Volume X Number 1

October 2005

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Vital Signs

Preparing the Revenue Cycle for Consumer-Driven Health Plans

by Allan P. DeKaye, MBA, FHFMA
President and CEO
DEKAYE Consulting, Inc.

Enter Consumer-Driven Health Plans (CDHPs)

Consumer-Driven Health Plans (CDHPs) are here! What are they, and how will they affect healthcare revenue cycle operations is a question that CFOs and PFS and Access Directors will need to answer. In order to better understand how to address them from an operational perspective, there needs to be a better understanding of what they are, how they work, and what the impact will be on the patient/provider relationship.

What are CDHPs?

CDHPs developed in response to the ever-increasing insurance premiums being paid by corporations and individuals for healthcare policies. While the general population has been faced with increasing deductibles and co-payment levels, companies and individuals continue to find that the premium levels were increasing at a continuing level. Whether evidenced by the continuous advances in medical technology, the introduction of life-saving procedures, tests and medications, or simply the confluence of profit-margins and the ability for insurers to assert the need to pay for these services, CDHPs grew out of this sense of higher and higher prices.

Although these factors are all related to the increase in the uninsured number of Americans, CDHPs really provides some options for those who are insured, or willing to assume a larger portion of the cost in return for a decrease in premium payments. For many years, companies and employees enjoyed the benefit of medical savings accounts (MSAs). MSAs allowed employees to save some portion or all of their out-of-pocket medical expenses (e.g., deductibles, co-payments and to some extent non-covered costs) with pre-taxed dollars set aside through payroll deductions. Usually this "use it or lose it" formula was used by many to foster some offsets to costs.

How do CDHPs Work?

CDHPs grew out of this concept. However, there were salient differences. Employers and employees could still obtain healthcare coverage, but with lower premiums in exchange for accepting higher deductibles. To offset the cost of these deductibles, employers and employees could place money into HSAs or health savings accounts. Again, with pre-tax dollars set aside, employees would be issued either debit-like cards or checks to be used to pay for their medical expenses. The major difference would be that unlike the "use it or lose it" requirement of MSAs, unused HSA monies could be carried forward indefinitely for the employeeís continued use for medical care in subsequent years. And, the balances could accumulate much like an IRA-type savings account with monies available for other uses at some future time frame. This created an attractive, almost investment like quality for CDHPs/HSAs. As insurance companies begin to rollout these high deductible health plans, healthcare providers will need to react to this new category of plan, and the attendant policy and procedural issues surrounding this new type of coverage.


Assessing the Impact of CDHPs on Providers

When managed care plans, notably HMOs, and later PPOs, POS and other type benefit plans first entered the scene, providers, both hospitals and physicians, struggled. One of the key elements of operational concern was learning how to recognize the difference in plan code types. Second, the ability to understand the extent of coverage, prior approval and authorization requirements was problematic given the difficulty in differentiating plans. Even assigning the proper plan code to be used in hospital information or physician practice management systems is a problem that still negatively impacts the registration, billing and collection functions today.

While improvements in payer support of electronic eligibility transactions ("270/271" or electronic eligibility inquiry and response) has improved, as has direct payer access through web sites and advances in technology, this new type of plan will present new challenges.

Recognizing a CDHP Plan

A patientís insurance identification card will still be the primary aid in determining the type of plan an individual has. However, the same could be said with todayís panoply of cards adorned with corporate logos and demographic and payer information. While staff might be doing better recognizing cards today, they are likely to be visually challenged with CDHP plans, especially as it relates to the presence of a high-deductible amount that the patient has contractually agreed to be responsible for.

Even if insurers do a good job in reissuing plan identification cards with clearly delineated plan types, and show the annual deductible amount, the collection process will face a series of new challenges that are discussed in the next section.

So You Collect at the "time and point of service" (TOS/POS)

Providers often indicate that they do collect patient responsible amounts at TOS/POS. Both TOS and POS are enumerated, since "timing" may related to a pre-admission event, while the "point" may refer to an actual service location. Some have been far more successful than others, but many providers are only able to make that claim because they can at least determine that more money was collected TOS/POS in the current month vs. the prior month. Fewer providers can differentiate their TOS/POS collection capability when asked:

What  percentage of patients presenting with responsible amounts due did you collect from?

What percentage of total amounts due at TOS/POS were collected?

Did the provider have the wherewithal to collect at every clinical service area?

What was the average amount collected?

The ability to answer these types of questions is very important when it comes to handling patients with CDHPs.

