Dr. HSA

High-Deductible Health Plans: What Hospitals Should Do to Prepare

February 2008 - Vol. 12

High-deductible health plans and health savings accounts (HSAs) are coming your way, and hospitals need to improve self-pay collection procedures and think about charging interest to some slow-pay patients. In the November 2007 issue of the Patient Friendly Billing newsletter, an interview with Dave Harris, Pricewaterhouse-Coopers' expert on account-based plans, offers insight on how hospital executives can learn more about these plans—first-hand. 

How significant are high-deductible health plans and HSAs to hospitals?

"Dr. HSA": David Harris, National Healthcare Revenue Cycle Partner, PricewaterhouseCoopers LLP, NY, NY © 2005-2008 All rights reserved.

Harris: These products represent only about 5 percent of the market right now for commercial insurance—not enough to cause significant pain to providers yet.  Forrester Research is estimating that one-third of the employees that get their insurance through their employer will be in an HSA-qualified high-deductible health plan by 2012.

How do these plans affect how hospitals get paid?

Harris: Account-based plans are usually backed by PPOs, and many provider network agreements state that hospitals cannot bill for the deductible at the time of service. So first the hospital has to bill the insurance company. The insurer will deny the claim if the patient has not met his or her deductible. Instead of getting paid in 15 days if a provider submits a clean claim, now hospitals and physicians get a denial in 15 days that says the "patient has not met their deductible so pursue the patient or their guarantor."

If patients with high-deductible plans have an HSA, they should have cash available to pay their share. Right?

Harris: Yes. However, some hospitals are being taken advantage of right now. Many people who have these high deductible health plans are well-to- do, so they have the money to pay their deductible. But they string the hospital out because they want to save the money in their HSA for retirement and pay for their current medical expenses out of discretionary funds (i.e., checking). For example, they have a $5,000 deductible, and when they get the bill, they'll call the hospital and say, "Can I pay this bill over time?" So now, instead of getting paid in 15 days on that PPO patient, hospitals are running a year, in some cases, to get paid—often at no interest, making it an interest-free loan for $5,000. 

How can hospitals know if this is happening?

Harris: By looking at their denials. If they see an increase in denials related to patients having not met their deductibles, that may indicate employers are now offering high-deductible health plans in their market. Their self-pay receivables will also grow if high-deductible health plans are on the rise.

What can hospitals do to protect themselves?

Harris: It's a three-pronged strategy. The first thing I tell my clients is you need to drink the Kool-Aid™. The best way to understand what consumer-directed health care is, is to offer it to your own employees as an option. That's the first step: Train your employees to get ready for this by offering that type of insurance product. Many hospitals are doing that already, and this trend has to continue. 

The second prong: You have to redesign your patient access procedures. The whole screening process for scheduling and registration staff has to change to look for high-deductible health plans.  Then hospitals can start those payment discussions either before or at time of service instead of after they get a denial. 

The third thing hospitals need to do is true up the self-pay dunning process. For example, the letters that go to patients with a high-deductible health plan who have not met their deductible should have different wording than a statement that's looking for a copay. 

You need to have communications that are tailored for a specific type of patient responsibility (i.e., copay, coinsurance, deductible, and out-of-pocket maximum).  You might want to look at it from a dollar-amount perspective: If the balance is less than $250, you have a certain dialogue with a patient. If it's between $250 and $2,000, maybe you offer financing opportunities through a financial services partner, like a bank. If it's greater than $2,000, maybe that requires a phone call as well as a patient statement: "Look, Mr. Harris, you owe us $5,500. How do you intend to pay us?" 

The interest policy for self-pay debt needs to be revisited by providers as we enter into this consumer-directed health market. A hospital may need to consider charging interest if it knows a patient has the money to pay the balance. It might waive the interest for somebody who really needs to pay over time. Of course, hospitals must have a policy that makes collection procedures consistent, so this requires careful planning.

Source:  Dave Harris, High-Deductible Health Plans: What Hospitals Should Do to Prepare, November 2007 Patient Friendly Billing newsletter.  The Patient Friendly Billing newsletter is an electronic newsletter that is available free to HFMA members at http:www.patientfriendlybilling.org. Nonmembers can purchase a single issue of the newsletter for $15.

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Reprinted, by permission, from HFMA Wants You To Know, December 12, 2007 page(s) 1-4.  Copyright 2007 by the HEALTHCARE FINANCIAL MANAGEMENT ASSOCIATION.