Improving Emergency Department Copay Collection

From HMCwiki

Improving emergency department copay collection is important considering many senior hospital financial executives have no idea what their emergency department co-pay collection rates are. In their gut they know they are low, but hospital accounting systems often are not set up to track this statistic. Yet, on an annual basis, it is estimated that hospitals write-off more than $2 billion per year in co-pays and deductibles. That’s an average of $400,000 for every hospital in the country. That’s a number that may be worth paying attention to.

Average collection rates on ED co-pays and deductibles are less than 33%. When you factor in the billing cost, which can be anywhere from $2 to $15 per patient charge, hospitals may only be netting 15 to 20% on these charges. But it doesn’t have to be that bad.

With many hospitals barely breaking even or losing money, plugging the gaping hole in the co-pay collection bucket can have a meaningful impact. Some hospitals are collecting ED co-pays at rates as high as 80% or more. What are they doing that the average hospital isn’t?

There are a number of practices being used throughout the industry that can help substantially increase co-pay collections. Before talking about the solutions, it might help to understand the nature of the problem.

Contents 1 Why are emergency department co-pay collection rates so low? 1.1 Point-of-service collections 1.2 Post discharge collections 2 “How’m I doin’?” 3 The one-two punch 3.1 Improving point-of-service collections 3.2 Improving post-discharge collections 4 Summary 5 References and resources

Why are emergency department co-pay collection rates so low?

Low ED co-pay collection rates result from a combination of structural factors associated with the process of delivering emergency services and from inefficiencies in the patient billing system. Based on our discussions with many hospitals, it has been observed that collection rates at the point of service average less than 25% and post-discharge collection rates are usually less than 10%.

Point-of-service collections

Emergency departments are busy, chaotic places. The primary objective is to have the patient seen by medical staff. Financial considerations come second, so the results are often low collection rates. Some reasons for these low rates include:

• EMTALA Regulations: Patients cannot be turned away from the emergency room for non-payment, so many receive treatment and choose not to pay or can’t pay at the time.
• Lack of Information: Patients show up at the emergency room and can’t provide their insurance information or co-pay amount.
• Imperfect Registration or Discharge Procedures: Many hospitals, especially smaller hospitals, do not even ask the patient for their co-pay before discharge.
• Staff Focus: Emergency department staff are very busy and may not have the time to verify co-pay amounts with payers or to ask the patient for payment.
• Patients Walk Out: Some patients simply walk out the back door without paying.

Post discharge collections

Post-discharge ED co-pay collections often fail to reach 10%, even when run through the full billing and collection cycle. With the average co-pay at $50 and post-discharge collection rates of less than 10%, a hospital may spend $10 to $15 billing the patient and collect on average $5 per patient. No wonder many hospitals choose not even to bill for co-pays. It costs less just to write them off.

The primary reasons for low post-discharge collection rates include:

• Time Lag: If a hospital has to wait until the insurance claim is resolved before billing the co-pay, the lag may be as much as 2 to 4 months, and the patient has forgotten they were even in the emergency department.
• Complicated Statements: Patients are confused by hospital statements. When confused, a patient will ignore the bill.
• Small Dollars: The average ED co-pay may be $50. If the patient ignores the bill, patient accounting will not spend significant resources to go after it. Neither will a collection agency. It’s just not worth it, relative to focusing on high balance patient receivables.

So after all of that time and effort expended by the hospital and their collection agency, that little $50 co-pay continues to float along, unpaid, and where does it end up? In the write-off pile.

“How’m I doin’?”

Before you try to fix the problem, the first thing you need to do is get a handle on your data. Many hospitals don’t break out low-dollar patient charges (i.e., co-pays and deductibles) by department in their reporting. This can mask a serious deficiency in ED collection rates.

Before deciding on a course of action, try to answer the following questions:
1) How many total ED visits did my hospital have during the period?
2) How many of those generated co-pays and deductibles?
3) What percentage of those co-pays were collected at the point-of-service?
4) What percentage of those co-pays were collected through billing?
5) What percentage did my collection agency collect?
6) What percentage did I write off?
7) What is the impact of this process in absolute dollars, not only in the cash not collected, but in the cost of multiple billing attempts, staff time dealing with accounting and with collection agencies and patients?

To get an accurate picture, you should examine data over a 6 to 12-month period to account for lags in insurance claim resolution and to cover at least 2-3 billing cycles to the patient. It might require Patient Accounting and IT to work together for a couple of hours, but it will be worth it. Once you have the data, you can figure out if you have a problem and what to do about it.

The one-two punch

Most hospitals and consulting firms that try to tackle the ED co-pay issue focus almost exclusively on the point-of-service. But due to some of the structural issues associated with emergency care, an exclusive focus on the point-of-service will only take you so far. The best hospitals we have encountered collect around 50% at the point-of-service. Pretty good, but you can do better.

Maximizing the overall collection rate requires a two-pronged approach. Both point-of-service collections and post-discharge billing and collections should be addressed in a coordinated manner. It is possible using some simple, practical techniques, to achieve overall ED co-pay collection rates as high as 70 to 80%. That’s a lot better than the 25% to 33% or less that many hospitals achieve today.

Improving point-of-service collections

The best performing hospitals in the country achieve point-of-service co-pay collection rates in the ED between 40 and 60%. Some best practices that we have observed from these hospitals include:
1) Verifying the patient’s co-payment at the time of treatment
Either ask the patient for their co-pay information or verify the co-pay with the insurer. Many insurers are set up for electronic inquiries, but inquiries may also be made by phone. This may require short term investment in IT and/or human resources to get your ED connected to payer websites, but will result in added revenue in perpetuity.
2) Ask the patient to pay
If you don’t ask, the patient won’t pay. Many hospitals, especially small community hospitals, don’t. Make sure to give the patient several options for payment, including cash, check and credit card. Many patients are responsible, and if asked to pay at the time will do so. Do not volunteer to bill the patient unless they ask for this option.