While insurance policies will differ, it will not be unusual for patients to have selected plans with annual deductibles ranging between $2,000-$3,000 per person. If this is a family insurance plan, then the importance of linking the accounts of spouses, children and any other covered dependents will take on even more significance than today.

If a provider were able to answer question #4 posed above, the answer would likely be in the $10-$50 range, with a modal value (i.e., the one that occurs most frequently) to be $20-$25. Now staff will need to ask for considerably larger sums, and patients will need to be prepared to pay these amounts!

Sticker Shock

When those CDHP policyholders, many of whom were probably previously PPO or POS contract holders, seek access to care under their plans, they are likely to experience "sticker shock." The $20 office co-payment will probably be between $100-$200 or more depending on whether itís a follow-up visit to an internist, an annual physical or a specialist consultation. The chest x-ray (maybe $150), the MRI, CAT Scan or other diagnostic test may well consume the entire amount of the patientís high deductible amount. While this may help a patient reach the point where insurance coverage begins (possibly at 100%, maybe at 90%Ėresulting now in a co-insurance condition), the question of the patient paying this high amount will become the focal point.

Issues will range from not only how much of the deductible remains unpaid, but how much is available in the patientís HSA account? What if annual contributions (from the employer and employee) is made on a pro-rata basis out of each paycheck? Suppose there are insufficient funds in the HSA checking account or available (credit) balance on the specially issued HSA Visa or Master Card? If the card is a debit card, will the provider have the right equipment to handle the transaction? And what will happen if the patient doesnít pay in full?

Policy and Procedure

We know from experience that many managed care and HMO contracts precluded taking collection actions against their enrollees for non-payment, such as deductibles or co-payments. A daunting question is will this be the case with CDHPs? While most hospitals have policy guidelines about pre-admission deposit requirements for elective, non-emergent services, CDHPs will present new challenges. First, of course, will be the ability to identify this type of plan. Second, the amount of deductible remaining, and the assumption of coverage for service by the insurer for amounts in excess of the out-of-pocket amount.

Next will come handling if the amount needs to be paid prior to, or at the time of service. For anyone that has had to have a car repaired after an accident or other mishap knows all too well the process for having insurance estimate the covered amount, approve and pay the claimĖless the insuredís deductible! Providers will be faced with this same scenario. We should not be surprised with the patientís reaction either. We can expect that they may not have understood it quite the same way. Additionally, the question of whether the entire annual HSA amount to be spent (annual deductible) must be paid by the patient, and then be reimbursed by the HSA to the patient isnít clear.

Should a provider, willing to accept a partial payment, be able to send dunning notices for the remaining deductible? Would non-payment result in the account being turned over to collection? The patient would continue to be presumed liable, but what about the HSA administrator? The employer? This is still unchartered territory, but nonetheless needs to be raised in this context.

Even more perplexing, could a patient covered by a CDHP/HSA plan be eligible for charity care? With all the attention being paid to how hospitals, in particular, administer their charity care policy, where would these patients fit in, if at all? While it will be up to each provider to make that determination, it will need to recognize the potential for uncollectible amounts, and the resulting issues that will emanate.


Tools, Techniques and Technology to Tackle CDHPs

Although CDHPs are not likely to start off with a significant enrollment base, there may be a shift from existing plan types to this type of coverage, if the concept and perceived benefits materialize as expected. Since hospitals and physicians can all benefit from improvements in this area of better patient identification and TOS/POS collections, there are available technologies to assist in this process, along with tools and techniques that when integrated into operations reduce vulnerability and exposure to related claim denials.

Tools and Techniques

Most providersí weakest link occurs at the point of pre-registration or the actual registration process itself. Ineffective interview skills and poor intake procedures leave many providers with incomplete and/or inaccurate data capture and system entry. Failure to capture the right information will negate and diminish billing and collection capabilities.

Staff education remains one of the most valuable investments providers can make in revenue cycle staff. However, in order to create the type of learning that will solve the problem, management must begin by identifying which of their major insurers (usually measured by volume of admissions or revenue generated) are offering CDHPs. Once determined, the ability to secure information from the payer about identification card information, and web site or Internet reporting for 270/271 needs to be obtained and disseminated to the staff in easy to understand terms.

If the amounts to be collected are going to increase exponentially as noted above, then the setting a policy that clearly outlines what the TOS/POS collection expectation is will help alleviate uncertainty by the staff. With collectible amounts potentially resembling what most of us would call major purchases, providers need to begin to adopt similar techniques to ensuring that the payment occurs.

