Anesthesia Business Consultants

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Anesthesia Industry and Market News: eAlerts

eAlerts are the latest industry information regarding regulatory changes, helpful compliance reminders, or any number of relevant topics in the fast-paced, ever-evolving specialty of anesthesia.

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March 7, 2011

In last week’s Alert, we wrote about billing patients who go out of network for the difference between the anesthesia practice’s fee and the amount allowed by the third party payer. More specifically, we explored some legislative and judicial efforts to insulate the patient from large unexpected bills when their insurer has not contracted with all of the providers whom the patient may see. The phenomenon we report here is different: even though there is no question about the patient’s liability for the payment, collecting the full amount can be difficult.

Impact of Larger Patient Deductibles and Copayment Amounts

More and more employers have been offering high-deductible health plans (HDHPs) and Health Savings Accounts (HSAs), particularly since the passage of the Affordable Care Act in March 2010 and the latest double-digit increases in insurance premiums. A growing number of Individuals are personally responsible for the first $1000, $2500 or more of their medical and hospital bills each year.

This increased out-of-pocket liability is a real hardship for many patients. It can create a downstream hardship for their anesthesiologists, whose cash flow may have decreased even though they have recently negotiated higher rates with the health plans in which they participate. At the same time, health plan payments are declining as the plans increase the beneficiaries’ shares of the amounts owed to providers.

Are you collecting as much as you think you are? Imagine that your contract provides for a $60 conversion factor. Imagine further that the patient has only spent $150 of his or her $1500 deductible thus far this year. Your 8-unit, 2-hour radical hysterectomy should yield $960 (16 * $60)—but you must collect it entirely from the patient; the health plan owes you nothing.

There are various ways to track the impact of patient responsibility on your collections. The chart and table below provide an example. In the chart, the bars represent the average payment made by individual PPO patients. The chart reveals a number of interesting things about patient responsibility. First, as one would expect, the patient share is higher in the first couple of months of the year because of the impact of deductibles. It is also clear that the amount patients had to pay out of pocket, or out of their HSAs, increased dramatically from 2009 to 2010: average patient responsibility increased by about $8.00 per billed unit, or 17 percent.

Note that these data reflect Date of Service information. In other words, payments are applied only to the month of service. As the chart indicates, these amounts will vary from one month to another.

In reviewing the above data one might ask whether the overall payment to the practice increased during the time period in question. The average total payment received by the practice in this example for a PPO case was $767.44 in 2008. It increased to $791.54 (+ 3%) from 2008 to 2009. In 2010, the average increased by 5% for an average 2010 payment of $834.64. What the table below summarizes is how these increases were realized. Insurance payments went up by 3% from 2008 to 2009 and then by 5% between 2009 and 2010. The significant difference in the overall yield, however, is in the patient portion, which increased by only 1% from 2008 to 2009, but by 17% from 2009 to 2010. Individual practice results will vary depending on payor mix, the specific managed care plans doing business in your area, and the group's leverage in the marketplace, but this example clearly demonstrates a need to start focusing more on the patient’s responsibility for managed care balances than we have seen in the past.


  Percentage Changes
  Insurance Patient Total
2008 > 2009 3% 1% 3%
2009 > 2010 5% 17% 5%


Implement a Multi-Step Collection System

The first step in formulating an effective plan of action is the careful analysis of the impact of copayments and deductibles on your practice. You cannot effectively manage what you do not measure and monitor. A review of the impact of patient responsibility on each of your managed care contracts will identify numerous opportunities for enhancing your yield per unit billed.

Before developing an enhanced collections system, it helps to understand some of the psychology. The anesthesiologist and/or CRNAs and AAs may not exist in the patient’s memory. The patient may recall and be grateful to them, but very often he is unaware that the anesthesia services he received are separate from his hospital bill. This is why so many communications (i.e. invoices, letters, phone calls, etc.) are often necessary. As a result of these communications, the costs of collecting from patients can run as much as seven times greater than the costs of collecting from insurers, i.e., up to $17.50 per claim.

