Self-Pay and the Bottom Line

Karen Minich-Pourshadi, for HealthLeaders Magazine , May 12, 2010
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New approaches put patients back into POS collections.

Self-pay receivable levels a have increased significantly in the past year and smaller hospitals are seeing the greatest increases, according to a 2009 Healthcare Financial Management Association study. The findings indicate that receivables are now growing faster than patient revenue at nearly a third of hospitals and another third of hospitals have seen self-pay grow by 10% or more. With such a significant increase, many financial leaders are looking to walk new paths to decrease the number of self-pay patients, while also working toward optimizing point-of-service collections—while ensuring they don't alienate their patients in the process.

Before devising a solution, financial leaders need to track what level of self-pay is impacting the bottom line. This starts with having accounts receivable group patient accounts by original balance and expected collection rate. The original balance is easy enough to determine; however, arriving at the expected collection rate requires a look at past payment history, credit score, medical credit score, employment status, and other demographics (e.g., marital status).

For Casa Colina Centers for Rehabilitation, a nonprofit 187-licensed-bed medical recovery and rehab center in Pomona, CA, the average cost of inpatient care is $1,075 per day. With an annual net revenue of $52 million, the facility estimates its charity care and community benefits programs grew to $908,000 in 2009 from $710,000 in 2008. Add this hefty sum to its charity care, which includes uncollected self-pay revenue, and the $1.5 million spent annually on collections and it's easy to see why Casa Colina is keeping a watchful eye on this line item.

Even with approximately 16 account representatives working with patients at admissions and in the billing department, the center was not slowing its uncompensated care losses. So last year Casa Colina dedicated one individual to work with patients to collect on unpaid bills, explains John S. Cherry, CFO at Casa Colina.

"We work with the patients; we don't turn them over to a collection agency," Cherry says. "We don't want to impact anybody's credit reporting. We know things are difficult enough, and we're not here to create any more headaches."

Creating a plan
Rather than take a hard-line approach to collections, Casa Colina is focusing on patient care through a more traditional approach. Admissions registers the patient and then checks the person's coverage. Then, based on the results of the screening, Casa Colina works with the patient to collect what it can up front, applies discounts where appropriate, and creates a payment plan for the rest. The center also bills inpatients every 14 days, which is the average length of stay, and works to try to collect payments on the back end as well.

In many respects, Casa Colinas' approach, which uses less pressure on collections and focuses on patient outreach, mirrors another California hospital's approach to optimizing collections from self-pay patients. John Bishop, CFO at Long Beach (CA) Memorial Medical Center, says the facility uses similar front-end techniques—striving to register patients for insurance where applicable and screening patients using Health Advocates to help identify possible Medi-Cal patients; however, it also uses bill estimates to help make more accurate up-front collections.

The 462-licensed-bed facility is one of five hospitals in the Memorial Care System. It creates an estimated bill for services. Then, the admissions team at Long Beach Memorial uses this information paired with the other information it has gathered to offer a discount to patients who qualify. There is a catch, however: This is a discount that is only offered on the front end.

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