Why states requiring hospitals to notify patients about presumptive eligibility is a win-win

It’s a sad but true fact that many Americans avoid medical treatment because of the assumed costs.

For instance, some 20 percent of cancer patients choose not to fill prescriptions because they’re too expensive. About half of working-age adults say they would not have the money to pay an unexpected medical bill.

What’s even more alarming, from a public health point of view, is that a portion of patients aren’t even aware they’re eligible for charity care because no one informed them. But that’s changing. In Pennsylvania, for instance, the state Department of Health and Human Services told hospitals to inform such patients or they’ll risk losing funding from the state’s Tobacco Settlement Program. Some other states, such as California and Colorado, have similar mandates in place.

Hospitals that have been negligent in communicating so-called “presumptive eligibility” now have incentive to improve their processes with these new state mandates. By changing their approach and informing low-income patients of their eligibility to receive free treatment, the patient can get better care and the hospital can remain compliant – a benefit for both.

A win-win for hospitals and patients

Proactively informing patients of their eligibility aims to enhance the patient financial experience by increasing transparency and dispelling fears one may have in receiving costly medical treatment. Such patients can now make clear-headed decisions about care that are unencumbered by the worry of lingering bills.

Hospitals too stand to gain from greater presumptive eligibility communications. By determining charity care eligibility and notifying patients, hospitals can receive funding from the state and offset what would likely be bad debt and ultimately uncompensated care. Also, hospitals are able to maintain patient satisfaction – all while more efficiently using their debt collection resources to pursue payment from patients who are able and more likely to pay for services. With not-for-profit hospitals, the risk is greater since failure to comply with IRS 501(r) requirements puts them at risk of losing their tax-exempt status.

What’s new about these mandates

Presumptive eligibility is nothing new. In the past, hospitals would only recognize patients as eligible if they were already participating in a government program – like food stamps – that had similar qualification standards.

In the last decade or so though, hospitals have accessed credit-score-like data, demographic information and social media data to make that determination. Such hospitals often find that patients who haven’t paid their bills are eligible for financial assistance.

The problem is that hospitals are often remiss in informing such patients about their eligibility. For instance, a Pittsburgh Post-Gazette survey found that 23 of 29 general acute care hospitals in the eight-county region of southwestern Pennsylvania were using presumptive eligibility tools. Of those 23 hospitals, 14 didn’t tell patients they were qualified for charity care.

Under Pennsylvania’s new State definitions regarding charity care, hospitals are required to notify patients of their charity care eligibility. Whether located in Pennsylvania, or any other state, hospitals must be mindful of the risk associated with noncompliance. That said, the ability to demonstrate that a reasonable attempt to notify the patient was made is not as easy as it may sound. Hospitals need to document their efforts in attempting to locate such individuals so it’s apparent they’re doing their due diligence.

The impact of compliance

It’s likely only a matter of time before this notification mandate is adopted by other states, and hospital administrators would be wise to implement solutions that not only assist in determining presumptive eligibility, but also establish effective oversight mechanisms.

By streamlining their charity program and supporting compliance with IRS and state requirements, hospitals will be well-positioned, not only to better assist low-income patients in their path towards wellness, but also protect their own revenue streams and sources of state reimbursement.

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