Let’s talk reimbursement. Hospitals have absorbed $121 billion of new cuts since 2010, including $2.1 billion in uncollected debts. In 2012, the American Hospital Association reported an aggregate Medicare/Medicaid loss of $56 billion in payments. The numbers are painful, especially since two-thirds of every dollar spent by hospitals goes to staff wages and benefits. Released by the AHA earlier this year, these stats sum up a few of the reasons administrators are scrambling to understand the “why’s” and “how’s” behind an industry-wide shortfall.Hit from All SidesAccording to the AHA, hospitals nationally are reimbursed only 86 cents for every dollar spent caring for Medicare patients and 89 cents for Medicaid patients. That adds up, especially since the two groups account for 58 percent of all care provided by hospitals.Kelly Miller, senior manager of Healthcare Consulting in the Nashville office of Lattimore, Black, Morgan and Cain (LBMC), said hospitals are in the process of transitioning from a strictly case- or volume-driven model to one that includes more quality pay-for-performance measures.
She also cited the move from inpatient care toward an outpatient-centered model as being another major impact on hospital revenue. For 2015, it’s predicted that overall Medicare spending on inpatients will decrease by $756 million, while outpatient spending will increase by $800 million.
“That’s a huge shift, and decrease in inpatient payments reflects a mix of everything going on in the inpatient world including lower inpatient utilization,” Miller said. Fewer inpatient stays, deductions for scoring poorly on readmissions criteria and hospital acquired conditions, as well as the hospital value-based purchasing program are all contributing factors to the shrinking bottom line.
Constant regulatory changes at both federal and state levels are also to blame. “Medicaid programs continue to be a concern with the new federal regulations, and everyone’s trying to figure out what works and what doesn’t,” Miller said.
She noted providers are turning to firms like LBMC and other consultants for assistance with reimbursement strategies, regulatory compliance and long term strategic planning to try to stay financially viable.
Healthcare’s New Payer
Another change in healthcare’s reimbursement paradigm is evolution of the payer.
“The biggest shift we’re seeing is the introduction of a significantly more important payer: the patient,” said Kris Joshi, PhD, executive vice president of products at Emdeon. Headquartered in Nashville, Emdeon is among the largest intelligent financial, administrative and clinical health information networks in the nation, processing more than 7 billion transactions with a claims value of $1 trillion annually. Clients include 340,000 providers, 81,000 dentists, 60,000 pharmacies, 5,000 hospitals, 600 vendors, 450 laboratories and 1,200 government and commercial payers.
“Consumers are becoming a much more significant part of the reimbursement system because co-pays are going up,” Joshi said. “What used to be a small co-pay is now sometimes 20 percent of the total bill. Fundamentally that’s different than what patients in the past have seen.”
Those high co-pays are, in part, a result of decisions made about plans available on the health insurance marketplace. Not surprisingly, enrollees often opt for the lowest monthly rates with the highest deductible. The patient as payer is a huge shift driving changes across the revenue cycle, from registration through billing and collections.
The Need for Transparency
The solution, Joshi suggested, is transparency and explanation of costs on the front end — a beneficial model for both patients and providers.
“Given the large patient liability emerging, most providers are starting to have that conversation up front with patients, which never used to happen,” Joshi said. “Patients are being told up front how much will be owed and asked how they’d like to pay for that. Those are conversations that didn’t happen before when hospitals were able to write off a $50 patient bill. Now those bill are $2,000 and can’t be written off without losing millions in revenue each month.”
That’s where companies like Emdeon come in, he continued. Tools like the Patient Responsibility Estimator help consumers and physicians look up prospective cost of a treatment based on diagnosis.
The next step, Joshi said, is to make billing itself convenient and transparent. Most patients receive a myriad of bills for each visit, in addition to the ‘clear-as-mud’ explanation of benefits. Overwhelmed, patients often won’t pay a dime until insurance corroborates what is actually owed.
“Healthcare is so complex that no patient or physician can ever keep up with the complexity of the billing process, which is the root cause for many bills not getting paid,” Joshi said. “If you want to improve economics, the first thing you need is transparency. That kind of billing innovation will be absolutely critical going forward.”
Better Billing, Better Results
The experts also noted providers should offer more flexible payment options. Fortunately, improved electronic payment capabilities are making these arrangements more convenient. And while some hospitals are sophisticated enough to handle these systems alone, many more are outsourcing billing.
Regardless of who handles billing, Joshi said it’s imperative to adopt a proactive approach to reimbursement. “It’s not enough to gather your bills and collectibles and tell someone, ‘Here collect on it for me.’ By then it’s too late to address the problem,” Joshi said.
“You start at the beginning, and what’s needed is the capability to treat patients as consumers. They’re paying out-of-pocket and expect transparency and clarity in healthcare just as they expect in other parts of life,” he concluded.WEBSITES:
