With the proliferation of high-deductible health plans, larger co-pays and high numbers of uninsured patients, the need for an accurate accounting of patients’ financial responsibilities has never been greater. And, with about half of all bad debt in healthcare organizations coming from outstanding patient balances, patient estimation has never been more important for providers’ cash flow, revenue cycle management and financial solvency.
Cheri Kane, managing director at PricewaterhouseCoopers, argues that patient estimation software is the “only way today that providers are able to come up with a solid estimate to the patient on what the fee is going to be. We’re talking about a very complex calculation involving the insurance verification along with the service being provided depending on who that provider is,” she says. “The easy ones involve radiology services such as an MRI or CT, what I call a very simple service or procedure. The complexity comes in when there’s an outpatient or inpatient surgery. So, patient estimation software is very important.” The software is designed to marry the negotiated rates from insurance companies with the fees from the hospitals and practices and then calculate a balance for patients based on their benefits structure and what they’ve already paid on their deductible.
Robert Magnuson, principal advisor with healthcare IT consulting firm Impact Advisors, who counsels clients in all areas of revenue cycle including pre-implementation planning and integration and revenue cycle assessment and optimization, agrees that patient estimation software is a complex technology. “There are a number of clinical attributes to each patient that will change what the costs might be under certain contracts,” says Magnuson. “Oftentimes, it involves more than just technology but technology working with a nurse auditor or administrator to comb through the data to refine the estimate. One of the most important parts of this is patient liability estimation-what is going to be the patient’s portion of the bill.”
Estimation software has been around for nearly a decade, Kane says, but adoption was slow because few healthcare organizations felt pressured to provide that level of pricing transparency.
Now, however, with the growth of high-deductible health plans and high co-pays, patients are feeling the squeeze as insurance policies have become much more complex and placed the burden squarely on consumers. “What we’ve seen over the last eight to 10 years-and has been maturing rapidly in the last couple of years-is a lot more effort on patient liability estimation and collecting that up front prior to service,” says Magnuson. Kane notes that some states have passed laws forcing price transparency and requiring hospitals and payers to provide that information.
According to Magnuson, price transparency overall is a critical business issue because patients increasingly want to shop competitively for rates for medical services. But, Kane says there is a problem in the marketplace with a standard definition of what exactly “price transparency” means. “Pricing transparency to me is not putting a list of services out on the Web so someone can go and look at it- which is what many providers are doing-because it may not be the cost that a patient is going to have to bear,” she says.
The reason more complex patient estimation software is gaining favor with hospitals, says Magnuson, is that with declining reimbursements and reduced margins, “if 3 to 5 percent of your potential revenue is on the co-pay, it seems foolish to leave that on the table-in the past they could afford to, now they have to go after it.”
Patient estimation software typically serves as a “bolt-on” solution to electronic health records systems and revenue cycle systems. The software can electronically reach out to the payer based on the insurance number of the patient and come back in near real-time with the patient’s liability. “An improvement in recent years with this kind of software is an elimination of the latency,” Magnuson says. “If the entire process doesn’t take place in real time, it can impact a patient experience.”
For those on the revenue cycle management front lines, the vastly improved functionality has been a game changer. “Previously, I was spending hours-at least 8 hours a week-trying to track and collect payments that patients owed for services we provided,” says Cindy Welch, R.N., practice administrator for Golden Empire Cardiology in Bakersfield, Calif., a practice focused on the prevention and treatment of cardiovascular diseases.
Welch leverages ZirMed’s cloud-based clinical and business performance management technology, which integrates with the practice’s electronics health records system. Users can get an estimate via the EHR in only a few clicks that verifies patient eligibility based on demographic, insurance, encounter and procedure data. The practice’s EHR, GEMMS ONE, is a specialized product for community-based private practice cardiology groups.
Magnuson says the real advances in patient estimation software are in the implementation and integration with the overall revenue cycle systems and EHRs. “One of the challenges with this software is making sure that during the implementation all of those contracts with all of those different payers are included in the build of the software,” he advises.
Welch says her practice has been conducting patient estimation with the ZirMed solution for a little more than a year with positive results.
