No room for patience: Hospitals seeking payments up front

There was a time, say two years ago, when a relatively well-off suburban hospital like Abington Memorial could afford to wait for patients to pay their parts of their bills.

Times have changed.

Like many hospitals around the country, Abington Memorial has started to ask patients for their money up front instead of sending bills later.

The effort to reduce billing costs is paying off: Abington collected only 4 percent of co-payments and deductibles from patients while they were at the hospital during the first eight months of fiscal 2008. It got 20 percent during that time period this year.

"People are always less likely to pay after the fact," said Michael Walsh, Abington's chief financial officer. The new strategy has "had a positive impact on our bottom line."

Kenneth Braithwaite, who leads the Delaware Valley Healthcare Council, said hospitals worried less about bad debt - uncollectible patient bills - when it accounted for 1.5 to 3 percent of revenue. But some hospitals are telling him now that their bad debt is above 5 percent and even into the low double digits.

Braithwaite sees increasing patient debt as an "emerging issue" and recently established a task force to assure that hospitals treat struggling patients with "understanding" and share "best practices" for collections.

Employers have been transferring more of the cost of health care to their employees in the form of higher co-pays and deductibles. Layoffs are leaving more people without insurance at all.

"As more and more of the burden has fallen to the patients, hospitals have become much more proactive about collecting that [the patient share] up front," he said.

Alan Zuckerman, president of Health Strategies & Solutions in Philadelphia, said hospitals have been increasing up-front collections for the last two or three years, with "more acceleration in the last six months."

Though it is routine to collect co-pays in many physicians' offices, some hospitals still don't ask for much cash. "There's lots of places I go where they don't collect much of anything," he said.

Abington started its push to increase collections at 2007's end, said Betsy Seeber, director of patient accounts. It's a two-pronged effort to make sure patients pay as much of their share as possible before leaving and to confirm that insurance information is up-to-date and accurate.

"It takes a heck of a long time to collect from Aetna when really the insurance is Blue Cross," Seeber said dryly. Even when the company is correct, getting a number wrong on the claims form can really slow down a payment.

The hospital has rolled out its program in a wide variety of departments, including outpatient registration, radiology and emergency. No one is forced to pay up front, Seeber said, but even inpatients are asked to pay their parts of the bills before they go home.

Walsh said he's hearing about more "push-back" from patients as their share has risen and fears about the economy have grown more intense. It's not unusual for patients to have a co-payment of $1,000 to $1,200 after several days in the hospital, he said.

"Each year, we've seen the level of co-payments increase," he said. "The economy being in the position it's in, people are just scared."

Seeber said some staff members were initially uncomfortable asking patients for money. She encourages them to think of it as a chance to explain insurance benefits to patients and help them pay conveniently.

From July through February, Abington collected $2 million from patients up front, a big jump from $303,518 during those months in fiscal 2008.

The percentage of money collected from insured patients during the next 45 days - after that, collection rates fall and costs climb quickly - rose from 21 percent during the first eight months of fiscal 2008 to 29 percent during those months in fiscal 2009. The hospital netted an extra $1.2 million, a significant amount for an enterprise with an operating margin of $20 million to $21 million, said comptroller Ron Fabrizio.

There's still room for improvement.

"Even though patients have insurance and they're responsible for their coinsurance and deductible, a lot of them aren't paying it," he said. "That's the mentality we're trying to improve here."

Bad debt, which includes money owed by patients without insurance, has continued to rise, albeit more slowly.

Pilar Rodriguez, team coordinator for outpatient registration, said many patients aren't happy to learn how high their co-payments are. "When I tell them the actual cost [of care], they're grateful," she said.

When people can't pay up front, she gives them an envelope with her name on it for sending their money later.

"Do you mind mailing this, because we get brownie points?" she tells them. So far, the envelopes have all come back.

Carol Ann Mueller-Bell, who hurt a rib during an improvisational dance, was happy to pay her $20 co-pay up front recently. "It means I'm going to have one less bill in the mail to deal with a month or two later," she said. "I'd just as soon get it over with."