Consumer-Driven Health Plans: Latest Challenge to Practices’ Cash Flow

by Tom Hajny^*

The high cost of healthcare is not only depleting the pocket books of consumers, it is killing employers’ bottom lines. The budgetary line item for health insurance costs is so out of control that, unless there is a significant change of course, it is projected to exceed profits by 2008.¹ Employers are frustrated and are looking for a way out of their dilemma. The problem is how do you move away from your historical responsibilities without finding yourself in the middle of an all out employee revolt? Can you say Viva la Revolution?

Employers are hoping a lifeboat—with employee incentives—will be health savings accounts (HSAs), created by the December 8, 2003, Medicare Prescription Drug, Improvement, and Modernization Act. The U.S. Department of the Treasury is touting HSAs as “...designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis.”

An HSA, combined with an insurance product called a high-deductible health plan (HDHP), makes up what is known as a consumer-driven health plan (CDHP). HSAs are owned and controlled by the individual and enable the consumer to pay and save for future qualified medical expenses on a tax-free basis. The HDHP indemnifies the individual from unusually high or even catastrophic medical episodes of care. CDHPs hold the promise to deliver the decisions on healthcare spending to the individual, driving out inefficient or unnecessary services.

It is projected the penetration of CDHPs into the market will explode with 31% of large employers (over 20,000 employees) offering CDHPs by 2007 (up from 12% in 2004). Among employers with 500 or more employees, the projection is 17% by 2007 (up from 5% in 2005). Of small employers, 13% are expected to offer CDHPs by 2007 (up from 2% in 2005).² 

For consumers and employers, HSAs hold out a real promise to ameliorate their problem. For providers, HSAs hold out, yet another, challenge. (See Table 1.)

BAD DEBT EXPOSURE INCREASES 

The first challenge will be addressing the potential for significant hits to a practice’s bad debt experience. Both Fitch and Moody’s credit rating agencies forecast an ever-escalating increase in bad debt directly tied to cost-shifting from employers to employees.³ The current bad debt experience may seem like a fond memory when the full impact of CDHPs takes hold. Table 2 illustrates how dramatically CDHPs will impact the patient/subscriber pocketbook.⁴ 

THE WAYS AND COMPLEXITIES OF HSA BILLING

It has also been noted that HSAs will affect the cost-to-collect expense as ever-increasing resources will be needed to identify payor sources for the self-pay portion.⁵ There are five basic ways HSAs will pay (and practices must bill) for claims:

1. Debit Card. The card allows members to access their HSA funds directly. The card authorizes payment up to the balance in the HSA.
2. Credit Card. The card allows member to access funds, or in the case of an under-funded account, to exercise a line of credit.
3. Checking. Checks are issued specifically for the HSA account. The member would write a check to the provider, limited by the balance in the account.
4. Member to HSA to Member to Provider. In this scenario, the member would first submit charges to his or her HSA, receive payment directly, and then turn around and—hopefully—pay the provider.
5. Provider to HSA. The member would present HSA billing information to the provider for submission to the HSA account, with payment made directly to provider.

The complications arising from identifying HSA type and payment sources, reacting to and developing processes for under-funded accounts, and ensuring follow-up for members submitting their own claims and making payment to the provider will challenge providers in maintaining cash flow while keeping the cost-to-collect expense to a minimum.

OPERATIONAL IMPERATIVES 

To address the challenge of HSAs, practices need to keep in mind that operationally, the challenge of HSAs is really a continuum of addressing the self-pay issue. All the best revenue cycle practices—good, sound financial counseling up-front; time-of-service collections; eligibility; benefit-level verification; patient-friendly billing; and patient communications—now, even more than before, need to be stepped up. Here are seven strategic imperatives practices need to be thinking about.

1. Integrate the CDHP concept into ongoing revenue cycle performance improvement initiatives. HSAs will put more of the decision making into the hands of your patients, and these patients will also be painfully aware of the cost of healthcare—because they will be paying first dollar. Your self-pay initiatives addressing fairness to the uninsured need to encompass the burgeoning self-pay class. There is nothing about HSAs that runs counter to good, consumer-orientated revenue cycle management. At scheduling/registration, obtain a copy of the patient’s HSA card and determine claim submission and payment methodology. (See above.)
2. Collect from the member at the time of service the unmet deductible or, in the case of the member who will bill HSA directly and then, presumably pay the practice, the allowed amount.
3. Get information about your market. Talk with the major employers and insurers in your market and determine how rapidly (and to what degree) HSAs and healthcare reimbursement arrangements (i.e., an employers’ unfunded promise to cover an employee’s out-of-pocket, eligible charges) will come into your service area.
4. Educate practice staff. Discuss the changing market and the shift to more, rather than less, self-pay, and discuss how the practice supports HSA initiatives.
5. Examine your real-time information needs. The ability to tell the consumer, prior to or at the time of service, what a service or procedure will cost is essential. Being unable to do this has hurt practices in their ability to collect self-pay dollars, and has hurt customer and community relations. Develop processes to determine at exit the exact amount expected.
6. Create patient-friendly bills. How will you communicate the full extent of service so the patient has a document verifying this was a legitimate HSA medical expense? Is it more of the same or is there a better way?
7. Establish policies for ease of collection. Credit and debit cards—at the customer’s convenience—will become a necessity. Is your staff trained in working with patients on collecting at time of service?

SUMMARY

CDHPs are here to stay. Employers welcome CDHPs because they drive costs away from themselves and into the hands of both consumers and providers. The consumer will make medical purchase decisions tempered by personal economic considerations. The providers are left to figure it all out with the hope their cash flow, cost budgets, and customer service will not be negatively impacted.

It will not be easy. Practices must become educated on how CDHPs work, become knowledgeable about specific HSA scenarios in their market, develop optimum processes and procedures, and train staff.

Additional articles from The Journal of Medical Practice Management:

• 10 Ways to Give Your Office a Face-Lift
• Age to Age: Insight into Managing a Multigenerational Staff
• Better Off Alone? Why Physicians Don’t Merge
• Educate Patients on Billing Policies to Improve Your Bottom Line
• How a Successful Litigator Decides Whether or Not to Sue You
• How to Perform Your Own Practice Operational Assessment
• Practice Management Secrets: Get Personal with Customer Service
• Self Assessment for Practices Considering Electronic Medical Record Systems
• Six Elements for Creating a Framework for Employee Motivation and Performance
• Why Your Practice Must Do Background Checks
• Working with Patients with Physical Disabilities

1. McKinsey and Company. Will health benefit costs eclipse profits? The McKinsey Quarterly Chart Focus Newsletter. September, 2004; www.mckinseyquarterly.com/newsletters/chartfocus/2004_09.htm.

2. Simmons J. The shift to consumerism: HSAs. HealthDecisions. org; January 31, 2006; www.healthdecisions.org.

3. Covington S, Moore T Jr. Hazardous Healthcare: The Impact of Health Savings Accounts on Minnesota Healthcare. Service Employees International Union Local 113; March 2005:9.

4. Welle-Powell D. HSAs: friends or foes? MGMA Connexion. February 2006;6:9.

5. HFMA Roundtable. Consumer-Directed Health Care: What Will It Mean For Your Business Office? Westchester, IL: Healthcare Financial Management Association; May 2006.

Reprinted with permission from The Journal of Medical Practice Management, Copyright Greenbranch Publishing, (800) 933-3711, www.mpmnetwork.com.

*Vice President, Health Payment Systems, Inc.; phone: 414-271-5700, ext. 105; e-mail: thajny@hps.md. Copyright © 2007 by Greenbranch Publishing LLC.