More on Revenue Cycle Management

Revenue cycle, billing improvements trump lawsuits when it comes to collecting

Making the process more palatable for consumers can help to avoid revenue leakage and lawsuits.

Jeff Lagasse, Associate Editor

Over the past few years, a curious revenue strategy has emerged among some hospitals and health systems: suing patients, or garnishing their wages, to collect revenue.

Virginia was in the spotlight earlier this year for that reason. Researched published in JAMA in June found that not only are lawsuits a common debt collection strategy among hospitals in the state, but more than 70% of Virginia's healthcare facilities that garnished wages were nonprofit.

These hospitals cite lawsuits as a "last resort," but the practice has still generated negative press -- which is never good in an era where patients are becoming increasingly empowered as consumers. Brand reputation matters, and patients are likely to go elsewhere for their healthcare if they perceive a hospital or health system to be unfriendly to consumers.

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That creates a difficult situation for these hospitals. They don't want to be entangled in a public relations nightmare, but ultimately they can't operate without a strong bottom line.

"Hospitals and healthcare providers in general are facing tremendous pressures," said Matt Hawkins, CEO of Waystar. "They're already operating on razor-thin margins, so there's lots of things going on in a typical hospital that are impacting them.

"In some cases they're losing patient traffic to more inpatient-type care," he said. "There are constant changes in insurance rules and coverage. And the other one that really stands out is that more and more of the patient's bill, or the total cost of care, is being borne by patients as high deductible plans kick in, and patients are more responsible for their portion."

It's this last area where Hawkins sees an opportunity for hospitals to avoid the morass of lawsuits and wage garnishments, which can be an ugly practice for any business. The technology now exists to make the patient's billing experience better, and providers can take less drastic measures to collect needed revenue.

That alleviates two problems: bad PR, and the ongoing issue of revenue leakage.


Revenue leakage causes significant problems, with one McKinsey analysis claiming that for every dollar in revenue, 15 cents are gobbled up by inefficiency or bad debt.

But in an age of technological innovation in healthcare, there now exists technology that can help health systems and patients understand patient financial responsibility based on more accurate estimates of the total cost. If a hospital or health system knows the approximate reimbursement for a claim, it can determine through insurance eligibility verification what the patient share will likely be.

"That would be a very powerful thing," said Hawkins. "To deliver that to a patient at the outset of the experience would be very helpful."

Patients who understand their financial responsibility early in the process are much more likely to pay, thereby reducing the problem of revenue leakage. Snags can come in the form of hidden bills or things that were unanticipated -- which Hawkins said is an indication that the system doesn't have a true handle of its own cost structure.

In addition to better estimating patient responsibility, algorithms can also be leveraged to determine who qualifies for charity care, and who's more likely to pay, which can streamline how providers care for their patients in a financial sense.

"Patients are conditioned to let the insurance engine kick in," said Hawkins. "Oftentimes that means a claim will be filed on behalf of a patient, and the long tail of adjudication will kick in. That can take upward of 90, 120 days. It's a very non-consumer-friendly experience. We're at the end of 120 or 180 days when you ultimately find out what your bill is. You oftentimes forget what your bill is for."

That wait time can be truncated significantly by providing claims in real time, which brings with it a greatly accelerated adjudication process that can provide relevant information to the provider and the patient at the point of care.


Certainly, much can be achieved through technology and automation. But to truly stanch any financial bleeding -- and to avoid the drastic measure of taking patients to court -- a deeper change may be needed, ranging from outsourcing billing to a broader transformation of the business culture.

"In the event there's a long trail of claims adjudication and someone does slip through the cracks, oftentimes hospitals will outsource their billing to a collection agency," said Hawkins. "You can engage with an agency to prioritize the urgency of claims to be collected, and factor out the bills that could qualify for charity care."

And by tracking patients and potential revenue based on the services they're providing, that brings a provider one step closer to creating a single bill -- a unified, simple and easy-to-understand bill that reflects the consumer experiences common to other industries.

"It's not just implementing technology that's required," said Hawkins. "It's more like, what are you doing to transform your business and put the patient at the center as a consumer? There's transformation thinking required. It's a mindset shift, to be able to transform the way you think about a departmental view of your health system.

"Every healthcare decision-maker hopefully wants to provide a great experience to the patients," he said. "The future means putting the patient at the center."

Twitter: @JELagasse

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