“It really keeps a close eye on all the data, which is at your fingertips,” she exclaimed. “Before, I would have to look through all kinds of reports and try to figure out the bottom line.”
Now, the practice provides a printed summary of cost estimates to patients ahead of time to let them know what their responsibility will be for procedures and how much they will owe.
PwC’s Kane advises providers to provide a patient estimation of costs-including insurance verification- prior to scheduling a medical service as a best practice. She insists the technology is “about much more than the price of services.”
But providers can’t think of the technology as just installing an estimation tool, she warns. It must be “packaged” with customer service and a pre-processing center to support the process with different payment mechanisms. Kane says the purpose is to work with patients from a customer service standpoint to help them through the process of figuring out their out-of-pocket costs in advance of the actual medical service.
“Many patients don’t really put a lot of thought into their healthcare and into the plans they choose and it’s not uncommon for someone to say, ‘I didn’t know I had a $5,000 deductible. I didn’t know I had to pay 20 percent,'” she says. “It prevents the problems we had in years past, for instance, when a patient would get a bill and say, ‘You never told me I had to pay $500.’ Patients’ expectations are not matching what their true financial burden is.”
Stating the obvious, Kane points out that “most patients don’t have $5,000 just sitting in a checking account to pay that up front.” The technology allows providers to work with those patients to develop other options such as loans, payment plans and deposits, she says. “They need to identify when and how this estimation is going to be communicated to the patient, ensuring they have a process in place to communicate it in an appropriate and compassionate manner,” adds Kane.
By helping alleviate a patient’s financial burden, hospitals and practices can actually increase patient satisfaction with the service they are receiving. “You have to have very diplomatic, trained staff with defined policies on what they’re going to do if the patient is not able to pay,” concurs Magnuson, who says staff training should also include role playing “because it’s that important.”
Golden Empire’s patient estimation software has played a large role in reducing days in accounts receivables, increasing collections and improving office efficiency, as well as patient satisfaction, Welch says. With the software, the practice has reduced accounts receivable days by almost 30 and patient collections have increased 20 percent.
Prior to implementing the software, Welch says her practice was lucky to collect a dollar for every five dollars of medical services rendered.
It has also helped the practice control an industrywide problem of money walking out the door. About half of patients’ financial responsibility that’s billed for after a visit gets written off as bad debt. Golden Empire is increasing its up-front collections by adopting a policy requiring some level of payment at the time of encounter.
The practice bills each patient’s primary insurance carrier after each visit. At the same time, Welch says, it asks patients to pay any deductibles or co-payments that are due at the time of the office visit. For Medicare patients, Golden Empire bills the secondary insurance carrier for patients, with many insurance carriers requiring pre-authorization.
In those cases, the practice sees it as the patient’s responsibility to inform them of these needs before any services are rendered. It is also a patient’s responsibility to confirm with the insurance company that the practice and its physicians are contracted providers.
“Two years ago, we would bill the service and then try to collect the payment from the patient,” Welch says. “We now collect their portion up front before the service is performed. That has made a huge difference in our practice. I no longer have to spend hours trying to track money down, and patients are happier because they know what their responsibility is for a test or procedure that our physician has suggested.
“They can use that information as a guide as to whether they want to proceed or not,” she adds. “Patients are less likely to pay once they have the service provided.
“For me, as a manager, it has really helped with the bottom line every month,” she says. “We’re a small practice and here in California we don’t have as many practices purchased by the hospitals, so for us we have to make every dollar count.”
In regard to return on the investment for the estimation software, Golden Empire recoups its monthly cost for the application by collecting one patient’s co-insurance or deductible per month, according to Welch.
“It was very difficult prior to this because I would have to call each insurance company individually and know the procedure codes, and at times they couldn’t necessarily tell you what was allowable,” laments Welch. “So, we would have to keep a running list on our own-based on experience-of what insurance X allows for that procedure and we’d have to come up with an estimated amount. And, it was really time consuming. Before we used patient estimation software, collecting the co-insurances and deductibles up front was not done routinely.
“Healthcare is tough every single day and I just want one thing to be easier,” she adds. “And, this technology has made our day-to-day operations so much easier. It’s one thing in our practice that we don’t have to worry about.”