Medical care: Cash on delivery, please

By Jonathan Nelson

The advent of high-deductible health plans leaves patients confused about their coverage and their financial responsibility and physician practices awash in bad patient debt.

Not long after the start of 2009, family physician Justin Bartos, M.D., realized something was seriously wrong at his Tarrant County practice. Revenue for January had dropped 20 percent below where it was at the same time last year. “That’s one of our biggest months of the year because in primary care, that’s the flu season,” Bartos says. Suddenly the alarms went off, as he puts it, and he and his partners began scrambling to find out what had happened.

The answer: Many of their patients had switched to high-deductible and consumer-directed health plans, or CDHPs. “I think a lot of companies changed their plans in 2008, and so when January 1st rolled around, everyone had new insurance and nobody quite knew what was covered and what wasn’t. Suddenly we’ve become the entity that has to figure out what the patient owes at the time of service.”

That’s a problem because the plans don’t offer a way to adjudicate the claim while the patient is standing at the cash register. The physician submits the claim and waits for days, sometimes weeks, and the patient is long gone, having paid nothing for the medical care rendered. When the physician receives the statement from the insurer, there’s no payment attached because the patient hasn’t met his or her deductible. Now it’s up to the physician to bill the patient and hope he or she pays. “So there’s a huge delay in our collections and consequently our revenues are substantially down.”

Bartos says the short-term solution for his six-physician practice involved assigning two and a half full-time employees the task of verifying insurance benefits and finding out what patients will owe before they come in for appointments. “Now for us, even on a low-end pay scale, with salary and payroll taxes and benefits, that’s $35,000 a pop easy. So we’re talking about almost $100,000 of additional expense to operate trying to figure out what we should be collecting at the time the patient comes through the door.”

With the growing enrollment in CDHPs and other high-deductible plans, doctors like Bartos have to take on the role of bill collector as patients find themselves forking over much more for their care out of their own pockets. According to a February 2008 report by Celent, an international research and consulting firm, an average of 12 percent of physician revenue comes from direct patient payment today. By 2012 the report predicts that number to be 30 percent.

That increase is supported by the swelling wave of employers shifting to lower cost, high-deductible plans of all sorts. The latest study by Watson Wyatt and the National Business Group on Health shows that 51 percent of U.S. companies now offer consumer-directed health plans, up from 47 percent in 2008. Another 8 percent of companies report intentions to offer CDHPs in 2010.

Individuals covered by CDHPs who qualify for a health savings account carry an average annual deductible of $2,010. For families covered by HSA-qualified CDHPs, the average deductible is $3,911. Those large deductibles aren’t just for catastrophic plans anymore. A recent Mercer report shows that the median deductible for employer-sponsored PPO plans jumped to $1,000 in 2008, an increase from $500 in 2007.

The most recent survey by the Kaiser Family Foundation shows 18 percent of insured workers have deductibles of at least $1,000, up from 10 percent just two years ago. For insured employees of small companies, that number jumps to 35 percent.

If physicians can’t determine what patients with these plans owe at the point of care, the patients leave without paying anything. Physicians have to wait to send the bills until the health plan adjudicates the claims. That process can take weeks and the likelihood of getting paid diminishes as the clock ticks. The McKinsey Quarterly reports that physicians only collect about 50 percent of the patients’ portion of the bill, adding up to about $60 billion in bad debt each year across the entire health care system.

“When we’re relying so much on the revenue that’s billed directly from the patient and we don’t collect it up front, it is a very difficult process to get it later,” Bartos says.

Problems for patients

Patients covered by these complex plans are often unaware of what services are covered, what charges will apply to their deductible and how much of their deductible they’ve spent for the year. Physicians often find themselves in the awkward position of trying to help patients understand the limits of their health insurance coverage. But physicians don’t have any way to know for sure whether a particular service is covered, how much the policy will pay and what the patient’s financial responsibility will be. That leaves patients confused and angry, and it means their physician doesn’t have the appropriate information to talk to them about different treatment options and the relative costs of those options.

