Reform-created Patients Drive Revenue, Challenge Collections

When state health insurance exchanges began operating in January, family physician Samuel DiCapua was cautiously optimistic about the impact on his practice. While the exchanges offered a source of new, commercially insured patients that could boost his practice's revenue, they also presented a potential cash flow problem.

"Because of the 90-day grace period that patients get to pay their first premium, there are two months where I may be billing an insurer but the patient no longer has that insurance because he failed to pay the premium," says DiCapua, part of three-physician Wells Family Practice in Wells, Maine. "It's inefficient and slows down your cash flow, which is extremely important for a small practice."

The looming threat of bad debt is one potential effect of the reform law identified in this year's PayerView report from Watertown, Mass.-based athenahealth, a provider of cloud-based practice management services that compiles an annual ranking of insurers on how well they work with providers.

*See the top-five payers nationally, and broken out by region here. Also visit athenahealth.com for complete PayerView rankings, and view an infographic from athenahealth.com.

The company examines data from millions of claims it processes for medical clients nationwide. It runs the data through an algorithm it developed, measuring payers' efficiency according to several metrics.

According to the report, many practices may be faced with heavier collection burdens due to an influx of patients with high-deductible plans purchased through health insurance exchanges.

"We thought ICD-10 was the big existential threat, but the provider collection burden from self-pay patients is the bigger story this year," says Todd Rothenhaus, athenahealth's vice president and chief medical officer. "It could be dramatic."

To survive a potential influx of patients from exchanges as well as expanded state Medicaid programs, practices must focus on a few key areas, Rothenhaus and other experts say. Communicating and working with patients on financial responsibility; monitoring a practice's payer mix; and managing billing and collection processes will be essential to staying profitable.

Impact of state exchanges

Like DiCapua, many office-based physicians are concerned about the effect of a regulation in the reform law that gives exchange patients a 90-day grace period to pay their first premium but does not require insurers to reimburse claims submitted after the first 30 days if the patient fails to pay - shifting the burden of collection and potential loss to physicians.

"Our members are very concerned about that possibility," says Reid Blackwelder, president of the American Academy of Family Physicians."If you're bringing in more patients who are newly insured through the exchanges you can verify that they've filled out the paperwork but you don't have information about whether or not they've paid their premiums."

Preliminary data suggest those fears may be well founded, according to the PayerView report. Major exchange payers Aetna, Humana, Wellpoint, and Blue Shield of California reported that 20 percent of enrollees in exchange plans failed to pay their first premiums in the first few months of the year.

Even if exchange-based patients continue to pay their premiums, physicians must take on a heavy collection burden with high-deductible plans, says Rothenhaus.

"In the early months, until they've exhausted their deductible, patients who purchased plans through state exchanges are paying the same amount of cash out-of-pocket as self-pay patients," he says. "Self-pay collections [are] probably the new battleground for the next two to three years."

To gauge their risk, providers may want to look at more detailed data on the provider collection burden of prominent payers in their region, says Rothenhaus. Geographic variations can be significant - Blue Cross Blue Shield (BCBS)-Texas, for example, expects providers to collect more than 25 percent of allowed charges vs. BCBS-Rhode Island which asks providers to collect 10 percent.

Physicians should also pay close attention to whether specialists in their referral network are participating in the exchange networks, says P.J. Cloud-Moulds, owner of consulting firm Turnaround Medical AR Recovery. For example, some insurers have narrowed their network of providers for plans purchased through exchanges but failed to make that clear to providers or patients.

One of Cloud-Moulds' clients, a physical therapy office, only became aware of the issue after claims started coming back processed as out-of-network. They've since learned to look for certain group numbers and alpha-prefixes on insurance cards that identify plans purchased through exchanges so they can alert patients prior to a visit that they will be charged out-of-network rates.

"The confusion we're seeing among both physicians and patients in regard to referrals is sadly nothing new and the problem may be exacerbated by the narrowing of networks in the new insurance marketplace plans," says Blackwelder. "Some of the confusion stems from inaccurate provider directories, so providers and consumers alike need to be careful and search the network for a particular plan and look to see if their provider is in it."

