Hospitals, MedCity Influencers

The effect of patient financial experience on critical access hospitals in 2020

Streamlining patient registration, offering more financial services and protecting patients from unexpected medical bills are proven ways to collect more revenue, improve cash flow and reduce bad debt.

Rural hospitals in America are fighting for their lives. More than 150 facilities have succumbed to financial pressure since 2005, with the closure rate doubling in the last seven years to almost 14 hospitals per year. While these facts have been well documented, what doesn’t always make the headlines is that nearly 35%of rural hospitals closing since 2010 were critical access hospitals (CAHs).

CAHs: basics, benefits and challenges
About two-thirds of rural hospitals and 25% of all hospitals in the U.S. are CAHs, a designation created by Congress in 1997 to reduce hospital closures and ensure rural Americans had essential medical services. The program requires Medicare to reimburse CAHs 101 percent of reasonable costs for inpatient and outpatient services to Medicare recipients. State Medicaid agencies have the flexibility to determine how they pay CAHs for providing services to Medicaid enrollees.

To qualify as a CAH, a hospital must offer 24/7 emergency services, have no more than 25 beds for inpatient services, maintain an annual average stay of 96 hours or less for acute care patients and be at least 35 miles from another hospital, among other criteria.

While the 101% Medicare reimbursement seems favorable, the model still leaves many CAHs financially vulnerable. Their small size and location can diminish economies of scale, reduce leverage with payers and vendors and limit the feasibility of offering profitable services that generate cash. Low patient volume, high rates of uninsured patients and rising non-Medicare and non-reimbursable Medicare bad debt add to the challenges CAHs face in covering costs and remaining viable.

Yet another hurdle: Collecting patient payments
Many healthcare providers have trouble collecting payment from uninsured and underinsured patients. The problem is exacerbated for CAHs because Americans living in rural areas are older, sicker and poorer, and nearly half say they can’t pay an unexpected $1,000 expense right away. Forty percent have had trouble paying medical bills and 45 percent didn’t seek healthcare because they couldn’t afford it.

Rural areas also have less access to health literacy, which means residents may have trouble finding and understanding insurance and what they qualify for. Fewer commercial health insurers serve small rural markets and those that do often charge higher premiums. As a result, nearly 10 percent of rural residents had no insurance of any kind in 2017, compounding financial problems for CAHs and other rural hospitals on the edge.

The future of CAHs in 2020
Self-pay patients can lead to high accounts receivable and slow collections, which are common problems for CAHs. The key to improving performance in these areas is for hospital administrators to scrutinize the patient financial experience and tailor it to meet their patients’ unique needs. For many CAHs, this means focusing on four areas that can build patients’ trust, increase collections and improve financial performance:

  1. Earlier patient engagement and registration. CAHs are oftentimes more successful whenever patient engagement starts well in advance of the appointment to ease patients’ fears and increase efficiency. By contacting patients to confirm insurance eligibility, co-pays and deductibles, and provide accurate bill estimates, patients know what they’ll owe before they arrive at the hospital.
  2. Personalized financial planning. Tools are available to help staff evaluate patients’ ability and propensity to pay their medical bills. Using this information, they can recommend a payment plan that fits the person’s circumstances and increases the likelihood of collecting the full amount owed. Also essential to personalizing this part of the experience is a patient advocate who can explain federal, state, local and third-party medical programs and the benefits that uninsured and self-pay patients may be eligible for.
  3. A thoughtful approach. Because people in small communities often know each other, conversations about personal finances can be uncomfortable. Training and tools can help guide staff to handle each situation based on patients’ needs and sensitivities.
  4. No surprises. Studies show Americans worry more about surprise medical bills than insurance premiums, deductibles or drug costs. Healthcare providers help reduce this anxiety with transparent, consistent pricing; clear communication tailored to the patient’s level of understanding and an organizational culture where staff treat patients with compassion throughout their clinical and financial experiences.

Measures of success for 2020
CAHs are often the only source of high-quality medical care for people in rural areas, and their survival is crucial. The Centers for Medicare and Medicaid Services (CMS), which certifies hospitals as CAHs, periodically reviews and adjusts certification requirements to improve care and operational efficiency. In late 2019, for example, CMS announced rules changes that lessen some regulatory and reporting burdens, which should save CAHs time and expenses. While these measures may help, CAHs must proactively make changes on their own to boost their bottom lines. In 2020, streamlining patient registration, offering more financial services and protecting patients from unexpected medical bills are proven ways to collect more revenue, improve cash flow and reduce bad debt.


David Shelton

David Shelton serves as Chief Executive Officer for PatientMatters, LLC. He has served in senior healthcare management for more than 15 years, with experience in operations, technology development, and manufacturing. His expertise includes delivering business growth, streamlining operational management, and generating profitability for PatientMatters and its healthcare clients. He is an active member of both Healthcare Financial Management Association (HFMA) and Healthcare and Information Management Systems Society (HIMSS).

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