The X Factor in Anesthesia Collections

When the Medicare program was established, a decision was made to implement a payment methodology that had been developed by Blue Shield. For each case submitted, an allowable would be determined based on the base value and the time units billed for the case. Actual payment to the provider would be reduced by two factors: an annual deductible and a patient responsibility, typically about 20 percent of the allowable. For the most part, commercial payers have adopted this methodology. While it is quite easy to calculate the allowable based on contract terms for most plans and while the patient portion is typically 20 percent, the impact of the deductible is much more difficult to predict because it is specific to each patient's plan and coverage. It is essentially the anesthesia collections X factor.

Conventional wisdom suggests that commercial insurers have been increasing the amount of patient deductibles in an effort to manage the cost of premiums. The assumption is that these increases will have the impact of shifting a significant portion of the cost of healthcare to the patient. While this may be true at a high level, the actual impact on individual patient bills is quite different. The reality is that there are three dimensions to the impact of deductibles on collections. Assessing the combined impact of all three over time does not necessarily change our conclusion as to the significance of deductibles, but it clearly highlights some of the subtle nuances that determine how much of the allowable is actually collected. Why does this matter? As we all know it is much easier to collect from the insurance than the patient. Here are the three dimensions in a nutshell:

· The percentage of patients that have a deductible

· The amount of the average deductible

· The amount patients pay against this responsibility

For purposes of this study, we have identified three major PPO plans: Blue Cross of California, Blue Shield of Illinois and Independence Blue Cross of Pennsylvania because they are large plans that are representative of the policies of commercial payers across the country. Medicare plans follow most of the same rules but the financial impact is much less significant to the average practice. Medicaid payments typically do not involve deductibles or co-payment. We compared the impact of deductibles over a three-year period: 2018 through 2020. It will be interesting to track the trends identified into 2021, but this is not possible at this time because it is only when claims are fully adjudicated that we know what the deductible and co-insurance amounts are. For each plan, we aggregated data from five clients.

Patients with Unmet Deductibles

We tend to think of deductibles as a first-quarter phenomenon. Typically, each January, deductibles get reset. The fact is that deductibles apply when patients first start to incur medical expenses, which could be at any point in the year. It is true that the majority of deductibles apply early in the year, but they are clearly an ongoing phenomenon. For purposes of this study, we have simply taken the overall impact year over year. It is one thing to measure the total number of patients who had a deductible responsibility each year, but to be useful, the data needs to be normalized; that is, we need to determine what percentage of claims were actually subject to a deductible reduction.

This chart demonstrates just how much variability there is from market to market. In California and Pennsylvania, the percentage of patients with unmet deductible responsibility has increased year over year, while, in Illinois, it has gone down. It is also clear that the percentage of anesthesia claims impacted by deductible depends on the plan; fewer IBC patients have deductibles than in California or Illinois.

Average Deductible Responsibility

As indicated above, not all patients have a deductible. The table below only indicates the average deductible for those patients who had a deductible. As the chart indicates, these values tend to be more consistent across these plans. These are significant numbers, though, because these are the amounts that patients must pay on their own, unless they have some form of secondary coverage. To put this in perspective, the average American household does not have enough savings to cover an emergency expense of $500.

These values have fluctuated over the past three years based on a number of factors. Significant among these has been the impact of endoscopy because the average units per case (6 units) tends to be much less than the typical surgical or OB case (12 to 16 units). The main point here is that even though patient deductibles may have increased at the policy level, they have not changed much at the anesthesia claim level.

Patient Payments

From a collections perspective, what really matters is how much of the patient responsibility, both deductible and co-payment, gets collected. As the chart below indicates, this is typically between 60 and 70 percent. There is also some evidence that last year was a more difficult time to collect patient money because of the pandemic, although the overall impact was not quite as dramatic as one might have expected. Most practices saw a strong recovery in the third and fourth quarters.

There are three main reasons that we cannot collect 100% of the patient responsibility. First, too many patients simply assume that this is what they have insurance for and refuse to take responsibility for their portion. Second, many do not have the funds or the financial ability to pay. And third, payment for their anesthesia bill is low on their list or priorities, since they typically do not know their anesthesia provider. Rent, food and transportation come first. As much as we would like it to be otherwise, these are the inevitable realities of American healthcare.

Unfortunately, there is no silver bullet when it comes to collecting money from patients. Even with deductible strategies used to delay claims to avoid or lessen deductibles, with the increase in patient deductibles year over year, avoiding the deductible all together has become more challenging. Inevitably, some of these balances end up being sent to a collection agency to pursue. Some practices have had success in some offices and ambulatory venues collecting pre-payments for specific types of cases, such as dental or cosmetics, but this does not seem to be a strategy that most practices can apply in a hospital setting. The reality is that at this level, practices are very much captive to the economics of their local market. Unemployment and financial insecurity are critical factors.

If you would like an analysis of deductible trends on your practice, please contact your account executive or email us at info@anesthesiallc.com.