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Using Data to Stop the Bleeding: How Hospitals Can Lower Uncompensated Care

March 14, 2017

Hospitals across the country face a double-edged sword when it comes to providing quality, affordable cancer care. On the one hand, cancer has become one of the most expensive medical conditions to treat. From chemotherapy to inpatient procedures, medical costs have soared over the past decade. At the same time, the rise of high-deductible insurance plans means that patients are required to pay a growing portion of their expenses out-of-pocket. According to a report by the Advisory Board, patients are unlikely to pay medical bills that are more than five percent of their household income. Consequently, hospitals are finding it harder and harder to collect their patients’ bills.

 

Hospitals now face higher levels of uncompensated care. Medical centers across the country are feeling the pressure. According to the American Hospital Association, 1 out of 3 hospitals is fighting to survive. The problem may worsen with the repeal and replacement of the Affordable Care Act, which would leave 24 million people uninsured in the next decade, largely by cutting Medicaid enrollment. (More on the proposed American Health Care Act and its implications in our next blog post.)

 

 

So, what can hospitals do to address this growing economic burden?

Above all, they must proactively communicate with patients about the costs of care, identify sources of financial assistance, and develop strategies to collect payment prior to or at the point of service. Research has shown that these actions can significantly improve patient satisfaction as well as payment collections.

 

Now the question becomes, how can hospitals take these proactive steps?

The answer lies in leveraging the power of the data to analyze the sources of uncompensated care. Once the causes are clear, hospitals can “stop the bleeding” by helping patients find available aid. Fortunately, there is a great deal of data to mine, including medical, insurance, and billing records. Here are just a few of the different lenses through which hospitals can examine this information:

  1. Payer mix: By looking at uncompensated care within the context of patients’ payment source—whether Medicare, Medicaid, self-pay, or private insurance—hospitals can determine where patients are struggling to pay their bills. For example, a recent study showed that cancer patients with Medicare face high out-of-pocket costs that are significant financial burden. Another study found that self-pay patients have a lower propensity to pay for medical services.

  2. Diagnosis: Patients’ financial obligations also vary based on the type of cancer they face. Examining financial data based on diagnosis can offer deeper insights into the price of services, patients’ out-of-pocket costs, and average uncollectible amount per patient.

  3. Service type: Just as payment source and diagnosis impact a patient’s ability to pay, so too does the type of service the individual requires. For example, the Advisory Board found that while inpatient surgical procedures resulted in a greater amount of bad debt per case, total uncompensated care was higher for outpatient services.

Example of average cost and collection per cancer site

 

By analyzing data within these and other contexts, hospitals can shed light on the causes of their uncompensated care.

 

The next step is to find solutions that will reduce patients’ financial responsibilities, which will, in turn, ease the pressure on the hospital. In our case study, a 3,000-patient hospital had $5.8 million of bad debt, accounting for 8% of their annual revenue. The hospital examined its uncollectible amounts for high-cost drugs and then identified top assistance programs for these medications. The potential cost savings were over $1 million. This is just one example of how hospitals can use their records to uncover significant savings opportunities. Other methods include optimizing patients’ insurance, enrolling them in government programs, and more.  

Example of potential cost saving from drug assistance programs

 

In this era of uncertainty and upheaval, hospitals must take advantage of every available resource. They can’t afford to sit back as bad debt continues to mount—nor can cancer patients continue to pay astronomical bills until their treatment becomes cost prohibitive. Hospitals can and should harness the data at their disposal to get to the bottom of their patients’ financial struggles and reduce economic distress. The time to stop the bleeding is now.

 

Srulik Dvorsky

Founder and CEO, TailorMed

 

 

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