Asking the patient to pay when you don’t know the co-payment amount can be tricky. However, some hospitals do this by asking for a deposit. Look at the range of co-pays you typically bill for and determine an appropriate deposit amount ask for. The most appropriate amount will likely fall between $50 and $75. If the amount is too high, you will have to issue a refund or apply the overpayment to deductibles, co-insurance or other charges. Either way, it’s better than having to pursue the payment later.
3) Offer the patient a payment plan and get them to sign it
Co-pays are going up. Patients are getting squeezed. Sometimes they will feel more comfortable paying over time, especially if the charges exceed $100. Offering a payment plan with the first payment made at the point of service will at least result in a portion of the charge being collected. Try to take a credit card, and get authorization to bill the balance on the card in installments. You can also set up an installment payment plan through the patient’s phone bill.

For larger balances of $250 or more, Co-Pay Funding can structure a program that will advance the hospital for the patient obligation and then set up a 1-3 year payment plan for the patient. This will accelerate the hospital's cash flow and result in substantially higher payment rates. This approach can also be used for private pay balances up to $10,000
4) Provide the patient with an incentive to make payment on the spot
Consider offering patients some small benefit for paying their co-pay before being discharged. Think like a bank, or a car dealer. Offer a Starbucks gift card. A free pharmacy discount card. Validated parking in the hospital garage. Check your payer agreement to determine how much flexibility you have in providing these incentives. The cost of the item is a small fraction of the cost of chasing the patient for payment after they leave the hospital. Besides, this will promote patient goodwill.

Improving post-discharge collections

Given how hard it is to get patients to pay after the fact, most hospitals naturally focus co-pay collection efforts on getting the patient to pay before they leave the emergency department. But even under the best of circumstances, the likely collection rate from your point-of-service improvements will not exceed 50 to 60%.

Focusing separate attention on the post-discharge process can yield even more benefits, possibly taking overall collections rates to as high as 70 to 80%. Here are a couple of ideas that will likely result in higher collection rates on the back end.
1) Get the bills out quickly
Patients are less likely to pay their co-pay bills if they receive them several months after leaving the hospital, as is usually the case. Getting bills out quickly may require deployment of human resources or an outsourced vendor to verify the co-pay amount, but the benefit of getting the bill out within a two or three weeks of the patient’s visit is quite substantial. Billing Solutions can provide this service, and also can offer co-pay verification for patient records where the co-pay amount is missing.
2) Keep the bills simple
If you are able to verify the patient responsibility amount, issue a bill listing just the co-pay. This may require some programming changes to your billing system or use of an outside vendor such as Billing Solutions. Keeping the billing simple reduces patient confusion and increases the likelihood that the bill will be paid promptly.
3) Hold your collection agency accountable
Collection agencies will aggregate their data when reporting to their clients. Your agency may have a 60 or 70% recovery rate overall, which may seem pretty good. But that recovery rate is heavily weighted toward larger charges, and likely hides underperformance on small charges. Since ER co-pays and deductibles tend to range between $50 and $100, they are disproportionately ignored by the agency.

Ask the agency to break out their performance by self-pay collections vs. co-pay and deductible collections. Ask for a breakdown of collections by charges over $100 and under $100. You’ll likely be amazed to see that they are collecting very few of the sub-$100 co-pays and deductibles, mainly because it’s not worth their time to go after them. So consider more effective alternatives for low-dollar charges rather than giving all of your collections to one agency for convenience.
4) Use phone account billing
One innovative approach being offered is to place low-dollar patient co-pays and deductibles on the patient’s home or cellular telephone number. Patients sign an authorization form at registration or prior to discharge authorizing this billing approach, and collection usually take place within 60 to 75 days. To date, this approach has yielded average monthly post-discharge collection rates of 70 to 85%.
5) Sell your co-pay receivables
Co-Pay Funding also offers hospitals the opportunity to sell their co-pay receivables and receive guaranteed cash payments. In certain cases, the hospital may find it more beneficial to sell its receivables on a non-recourse basis than to attempt to bill and collect for those receivables on their own or through a billing or collection company who will experience relatively low collection rates.

This approach provides the hospital several benefits including:

• guaranteed payment on co-pays and deductibles
• accelerated payments, usually within 30 days of the patient visit
• elimination of billing expenses on co-pays sold
• non-recourse relationship—if the charges are not collected, the write-off belongs to the third party, not the hospital.

Summary

Most hospitals seem to view the collection of co-pays and deductibles generated out of the emergency department as a lost cause. Write-offs of 2/3 of the co-pays generated are the norm. In some cases, hospital administration simply ignores the issue, because their data on collection rates are not transparent by department or because of a perception that little can be done to improve the situation.

But with some relatively simple, low risk strategies, ED co-pay collection rates can be significantly improved. The resulting boost in cash flow can have a meaningful impact on the hospital’s profitability. Higher collection rates also mean fewer accounts turned over to collections and better patient relations all around.

As hospitals continue to face increasing financial pressures, it is clear that seizing an opportunity to realize hundreds of thousands in additional revenue through improved ED co-pay collections is simply smart management.

References and resources

Note: This article was originally submitted by its Author, 2/24/06
"Emergency Department Co-Pays Don’t Need to Equal Write-Offs", Gus Bessalel, Co-Pay Funding, LLC.