July 14, 2014 •Brian Watson
For a majority of tax-exempt hospitals, charity care is a big – and growing – problem.
According to the latest information from the American Hospital Association, uncompensated care reached an all-time high in 2012, with member hospitals reporting $45.9 billion in bad debt and charity care combined. That’s a 10% increase over figures from 2011 – and equals 6.1% of the total expenses of hospitals surveyed.
And while the Affordable Care Act is helping to reduce the number of patients receiving financial assistance, its impact on charity care – at least initially – has been mixed at best.
On the bright side: as of May, over 8 million people have added coverage through the ACA state and federal exchanges launched late last year. That’s millions and millions of patients that – without adequate insurance coverage provided by the ACA – might previously have contributed to the record amounts of charity care providers are facing.
Now for the downside: only 24% of those people were previously uninsured. And despite increasing exchange enrollment and more positive momentum, the Congressional Budget Office estimates that by 2023, 31 million Americans will still lack adequate insurance coverage.
In addition, ACA legislation now requires hospitals to meet four new charity care compliance regulations in order to maintain their tax-exempt status.
Not-for-profit providers are now being asked to conduct a community health assessment every three years, establish and publicize a uniform charity care policy, charge uninsured patients the same rates as the insured population, and avoid “extraordinary collections activities” for services covered under their financial assistance policy.
While these actions have clear benefits to patients – and by extension, the hospitals they use to receive care – providers are also being asked to take on additional work. And that means devoting more staff time and productivity serving their charity care populations.
The upshot? Charity care will likely continue to be a major financial issue for hospitals. And at a cost that’s over 6% operating expenses, it’s an issue that has significant balance sheet implications.
Finding Time (And Money) for Charity Care
Charity care management is becoming a full-time venture for many patient accounting employees at hospitals across the country.
The perfect storm of rising charity care levels and more stringent regulation requirements has created a mountain of work for most healthcare providers. Business office employees are being asked to add more work to their already crowded plates. And new hires are placing additional stress on tight budgets.
But providers can’t simply wash their hands of charity care. It’s fundamental to maintaining your tax-exempt status. It’s a key driver of patient satisfaction – and ACA reimbursement rates. Not to mention treating patients regardless of ability to pay is an essential part of your mission as a care provider.
So the question becomes: what can you do to make the process as fast, easy, and efficient as possible?
More Financial Counseling
According to the U.S. Department of Education, 21% to 23% of Americans are “functionally illiterate”, struggling with tasks like locating information in text and understanding simple printed materials.
From a charity care perspective, that means one in five patients could have difficulty understanding your charity care eligibility requirements or correctly filling out applications.
That’s one area where skilled, experienced financial counselors can make a big difference. Offering financial counseling in pre- or point-of-service consultations provides patients with propensity to pay risks to understand your policies, what is expected of them financially, and assistance completing requisite forms.
It also reduces identification issues that keep patients that would likely qualify for charity care from slipping through the cracks as bad debt.
Presumptive Enrollment
Of all patient balances that become bad debt, the Healthcare Financial Management Association estimates that up to 25% should actually be classified as charity care. Considering hospitals provided nearly $46 billion in uncompensated care in 2012, reversing that trend alone would prevent a lot of thorny balance sheet issues.
And while financial counseling is a very good start, there is a limit to its utility. Even the best staffed and managed departments will struggle to provide one-to-one attention to every patient in every care setting.
That’s why today’s best-practice charity care applications rely on predictive intelligence. These analytic, algorithmic models mine patient financial data – including credit score/history, financial profile, and propensity-to-pay – to proactively identify and medal-score patients that qualify for charity care. Independent of any face-to-face financial counseling.
Presumptive enrollment is a true win/win. Patients can receive assistance without providing tax returns or supporting documents – or even knowing that they’re eligible for charity care prior to treatment. And providers benefit from simple, standardized financial policies.
Have a Clear, Actionable Charity Care Strategy
ACA guidelines now require providers to regularly assess, document, and publicize hospital charity care policies to maintain their status as a tax-exempt organization.
Since ACA launched last year, I’ll assume you’re already well aware of the guidelines and have a working plan in place.
But from an operations standpoint, that’s only the tip of iceberg.
How do you meet the needs of patients that fall into different charity care classifications? What’s the verification process to ensure patients have been screened for programs like Medicaid? How are third parties integrated and managed? Do you plan to scale back charity care for patients that would otherwise qualify for ACA-subsidized coverage – like those earning between 200 and 400 percent of the poverty line?
This is a blog post. Not a novel – which might be what it would take to suss out solutions to those and similar questions. But suffice it to say, your charity care strategy should provide a clear roadmap of the process – policies, procedures, accountability – from start to finish.
Outsourcing
Given the new ACA-mandated charity care rules, it can be costly and time-consuming for hospitals to try to handle all the heavy lifting internally.
As with early-out and first/second placement collections, many providers are finding that outsource charity care vendors have specialized skills and technologies that can help:
• Redirect more staff time and productivity to billing processes that generate collectible revenue.
• Create intelligent, transparent, data-driven strategies that move critical collections and settlement decisions earlier in the revenue cycle.
• Streamline scoring, modeling and qualification processes to improve identification of charity care-eligible patients.
• Respond to patients’ charity care questions and concerns, with phone-based and even on-site counseling support.
• Fast, efficient charity care application printing and mailing services
• Auditable, ACA-compliant reporting and specialized work-lists for targeted account management.
If you do choose to outsource, it pays to be diligent in selecting the right vendor. With tax penalties and reputation issues looming for hospitals that don’t meet ACA financial aid requirements, it’s more important than ever that you’re able to quickly, accurately identify patients that qualify for charity care.
The Wrap-Up
Need help increasing the effectiveness of your charity care management program? Contact the patient billing experts at Elite today for a free charity care management consultation.
From proactive identification, to charity care application print and mail, to granular reporting, we’ll suggest charity care best-practices that enhance both your financial profile and standing in the community.