Addressing the Challenges of Charity Care Documentation
Medical News, 4/01/08
Nearly 47 million Americans, or 16 percent of the population, lack health insurance. According to a recent Health Affairs study, between 2004 and 2006 the number of uninsured Americans increased by 3.4 million despite improving economic conditions. These numbers do not even take into account the significant number of individuals who are “underinsured.”
Historically, the majority of self-pay accounts that hospitals and other healthcare facilities dealt with were uninsured patients. In fact, in the early days of insurance coverage, many plans boasted no patient out-of-pocket expenses. But with the recent shift to consumer-driven healthcare plans and health savings accounts, which carry significantly higher co-pays and deductibles than traditional insurance plans, a greater portion of self-pay accounts are derived from insured patients. Additionally, an increasing number of individuals with the financial capacity to purchase insurance are opting to “go bare” – without coverage – due to the high cost of health insurance premiums.
As the number of uninsured and underinsured rises, healthcare providers will increasingly face challenges associated with self-pay accounts, including documenting charity care, applying appropriate discounts, setting up payment plans and financing options, and collecting payment at the time of service.
The healthcare industry’s challenge of documenting charity care is one that has been a popular news story of late — and will continue to be. Charity care, defined as subsidized or free healthcare provided to uninsured and low-income patients, is the most direct way a hospital can give back to its community. It is also the original rationale for granting hospitals not-for-profit status.
A Health Forum/American Hospital Association annual survey reported that in 2006, registered community hospitals provided $31.2 billion of uncompensated care, 5.7 percent of their total expenses. (This number represents the estimated cost of bad debt and charity care to the hospital.)
Due to a lack of standards within the industry, consistently defining and reporting charity care can be complicated and time consuming for healthcare organizations. In addition, many healthcare providers do not have effective systems in place to deal with and accurately document charity care cases.
Patient access departments are being asked to take on an enormous load of complex cases without proper tools or training. In fact, many facilities still conduct the process of documenting charity care entirely on paper. It’s no wonder that patients often give up, get lost in the shuffle, or forget to follow up with the appropriate contacts.
The new Internal Revenue Service guidelines (Form 990) going into effect in 2008 increase the urgency for providers to have processes in place to account for charity care in a standardized way. This is especially critical for organizations with not-for-profit status, as government turns its attention to whether they provide enough community services to justify their tax-exempt status. Tools that help document charity care are essential in demonstrating compliance and consistency.
Another issue providers face related to the uninsured and other self-pay patients is how to set discounting policies. In today’s healthcare system, insurance companies negotiate with providers for lower prices. Uninsured and underinsured patients, who do not have the same negotiating power, usually pay full “sticker price” for care. Over the past several years, lawmakers and consumer advocates have taken action to ensure that low-income uninsured and underinsured Americans are charged fair prices for their care and are protected from aggressive debt collection practices. Many healthcare providers are struggling to determine and implement proper, consistent processes for applying these discounts.
What are healthcare providers to do in this changing landscape? Many hospitals and other facilities have opted to implement a comprehensive self-pay management system. Harnessing proven Web-based technology and available demographic data, such a system enables healthcare service providers to interact with all patients regarding financial responsibilities at the point of service.
The system can provide registrars and financial counselors with real-time, interactive scripts that integrate patient demographic information with each provider’s unique business rules, thereby eliminating guesswork that goes along with determining a patient’s financial responsibility. The system should have the capability to determine what government assistance programs for which a patient might qualify, and then begin the qualification process in an automated fashion. A self-pay management system can identify discounting and charity care options when applicable and help to ensure that patient financial accounting is handled appropriately and in a non-discriminatory manner.
Recognizing the changing payment structures caused by the increase in self-pay patients — and implementing systems to address these changes — is critical for hospitals and other providers. An effective, comprehensive system that appropriately and consistently handles self-pay accounts will streamline a provider’s revenue cycle management, improve the working environment for patient access staff, and, most importantly, ensure that all patients receive the care, respect and assistance they need.
Earl T. Winter is Chairman, CEO and Founder of nTelagent, Inc. The company’s Self-Pay Management System is used to document charity care at the point of service. www.ntelagent.com.
Laura Campbell
President & CEO
Laura Campbell & Associates
laura@laura-campbell.com
615 579 6599
