Self-Pay and the Bottom Line

Karen Minich-Pourshadi, for HealthLeaders Magazine , May 12, 2010
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"We don't have a policy to negotiate on the back end because we realized we didn't ever want to negotiate on the back end. However, we realize that to have a realistic opportunity to get paid, we need to offer a discount that put the bill in the realm of feasibility for the [self-pay] patients. So we offer them a significant discount if they can come up with the cash up front," explains Bishop.

Charity care is consuming about $40 million of Long Beach Memorial's $800 million budget; another $40 million represents the uncompensated cost of seeing Medicare and Medi-Cal patients. Bishop says that its policy has helped keep the uncompensated care figure at about 10% or less of the total net revenue year over year.

"We've found our most successful [payment] tactic is to aggressively work with these patients to get them qualified for medical insurance or other programs," he says. "I don't think anyone finds it easy to navigate through the system so we try to explain their options and educate the patient about their bills—we don't want them to have sticker shock."

While bill estimates and patient screening has helped keep Long Beach Memorial's self-pay losses consistent, at the 769-bed New Hanover Regional Medical Center in Wilmington, NC, upgrading its technology caused a significant up-front collections turnaround. Ed Ollie, executive vice president and CFO, says the medical center was watching its self-pay and charity care increase steadily from $32 million in 2008 to over $35 million in 2009 and projections over $40 million for 2010.

"Any time you have a line item increasing 10%-12%, you have to pay attention. Our bottom line gain/loss operations run at $20 million to $25 million a year, so that's a significant chunk of our margin," he explains.

The facility used to approach up-front collections from self-pay patients on a "catch as catch can" basis, he says, until it decided in 2008 to revamp the approach. It was a decision that took cash collections from $20,000 monthly to $600,000, with a goal of collecting $800,000 to $1 million a month by year's end.

The approach went from more concentrated back-end collections to a strong front-end focus. New Hanover Regional offered extensive training, which included not only scripting the team's patient discussions, but also working with them on asking for money up front. They also revved up screening and prequalifying procedures and began contacting patients on the phone to verify insurance and arrange payment ahead of time.

"People coming to the hospital already have a lot of anxiety, and they like it when we remove the financial anxiety part of it in advance. We are really providing them with a service," explains Ollie.

New Hanover Regional uses Atlanta, GA-based Chamberlin Edmonds as its main tool to guide patients through the benefit application process, along with two other software programs. Additionally, for patient registration, the hospital uses software from the Miami Lakes, FL-based company AHI, called AHIQA, which allows registrars to see registration errors in real time, once the process has been completed, so they can verify and collect more information from the patient, who is still in front of them. The program allows staff to see all the historical bills as well as whether the patient had unpaid bills, which provides staff with the opportunity to discuss payment for that treatment.

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