How Uncompensated Care's Financial Threat Can be Mitigated

By providing more payment options and moving away from a "one-size-fits-all" collections approach, one Florida hospital is making progress toward managing the revenue leakage that comes with self-pay patients.

Providing too many services that don't get reimbursed is a recipe for financial disaster for hospitals and health systems. And as more patients move into health plans with a significant self-pay portion, uncompensated care is a growing threat.

"There are lots of areas of revenue leakage, I would call it, as it relates to the services we provide where, unfortunately, we don't always get paid," says Jeffery D. Hurst, senior vice president of finance at Orlando-based Florida Hospital, a not-for-profit health system with eight hospitals and 22 campuses throughout the state.

Hurst cites uncompensated care as Florida Hospital's top revenue challenge over the past several years and says he expects that trend to continue, thanks in large part to high-deductible health plans.

"We have had some relief in terms of the number of patients who were previously uninsured and now have insurance or some type of coverage, predominantly through the open enrollment of exchange products. However, the challenge is that a lot of those patients now have a $3,000 or a $7,000 out-of-pocket obligation. In theory they are technically insured, but until they satisfy that out-of-pocket cost, they really don't have insurance," he says.

Creating Better Patient Engagement

In an attempt to prevent leakage, Florida Hospital has upped its efforts to engage patients in conversations about their medical bill, Hurst says.

"I think uncompensated care will continue to be a challenge for us over the next several years, but it also creates an opportunity for us in the age of consumerism to elevate the conversation and elevate the relationship with patients and to be more proactive and educational in our approach. We are creating collaborative relationships with patients."

Part of that collaboration, Hurst says, is to provide more payment options and to move away from the "one-size-fits-all" approach Florida Hospital has taken in the past to its collections process.

"We have a sophisticated workflow in place to stratify and segment populations based on things like credit worthiness and insurance plans and that has worked fairly well for us. However, when it came to the point of having a conversation with the patient it was still just one approach. They had to pay it all in full. Now we are giving patients different options and letting them choose what works best for them, and that is creating better relationships," he says.

For example, the organization is working with "an external third-party strategic partner to offer zero-cost, zero-interest payment plans" to patients who have a desire to pay but may not be able to write a check for the entire amount at one time, Hurst says.

"Up until a year ago, we were still charging interest on patient payment plans. [Our strategic partner] recommended that we really needed to move away from charging interest. We should have recognized this previously because for the population we are dealing with, the dollars that are involved are often significant, so layering or adding interest on top of that creates more of a financial burden," he says.

"We are shifting the conversation, which has typically been focused on collections, to one that is about resolution and helping the patient find the best payment option for them… We are being more flexible and offering more options and moving away from things like interest-bearing loans so that we are not providing any disincentives for payment."

The results of this heightened level of patient engagement have been significant so far. For example, from 2010 to 2014, by working with patients through its financial assistance program, Florida Hospital has dropped its bad debt as a percentage of total uncompensated care on its uninsured population from 6.5% to 2.9%. 

"In relative terms, we have reduced our bad debt by over 50%," Hurst says. "That's good for us and good for our patients."

Aligning Financial and Clinical Priorities

Another critical component to protecting the bottom line from revenue leakage is to develop what Hurst calls a "clinically aligned revenue cycle."

"In much the same way that we've focused on engaging with patients at a higher and better level, we are also doing the same thing with the level of engagement between our financial team and clinical team," he says.

Florida Hospital's care management team has reported up through the finance side of the business for about 25 years—something that has gone a long way toward aligning goals within the organization, Hurst says.

"On the inpatient side, it's looking at capacity, throughput, and the efficiency of workflows. It's really a triad model with our physician team, nursing team, and care management team to improve clinical outcomes and the efficiencies with which we are providing care," he says.

"A lot of what our care managers do today focuses on the appropriateness of admissions, the appropriateness of discharge, on patients who need post-acute care and on making sure they are going to the right care setting."

On the outpatient side, roughly 45% of patients who present in the emergency department are in need of services that could be provided in a lower-cost setting, Hurst says. By redirecting patients to alternate locations, care managers are helping Florida Hospital reduce the overall cost of the care it provides. Additionally, providing care at lower-cost sites means fewer dollars are at risk of non-payment.

"We have care managers in the ED, not only to monitor the appropriateness of admissions but… to try to do more with the uninsured, the working poor, and the Medicaid population to get them access to alternative care sites so they can get the care they need at the right price for them and, quite frankly, at the right price for us," Hurst says.

The Importance of Leading by Example

To mitigate the financial risk of uncompensated care and to meet other pressing organizational objectives, it's crucial to have a culture of teamwork and cooperation where everyone is working toward the same goals, Hurst says, noting that the best way top executives can achieve this is to set the example.

"I am very blessed that I have a very good relationship with our chief medical officer and chief clinical officer. I have been ordained, if you will, as an honorary member of our clinical team even though I am a finance guy. It starts at the senior level of the organization and those senior leaders have to lead by example, including your physician leadership," he says.

"By having that type of relationship at the senior level, it disseminates down to our teams and to the front line staff. It sends a very strong message and fosters a collaborative relationship."