Self-Pay Cash Flow: 5 Ways to Ensure You Don’t Have It

Today, I read an article written by Rene Letourneau, for HealthLeaders Media, which identified the top revenue challenges as identified by several revenue cycle executives. Not surprisingly, the first challenge listed had to do with self-pay cash flow. H. Jeffrey Brownawell, Chief Revenue Officer at Memorial Hermann Health System, Houston, TX, said that more cash needed to be collected, particularly up front. According to the article, Brownawell said, “As an industry we haven’t done that as well as we should have. We’re trying to look at how our process can be more efficient up front. On the hospital side, you need to collect money up front because the likelihood of collecting drops if you don’t.” Room for improvement is recognized by all revenue cycle executives, but, as Brownawell admits, the nature of emergency services makes it especially challenging as hospitals are obligated to stabilize everyone who walks through the door. And most patients are not in a financial position to write a check at discharge to cover all—or even half of—their out-of-pocket costs, insured or not.

So, does that mean a hospital does nothing and hopes that those who can and will pay will cover for those who cannot—or do not? No, of course not. But some facilities are still lamenting their pitiful self-pay cash flow while doing very little to move the needle in the other direction. How did they get to this point? Let’s review:

1. They never ask for a down payment before the patient leaves the facility because they don’t want to upset an already stressed patient. Never mind that what you collect at discharge may be the ONLY money recovered from that patient for the services you just rendered. Remember, there is NO other business that routinely let’s customers walk out the door without paying. It is the hospital industry that has allowed this practice to shape the expectations of the buying public and the sooner those expectations are changed to “payment expected at time of service” the sooner self-pay cash flow will improve. And it isn’t only the public who needs to understand the importance of payment expectations. It is not unheard of for so-called compassionate clinical staff to show a patient out the back door so the patient can avoid the discharge desk. Clinical staff should understand that this is neither compassionate or acceptable.
2. They don’t screen patients for public benefits like Medicaid or financial assistance while they’re still in the facility—or within a day or two thereafter. Once the patient leaves the facility, the importance of the bill in the patient’s mind dwindles with every passing day. Most patients who qualify for Medicaid or financial assistance do not know they meet the requirements for public benefits or financial assistance until they are screened. While Medicaid doesn’t pay much, it pays better than nothing and financial assistance looks a lot better on a financial statement than bad debt.
3. They don’t have payment policies that encourage payment quickly.The concept of the time value of money is a long held pillar of finance that is still respected today. While most patients won’t be able to pay in full even with a 20 percent (20 percent as an example) discount, some patients will be motivated to find the money from somewhere—from a friend, charge card, or savings account. Would you rather have 80 percent of the money owed today or wait for what could be months to get your money? Remember, there is a negative correlation between the importance of the bill in the patient’s mind and the lapse of time after discharge. The other factor to consider is the possibility that unforeseen expenses could take precedence over your bill that would divert what you would have received to someone else.
   And, if a patient cannot pay their balance in full utilizing a discount perhaps they can pay in 90 days without a discount. They may find their motivation to pay in 90 days increases if their next option is an interest-bearing extended payment arrangement.    
4. They don’t offer patients the opportunity to pay their patient debt over time in a term-limited, interest-bearing agreement. But, let’s be real. A person who makes $40,000 a year with a $10,000 balance is unlikely to be in a position to pay their balance in full even with a discount. They need time. They also need motivation to put your bill on the top of the pile. If you offer the patient an interest-free payment option, you risk the possibility that the patient will put more pressing bills ahead of yours. Interest, as long as it isn’t set at a predatory rate, is a friendly reminder that you, the facility, care about the bill and that they should, too.  
5. They allow self-pay account balances languish in perpetuity on the A/R because patients are permitted to pay their $8,000 debt every month–$15 at a time. Sure, they’re paying. Perhaps they’re paying just enough to keep you from sending that account to collections. Perhaps they’re telling you that $15 is all they can afford. But in truth, these accounts are costing you money—more money than you’re getting from them. They’re costing you money because time is passing. They’re costing you because you haven’t established—and committed to—patient payment options that encourage prompt payment and sets standards for what your facility considers acceptable.

Take a moment to consider your hospital’s situation. Is your hospital working to change the expectations of your own staff as well as the public? Are you willing to establish—and commit to—a financial assistance and payment policy that is compassionate while protecting your hospital’s financial interest? Contact the Midland Group today and see what we can do for you.