We're seeing more credit checks, and the primary driver is the increased shift in responsibility from the health plan to the individual patient," says Jeffery Hurst, senior vice president and senior finance officer at Orlando, FL-based Florida Hospital, a member of Adventist Health System. Adventist operates 44 hospitals in 10 states.

The proliferation of high-deductible health plans in the employer-sponsored insurance market and the Patient Protection and Affordable Care Act exchanges is pushing healthcare providers to scrutinize the ability of patients to pay their medical bills, he says. "The industry is struggling, as the patients are, to figure out how we deal with these higher out-of-pocket responsibilities."

Related: How Real is Healthcare Consumerism?

Florida Hospital has collected data that shows a strong correlation between a patient's FICO credit score and propensity pay medical bills. According to data from Hurst's revenue cycle team: For patients with credit scores below 550, propensity to pay ranges from 39% for account balances below $100 to 8% for account balances from $1,000 to $5,000. For patients with credit scores greater than 800, propensity to pay ranges from 98% for account balances below $100 to 97% for account balances from $1,000 to $5,000. 

Credit bureaus such as Experian, TransUnion, and Equifax offer revenue cycle solutions that include payment predictor tools for health systems, hospitals, and physician practices.

Florida Hospital's Hurst says that determining a patient's ability to pay medical bills is important for healthcare providers for two reasons—financial outcomes and appropriate investment of resources.

Related: Patient Skepticism Slows Healthcare Consumerism

The best financial outcome for Florida Hospital is not always collecting on a bill, with financial assistance and enrollment in Medicaid also on the table as options for patients with limited resources, he says. "It's our objective to reach the optimal resolution with every person we see… What I never want to do is send a charity care patient to bad debt."

Determining a patient's ability to pay is a critical element of allocating revenue cycle resources, Hurst says. "There's no point chasing after someone if they fundamentally don't have the ability to pay."

Credit Checks Add Capability to Revenue-Cycle Tool Box

Credit checks are just one of many tools available to healthcare providers seeking to determine a patient's propensity to pay medical bills, says Gerry McCarthy, president of the Healthcare Solutions division of TransUnion.

Providers are "interested in past financial behavior of the patient… That is the single largest indicator of patient financial behavior. Collectively, all of the data points enable providers to offer financial counseling and potentially find charity care or other payer reimbursement," McCarthy says.

At Florida Hospital, the revenue cycle staff combines credit checks with internal data. "All we pull is a credit score," Hurst says, "and then we combine that with internal data—balance amount and health plan—to determine the appropriate workflow for the account." There are several workflow categories for Florida Hospital's patient accounts, including payer status categories such as uninsured, insured, and Medicare patients.

Florida Hospital is " working on an advanced model that includes your payment history with our health system," Hurst says, a move that reflects its expectation that consumerism in healthcare is here to stay.

Christopher Cheney is the CMO editor at HealthLeaders.

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