Janet Hurley, M.D., a family physician in Whitehouse, just outside of Tyler, says the lack of real-time coverage information is a growing problem. When patients come in with the run-of-the-mill PPO plan, they pay their co-pay with confidence that the services provided are covered. “As we’re finding with increasing frequency, that is not always the case,” Hurley says. As the insurance market offers new lower-cost products to employers, patients are realizing that their benefit packages are shrinking even as their out-of-pocket costs climb. “We may find that a simple office procedure we perform that we thought was not going to be a problem actually ends up being billed toward their deductible. In fact, that’s really not fair to the patients because certainly you would want them to know what their upfront costs would be ahead of time,” she says.

Take the case of an ancillary test, say an imaging test that Hurley decides a patient needs right away. One of her nurses will probably have to spend as much as an hour on the phone with the insurer trying to secure authorization. “If we don’t follow that procedure very closely and make sure that we truly do cross that ‘t’ and dot that ‘i,’ then our patient may end up with a significant amount to pay out of pocket.”

Bad for business

“That’s no way to run a business,” says Connie Baron, former TMA lobbyist and nationally renowned expert on managed care. Baron is providing consulting services to TAFP during the 81st Texas Legislature. “Normally, when you walk in to receive any other kind of service, you know exactly what it’s going to cost you,” she says. “And if you’re the provider of that service, whatever it is, you know what to charge and you’re going to collect that at the time of service.”

Without the ability to access instant verification of benefits and payment estimates, doctors often provide care for patients without collecting any money. “Some insurers actually contractually prohibit a physician from collecting from the patient until the claim has been settled and the doctor gets the information on the back end regarding what the patient’s responsibility is,” she says.

Apart from choking off physicians’ cash flow and inflating their receivables, Baron claims the added administrative hurdles in the processing of claims actually adds cost to the health care system. Here’s how it works. The patient sees the doctor, receives medical care and pays nothing at the end of the visit. The physician submits a claim to the health plan. The plan then sends a notice to the patient that a claim has been filed. The plan sends a notice to the physician describing how much the patient will owe, along with any payment the plan owes. The plan sends a notice to the patient of how much he or she might be billed by the physician. The physician bills the patient and the patient pays the bill.

“This may be four to six weeks if they’re lucky down the line, possibly six months,” Baron says. “The patient’s already forgotten about that doctor’s visit by the time they get the bill from the doctor.”

These problems are multiplied by the number of insurance plans physicians accept. Jorge Duchicela, M.D., practices family medicine in a three-physician group in Weimar, a small community along Interstate 10 between San Antonio and Houston. Their practice maintains contracts with about 200 different health plans. “Even though we have a computerized system for billing and scheduling, and an electronic health record—we have invested in that—we still have a difficult time knowing how much a patient is supposed to pay us at the time of a visit,” he says.

If that information were available electronically, Duchicela and his partners would not only know what to bill and be able to collect it then and there, but they would be empowered to have meaningful discussions about various treatment options and their relative costs with their patients in the exam room. “We don’t have that now,” Duchicela says, “and to us, it’s a huge burden.”

Setting a standard

A bill currently working its way through the Legislature could help physicians and their patients easily access insurance information during the patient visit. House Bill 1342 by Rep. José Menendez, D-San Antonio, and its companion, Senate Bill 863 by Sen. Chris Harris, R-Arlington, would require health plans to provide instant verification of benefits, including what services are covered, the amount of the patient’s deductible and any co-pays or co-insurance, and an estimate of the patient’s financial responsibility, at the point of care. The measure would also prohibit plans from contractually blocking a physician’s ability to collect payment from the patient before full adjudication of the claim.

In an interview for TAFP’s video news webcast, Capitol Report, Rep. Menendez said the measure would improve the interaction between doctors and patients by removing unnecessary steps in the payment process. “You know, with the technology we have today, it’s just a matter of getting some computer systems to talk to each other,” Menendez said. “The health insurance companies have to know what their insurance provides, what their coverage provides, and I’m sure that with a simple identification number, they know what each patient’s deductible is, what their co-pays are. So if they have that information, why can’t they share that information with the doctors?”