Managing your payer mix

Depending on location, physicians may see an influx of patients from expanded state Medicaid programs as well, which could also hurt cash flow if not closely monitored. According to PayerView data, Medicaid takes much longer on average to pay claims (46 days in accounts receivable vs. 27 days for non-Medicaid insurers) and has a higher average denial rate (18 percent vs. 7 percent) than other payers.

"Medicaid traditionally pays about two-thirds of Medicare rates, on average, and tends to underperform in terms of turning around payments," says Blackwelder. Physicians may be especially wary of expanding their Medicaid population because of an ACA regulation set to expire at the end of this year that brought Medicaid payments for preventive services up to Medicare levels for two years starting in 2012.

"It's unlikely that physicians will now open their panels to bring in more Medicaid patients knowing that at the end of the year the payment will go back to being so low that you actually lose money taking care of those patients," says Blackwelder.

Physicians should track their payer mix to ensure that their Medicaid population stays at acceptable levels, typically 25 percent or less of the total panel size of an average primary-care practice, experts say. By keeping close tabs on Medicaid enrollment, practices can move to stop accepting Medicaid patients at a certain threshold.

"If you're substituting better paying commercial patients with Medicaid patients, that's going to cause some problems in your operating budget," says Jeffrey Milburn, a consultant with the Medical Group Management Association. "You need to know how many new Medicaid patients you can bring in without jeopardizing the practice."

Constant tracking and awareness of your operations goes a long way toward preventing eventual cash flow problems, adds Milburn.

"You need to monitor the payer mix and denials very closely from the beginning, not wait six to nine months and then realize you don't have enough money in your checking account to pay your staff," he says.

Communication is key

Clear communication with patients upfront is more important than ever as new patients enter the practice, experts say. Make sure the front-office staff verifies coverage before the time of the visit and talks with patients about their financial responsibility.

"We try to be as transparent as possible and make sure people understand what they're responsible for," says DiCapua. "It's extremely important to set expectations from the beginning."

DiCapua is open to discussing payment plans, for example, allowing the patient to pay a large bill over time. Cloud-Moulds also advises her clients to talk with patients with no insurance or high-deductible plans about payment options.

"Instead of saying, 'We can't see you,' say 'We don't accept your insurance but let's discuss some other options,'" says Cloud-Moulds. "Maybe they can't come in three times a week but they can afford once a week with a home-exercise program."

Practices with good front-end registration processes are in a better position to deal with potential problems, says Milburn.

"Get all of the patient's information upfront," he says. "Make sure the patient understands they will have personal responsibility if their insurer doesn't pay or denies coverage."

The front-office staff must adjust to a new and sometimes uncomfortable role in an era of high-deductible plans, says Rothenhaus.

"My biggest concern is that collection of cash upfront hasn't been culturally appropriate, yet we're shifting more of that burden to offices," he says. "We haven't wanted to have that uncomfortable conversation in the front office about whether a patient can pay - but without communication it's bad debt waiting to happen."

*See the top-five payers nationally, and broken out by region here. Also visit athenahealth.com for complete PayerView rankings, and view an infographic from athenahealth.com.

In Summary

To survive a potential influx of patients from exchanges as well as expanded state Medicaid programs, practices should:

• Monitor payer mix closely and keep Medicaid population at an acceptable level

• Alert patients to their financial responsibility before visits

• Talk to patients about flexible payment plans

• Verify that specialists in referral networks are working with exchanges

• Examine PayerView data on the provider collection burden of prominent payers in their area

Janet Colwell is a Brooklyn, N.Y.-based freelance writer specializing in healthcare. With more than 20 years experience as a journalist, she writes frequently about clinical and practice management issues for several national health industry publications. She can be reached at editor@physicianspractice.com.

This article originally appeared in the June 2014 issue of Physicians Practice.