Credit History

Providers continue to be resistant to obtaining credit data about patients. Yet for most major purchases that are made, from cars to homes to plasma screen televisions, etc., consumers are credit checked. As weíve learned from news and print media, lower interest or mortgage rates may apply to consumers with better credit than those without. We need to ask the question, if we credit check a consumer for a $30,000 car, a $300,000 home or a $1,000 large item purchase, why wouldnít do the same for a patient expected to have a $10,000 or higher hospital bill? And especially, if $2,000-$3,000 may be expected as the patientís responsibility resulting from a CDHP plan?

Hospitals have what the credit bureaus and regulators call, "permissible purpose." For those who extend credit, they have a legitimate right to know the likelihood that an consumer (patient) has the wherewithal and propensity to pay and manage debt. Credit-scoring and obtaining other credit attributes is not a guarantee of payment; but rather, it is an indicator of how well a consumer (patient) behaves from a credit history perspective. The industry has studied this behavioral pattern, and found to a large extent correlation between a consumerís credit score, and the propensity for the consumer, when assuming the role of a patient, to pay their healthcare debt in a manner similar to paying other debt.

Similarly, credit data can alert a healthcare provider about possible fraud and identity theft, as well as changes in address and financial solvency (e.g., notice of bankruptcies and recorded deaths are usually noted in the credit file). Whether itís the improper use of a never-issued social security number, or one that belonged to a deceased individual, or merely the mis-keying of a valid number, this type of information can help providers better identify its patients. Even in a HIPAA compliant environment, safeguarding PHI (protected health information) seems rather incongruent, if the information is incorrect to start with.


Legacy systems, whether hospital information or physician practice management systems, may not have all of the functionality needed today to cope with current Access and PFS issues, let alone the challenges presented by CDHPs. Add-on or bolt-on technology does exist that can seamlessly integrate new functionality to enhance the patient registration, billing and collection processes.

Most technology trading partners are integrating their applications, so that they can establish two-way communications with legacy systems. By using standard protocols (e.g., HL-7), the ability to introduce new software applications is akin to purchasing a new computer software program. Often the challenge that results is the need to provide the initial interface, and ensure distributive processing across often vast networks of linked computer workstations.

In order to address CDHP, the availability of rules based logic that can interact with, and oftentimes become the platform from which staff see and transact on can fill in the gaps where current system limitations prevail. For example, a software application that can list the benefit coverages of a CDHP, and automatically warn staff that a prior approval is needed, or that $1,500 of the high deductible amount remains unpaid would be beneficial. More importantly, if such a CDHP patient is registered without an insurance verification, the system could automatically trigger a 270/271 inquiry, or query the payer for an approval. If the system could simultaneously warn the staff, but also the supervisor or clinician of a problem, providers would be better positioned to react before an errant event where to occur. However, all of the bells and whistles that technology brings will have little demonstrable impact without staff who are educated, not only on how to use the tools and techniques, but with an understanding of the underlying principles upon which the revenue cycle operates.

The same is also true of online cashiering applications that can turn any networked workstation into a satellite cashier capable of processing credit cards. With the right equipment configuration, debit cards and check authorizations can also be accommodated. While the security of offsite cashiering stations are always a concern, the technology can allow audit and control functions to be automated, while allowing remote locations to become fully participating in the TOS/POS collections process. The two-way communications afforded between adjunct applications and mainframe data bases can keep both systems in synchronization.


Where Do We Go From Here?

"Itís a long, long way to Tipperary!" But most challenges are often overcome by taking the first step. CDHPs will provide a new set of impacts, but nothing fundamentally will have changed. However, the operational areas and workflow sequences that produce errors today, will continue to negatively impact cash flow, as CDHP errors will be added to the list of problems. We often see the mantra, "denial management;" the focus needs to be changed to "denial prevention." Taking a proactive series of steps, some of which have been outlined in this article will help providers prepare for CDHP, as well as improve their overall capabilities to register, bill and collect for patient care services.

For more information about this topic, or the technologies available, you can visit: www.dekaye.com. The author may be contacted via email at: dkconsult1@aol.com, or by phone: (516) 678-2754. All rights reserved, © DeKaye Consulting, Inc. For permission to reprint this article, please contact us.


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URL: http://www.dekaye.com E-Mail: Adkcmpa@aol.com or DKConsult1@aol.com

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