It is important, therefore, to start the process of educating the patient as early as possible. Consider trying one or more of the following methods:

  1. If the anesthesia administrative staff have any interaction with the patient prior to surgery, as sometimes happens with arrangements for labor epidurals, for example, that staff could be trained to communicate payment expectations and/or given scripts on how to ask a patient for money. The staff should be equipped with copies of the practice’s collection policies and protocols.
  2. Seek a commitment from your hospital to require the admitting clerks to present information about the patients' responsibility for the anesthesia bill as well as the hospital bill. If possible, include the hospital’s obligation in the next contract.
  3. Work with your surgeons to have their office staff explain the patients’ obligation to pay and even arrange payment of the deductible up front.
  4. e-PREOP™ (Integrated Preoperative Services) is an information management system that creates a stand-alone preoperative health record, typically in the hospital admissions process or in the surgeon’s office. ePREOP software integrates with various electronic health records and also provides the means for a seamless transfer of patient data between parties, eliminating the need for repetitive patient interviews and data entry.
          The data that can be captured by the surgeon’s office staff or the hospital includes credit card information for self-pay and deductibles.
          ABC is proud to be partnering with e-PREOP’s anesthesiologist-led developers to market this unique and important tool.
  5. We are also pleased to announce that ABC clients with practice websites will soon be able to link to a portal on through which patients will be able to make online credit card payments. The websites themselves—both client practices’ and ours—will be able to foster patient understanding of their health benefits and personal liabilities.

There are many other information system enhancements that can increase collections from patients. Among these are:

  1. Modifications to allow staff to begin identifying patients with HDHPs and FSAs,
  2. Incorporating electronic verification through programming changes and collaboration with clearinghouses, and
  3. Incorporating the practice’s top payers’ fee schedules into the information system.
  4. A pain medicine group with its own office—or an anesthesia group that enjoys the highest level of cooperation from the surgeons—may be able to develop a policy of collecting 75% or even 100% of the estimated patient share at the time of service. Collecting patient payments at time of service can reduce accounts receivable by more than 15 percent.
  5. A very large anesthesia practice may wish to emulate credit card companies and collection agencies and segment its patients by demographic and encounter data to determine which patients are most likely and least likely to pay their debt in a timely manner. The practice can then prioritize and organize its collection efforts to achieve optimal returns. For example, patients deemed highly likely to pay their full debt can be targeted for the full amount from the outset, while other patients can be offered discounts for immediate payment.
         While we are blue-skying, why not think about demonstrating Anesthesia’s value to the hospital by offering to share the results of any such segmentation?

Improving back-end collection processes can also contribute to better cash flow. The most obvious process is to provide easy payment options. Fewer than half of today's hospitals permit patients to pay online or via IVR (interactive voice response) technologies. The percentage of medical practices is doubtless considerably smaller. By giving patients convenient payment options, where they can punch in a credit card number—or use a service like PayPal—rather than writing and mailing a check, anesthesiologists can facilitate the collection of the patient balance. In 2009, 64.4 million households paid at least one bill on a bank or vendor website. As noted above, ABC is about to make an online patient payment portal available to our clients.

A complete electronic billing system may simplify the creation of a custom payment plan, if the practice chooses to offer one. Another benefit of such a system is the savings in staff time. Reconciliation costs have reportedly been reduced by up to 40% through internet-based payment methodologies.

Whether the patient receives a paper or an electronic statement, the occasion provides another opportunity to help patients understand their bill and their insurance benefits. Some physicians have inserted in the envelope or posted online a glossary of terms, or a "What to do When You Receive a Medical Bill" brochure that outlines simple options.

In the end, we must remember, we are dealing with something that is painful to many patients and secondarily to their physicians—the shift of financial responsibility for their medical bills from employers and health plans to the patients. No collection system is going to be perfect, least of all in the current economy. As one practice administrator has noted, when they receive a reminder of the balance due, some patients “call to tell us their credit is already bad and they don't care if we send them to a credit reporting collection agency…..most ignore our letter and go to collections."

Sensitivity and sound technology are our best assets. We hope that we can continue educating each other on both.

With best wishes,
Tony Mira

President and CEO