Finding new solutions for uncompensated care in a post-reform era

After rising continuously for more than 35 years, hospital uncompensated care costs — the sum of a hospital's bad debt and charity care — declined by an estimated $7.4 billion in 2014, according to analysis from the American Hospital Association. Despite the drop, U.S. hospitals had nearly $40 billion fall into uncompensated care that year, the Office of the Assistant Secretary for Planning and Evaluation estimates.

The decrease in uncompensated care is largely the result of previously uninsured people gaining coverage under the Affordable Care Act. President Barack Obama's signature healthcare law has had several profound effects on the U.S. healthcare system, the most significant including the expansion of Medicaid and the creation of insurance exchanges, both of which allowed millions of low-income Americans to obtain health insurance.

"Every state has seen a significant drop in uncompensated care, even those that did not expand Medicaid, because of the exchanges," Michael Considine, vice president of product development, eScan platform and healthcare solutions at TransUnion, said during an Aug. 5 webinar hosted by Becker's Hospital Review. "But those that expanded Medicaid saw a huge drop, more than the states that have not expanded Medicaid."

While more Americans gaining healthcare coverage is a good thing, Mr. Considine said "there is a dark side to this data" that can still lead to uncompensated care and lower payments to hospitals. Some patients still slip under the radar and hospitals are unable to identify coverage or verify Medicaid eligibility, while at the same time, new payment structures lower reimbursement under the assumption more patients have health insurance.

"Payers and CMS are building payment methodologies on the assumption you are going to collect on the newly insured patients," he said. "If you're not capturing all of the [insurance] eligibility on these patients, it's possible your end net revenue is going down."

This challenge is even more pronounced for hospitals in the 21 states that have elected not to expand Medicaid, he added.  

Why do hospitals miss Medicaid eligibility?

Despite having coverage through Medicaid, hospitals sometimes end up providing uncompensated care to Medicaid patients. This most commonly occurs during emergency department visits. Since emergency medical cases are urgent and unscheduled, there is no opportunity for hospitals to verify patients' eligibility before providing medical service.

Often, patients arrive at the ED without their Medicaid cards and numbers, which means hospital admissions staff must rely on demographic information to locate their coverage. However, if there are any differences in demographic information between the patient's version and the payer's version, hospital staff may be unable to identify the patient's plan.

Another reason hospitals miss Medicaid coverage is patients' confusion over their status. Patients who enroll in a health plan through an exchange may be unsure if they have Medicaid or commercial insurance, and this layer of confusion can result in missed coverage, according to Mr. Considine.

Lastly, Medicaid expansion has exacerbated hospitals' challenge of capturing retroactive eligibility. Previously ineligible patients who identify at the hospital as self-pay may be later identified as Medicaid-eligible, so hospitals need to have a post-service eligibility service in place. However, Medicaid expansion has led to too much retroactive coverage to catch, according to Mr. Considine. 

Why do hospitals miss commercial coverage?

Hospitals miss patients' commercial coverage for many of the same reasons they miss Medicaid eligibility — ED visits and patients' confusion over their insurance status, particularly regarding their premium balance and what they owe.

Patients arriving in the ED without their insurance card pose a challenge for hospitals, especially because some payers require a policy ID number and don't allow hospitals to query on demographics, according to Mr. Considine.

Moreover, high deductibles and co-pays sometimes lead patients to withhold insurance information and try to qualify for charity care.

"That impulse on the patient's part is rational," Mr. Considine said. "While many hospitals say they will cover a patient's balance after insurance, some are thinking about not applying charity care guidelines after insurance."

Solutions for hospitals

Hospitals have three principal needs when it comes to reducing uncompensated care costs, according to Mr. Considine:

1. Identity verification to capture correct demographics

2. Use an insurance eligibility clearinghouse to verify and discover eligibility at the point of service on all patients

3. Work with a post-service eligibility solution that finds Medicaid, Medicare, TRICARE and commercial eligibility

According to Mr. Considine, between 1 and 5 percent of all missed payments are from patients who actually have coverage. While many hospitals already direct significant efforts and resources to improve coverage discovery processes internally, many can benefit from the added support of a third party.

eScan, a post-service coverage discovery solution from TransUnion's healthcare division, is designed to increase efficiency to the billing process and protect revenue, and has already saved hospitals millions. According to Mr. Considine, since the company's inception, eScan has converted a total of $6.2 billion in uncompensated care charges to paid status. It has also recovered a total of $898 million in cash for hospital clients.

"In this day in age, something that you really have to emphasize is efficiency. When you talk about changes to the reimbursement methodology, all of them are around driving efficiency through the hospital," said Mr. Considine, adding, "eScan focuses on efficiency more than anything else."

eScan includes rigorous processes to identify missed and retroactive coverage. It offers a rules-based delivery protocol that delivers the eligibility when clients are ready to see it and service-level coverage mapping so users can be sure they are not looking at accounts that aren't actually covered by the eligibility that was discovered. eScan can serve hospitals as a safety net that never allows an account to miss the filing deadline and ensure the hospital's revenue is protected.

To watch the webinar on YouTube, click here.

To download the webinar as a PDF, click here.

 

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