10 things keeping healthcare finance leaders up at night

The legislative session this year has been a roller coaster for anyone with a stake in the U.S. healthcare system, as Congress has made several attempts at significantly changing pieces of the Affordable Care Act.

If you’re in the healthcare industry, this drama is just one of several issues taking place across the U.S. healthcare system right now that keeps healthcare finance leaders up at night. Here’s a top 10 list:

  1. Uncompensated care– Uncompensated care costs hit $35.7 billion in 2015, according to the most recent full year measured by the American Hospital Association.[1] That represents 4.2 percent of total expenses. Interestingly enough, we know one reason for such costs is that many insured patients can’t foot the bill for out-of-pocket costs from deductibles, coinsurance and copays. In fact, approximately 68 percent of patients with bills of $500 or less did not pay their hospital bills in full last year - up from 53 percent in 2015 and 49 percent in 2014.[2]
  2. Bad debt. Not entirely separate from the first issue, but nonpayment by patients leads to bad debt, which hits rural hospitals especially hard because they often don’t have the ability to absorb this debt. Even though there are fewer uninsured patients because of the ACA, the fact that patients pay more out of pocket has led to a rise in bad debt.
  3. Rising deductibles. A major reason that patients are defaulting on payments and putting off medical coverage is that deductibles continue to rise. Overall, they’re up 63 percent since 2011, according to Kaiser Family Foundation.
  4. The ACA’s shaky status. The lack of certainty about the ACA’s future is a major cause for angst among healthcare administrators. Medicaid, health exchanges and other types of health plans will likely be impacted by ACA disruptions. The only certainty is that more of the costs will shift to patients, which will exacerbate worry No. 1.
  5. Patients not understanding their responsibility. When you buy a car or a house, you know what you’re going to pay. However, when you get an operation or other medical services, your out-of-pocket costs are unclear. One reason for this is that hospitals have typically focused on the insurance provider as the “customer” even though patients are footing more and more of the costs for medical expenses. Providing a framework to inform customers about the out-of-pocket costs of their medical care is imperative, and many hospitals are still behind the curve.
  6. Collections. Often hospitals’ efforts to recoup payments downstream are unsuccessful. Studies show that collecting after the patient has been treated defaults to a 50-70 percent payment rate. [3] And as the amounts owed become higher, the likelihood of payment diminishes even more. Going with an external collections agency can also be costly and cause significant patient satisfaction issues.
  7. Acquiring new patients. While non-payment from patients is a major concern, attracting patients to your facility can be tougher. A survey last year from RemitData found that nearly 50 percent of RCM vendors and companies said acquiring new patients was a top challenge.
  8. Retaining existing patients. Another side of the same coin is patient retention. While hospitals want to attract new patients, they also want to keep their “good” patients in their system as well. The consumerization of healthcare and the fact that patients are paying more out of pocket makes it imperative that their experience, from a clinical AND financial aspect, is as positive as possible.
  9. Technology. Keeping up with the latest technology is difficult to fund with competing priorities, while at the same time, it can lead to higher patient satisfaction and predictive analytics that can make operations more efficient (thanks to new innovations like machine learning). Juggling the cost-benefit side of the equation can be a headache for leaders as they evaluate what and where they should invest in technology.
  10. Benchmarking. Making the best decisions hinges on knowing where you stand compared to others in the industry and whether your efforts are making progress. Without proper benchmarking, it can be difficult to discern where to focus and when to act. In the RemitData survey, half of providers and RCM companies listed benchmarking as one of their top concerns. So did 63 percent of vendors.

With all of these driving forces, it’s hard to sleep at night. Innovative and successful revenue cycle leaders have developed people, processes and technology to address the concerns above and have been flexible in their approach. As we continue to see disruption in the healthcare market from a legislative, funding, and technology standpoint, it will become critical to adapt and focus on what matters most – the patient. Positioning your revenue cycle to be patient-centered in an effective and efficient manner will differentiate between the winners and losers as we progress towards 2020. Get a good night’s rest first though.

[1] American Hospital Association, “Uncompensated Hospital Care Cost Fact Sheet,” December 2016 - http://www.aha.org/content/16/uncompensatedcarefactsheet.pdf

[2] TransUnion Healthcare, “Patients May be the New Payers, But Two in Three Do Not Pay Their Hospital Bills in Full,” June 26, 2017 - http://newsroom.transunion.com/patients-may-be-the-new-payers-but-two-in-three-do-not-pay-their-hospital-bills-in-full/

[3] McKinsey &Company: The Next Wave of Change for US Healthcare Payments, May 2010 - http://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/the-next-wave-of-change-for-us-health-care-payments

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