In crafting the bill, TAFP worked closely with the Texas Association of Health Plans and several major insurers. TAHP Executive Director Jared Wolfe understands that to maintain a stable cash flow, physicians need to be able to collect payment from patients when the care is given. “I think it’s also something from the plans’ perspective that we see as a service we can provide and something I think people should reasonably expect that we can provide,” he says. “From that perspective, it’s a unison of good policy and good politics for us.”

Wolfe says the marketplace is reacting to physicians’ information needs and evolving to offer workable solutions. “For a while there, it seemed like everybody who had a pulse or could fog a mirror had their own little version of what they could sell to physicians on this and I think it’s starting to come into focus now,” he says. “You’re starting to see standards in place and some large groups that have been successful translating this into actual practice environments.”

Many of the big health plans offer some form of online benefit verification through webportals for their major products. Cigna is launching a new online cost of care estimator this spring. Blue Cross and Blue Shield of Florida and Humana launched Availity in 2001, which offers instant eligibility verification and real-time claims adjudication for some plans, and other products like TriHealix—which recently changed its name to TransEngen—and athenahealth contract with health plans and data clearinghouses to offer a host of real-time information to physicians. For example, TransEngen can provide doctors with eligibility verification, actual deductible amounts and an estimate of the patient’s out-of-pocket costs for more than 400 health plans.

Bruce Lowder, president of Austin-based Med Solutions, calls it the “retailization” of health care. He says physicians need tools that help them turn mounting bad patient debt into increased collections. “In order for physicians to stay in practice, they’ve got to make some changes and get some help in becoming better business people in terms of running their practices.”

So if there are good products available to provide physicians with benefit information at the point of care, why aren’t more physicians using them? One reason is that the insurance market includes many small low-cost, low-benefit plans that don’t make any attempt to provide physicians and patients with benefit information. With so many different plans offering varying amounts of information through an array of proprietary tools, physicians have been wary to change their administrative processes for an uncertain return on investment. When information is available, doctors are reluctant to submit all of the information for a patient visit through one tool for verification and a payment estimate only to have to submit the claim again for payment.

And those practice administrative processes are a problem, too. Many practices don’t have a workflow in place to code for services and generate a claim while the patient is still in the office. Wolfe hopes that by working with TAFP on H.B. 1342 and S.B. 863 to set a standard for exactly what information plans need to provide, physicians will see the value in streamlining their administrative processes. “I think having some consistency on the plan side will help them in that,” he says.

San Antonio’s Christus Santa Rosa Family Medicine Residency Program realizes the benefit of incorporating instant verification of benefits, according to program director Todd Thames, M.D. With 21 residents and a 10-physician faculty, the program handles 30,000 visits per year with almost 15,000 active patients. “It’s a big practice,” he says, “and it’s also complicated by the fact that it’s a residency program, which has an even higher order of chaos associated with it from a practice-management standpoint.”

Yet they have only one full-time employee dedicated to insurance benefit verification. Thames attributes this efficiency to the instant verification of benefits capability of the program’s practice management software. Front-desk employees who schedule appointments have access to the software, so insurance and eligibility verification begins the moment they receive the first call from the patient. Since the information their system accesses includes an estimate of payment by the insurer plus the patient’s portion, conversations about patient financial responsibility can begin right then.

Since almost half of the program’s patients are enrolled in Medicaid, the software’s ability to determine whether the clinic is a patient’s designated primary care provider is invaluable. For a variety of reasons, Medicaid patients often don’t know to what physician or practice they’ve been assigned, but the program will only pay for care delivered by a patient’s designated primary care provider. With the instant eligibility tool, clinic schedulers know immediately whether a patient will be covered or not.

Thames says they do encounter problems when they can’t get information on small health plans and some of the self-insured plans in the area. That’s the goal for H.B. 1342 and S.B. 863, to set a minimum standard for what information plans must be able to provide at the point of care. The bill’s supporters believe that such a standard will spur evolution in physician practice management software and health plan claims processing operations so physicians and patients will have the information they need to make good, prudent health care decisions.

For physicians like Justin Bartos, it can’t happen soon enough. “I hope that an electronic solution will develop,” he says. “I certainly have invested in the infrastructure to be able to utilize that when it’s available, but it’s really putting us in jeopardy at the present time because our margins are not that huge in primary care.”