High-Deductible Health Plans Propel Sweeping Change in How Providers Collect for Care

The Advisory Board Company releases biennial Revenue Cycle Survey at inaugural technology summit

Oct 28, 2015, 10:11 ET from The Advisory Board Company

WASHINGTON, Oct. 28, 2015 /PRNewswire/ -- Hospitals and health systems more than doubled their annual point-of-service collections revenue over the past four fiscal years (FY), in large part a response to the rise of high-deductible health plans (HDHPs), according to The Advisory Board Company's latest Revenue Cycle Survey.  However, there is still a substantial gap between high performers and the recommended collection levels for sustained financial stability.

While trends in revenue collection have shifted steadily toward patient collections at or before care delivery, including advance deposits, the survey found an unprecedented, systemic change toward encouraging more point-of-service payment.

"The surging number of patients being given more financial responsibility for their care has compelled providers to recast their revenue cycle strategies," said Christopher Kerns, Managing Director, Research and Insights at The Advisory Board Company.  "This move to collecting payment at or before the point-of-service reflects the industry's experience that as more time passes after care is delivered, a patient's propensity to pay decreases substantially."

According to the survey, point-of-service collections as a percentage of net patient revenue more than doubled over the past four years:

  • In FY 2010, the median institution's total point-of-service collection was $0.7 million.
  • In FY 2014, the median institution's total point-of-service collection increased to $1.8 million.

To control for the size of a hospital or health system, the researchers examined point-of-service revenue per hospital bed and found that this figure steadily rose as well.  In FY 2010, the median point-of-service revenue per bed was $2,660.  That median rose to $4,000 in FY 2012 and $5,780 in 2014.

Houston Methodist Shows Impact of Best Practices
In changing their approach to collecting payment, Houston Methodist, a seven-hospital, 1,500-bed system based in Houston, Texas, leveraged data and analytics provided by The Advisory Board Company to increase annual point-of-service collections by more than $20 million between FY 2010 and FY 2014.  This represents a 6.85% increase in the amount of annual net patient revenue collected at the point of service.

"By using data and analytics, we improved the process for point-of-service collections, and currently collect close to 40 percent of total patient payments at the point of service," said Scott Ulrich, Director, Revenue Cycle Operations at Houston Methodist.  "The trend toward patient responsibility for large portions of their care is increasing, which makes it much more important to provide patients with detailed billing information so patients can make informed choices about their care.  This requires an intense focus on the front end of our revenue cycle."

Point of Service Collections Best for Shrinking Bad Debt
Research led by The Advisory Board Company highlights both that increasing point-of-service collections can drastically decrease bad debt levels and that this tactic is the single most powerful tool for reducing uncompensated care. 

Experts at The Advisory Board Company advise that, while point-of-service collections have rapidly increased to a median of 0.57% of net patient revenue – and high performers are collecting 1.1% of net patient revenue – health systems are still far from where they need to be.  The experts estimate that institutions will need to collect 5% of net patient revenues at the point of service to remain financially healthy in the context of ongoing expansion of patient obligations.

The Advisory Board Company released the biennial Revenue Cycle Survey at its inaugural technology summit, Amplify™.  At the October 28 and 29 event, more than to 1,000 hospital and health system administrators are exploring how technology is driving advances in health care in such areas as consumer engagement, population health, interoperability, and payment transformation.

About the Survey
In the biennial Revenue Cycle Survey, The Advisory Board Company surveyed 170 senior hospital and health system executives at approximately 70 hospitals and health systems, mostly nonprofit.  The survey is disseminated and analyzed every two years; the previous survey was in 2013.

About The Advisory Board Company
The Advisory Board Company is the leading provider of insight-driven technologyresearch, and services for the health care and higher education industries.  Through its innovative membership model, the company collaborates with more than 230,000 leaders at 5,000 member organizations to elevate performance and solve their most pressing problems.  The company provides strategic guidance, actionable insights, web-based software solutions, and comprehensive implementation and management services.  For more information, visit www.advisory.com.

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SOURCE The Advisory Board Company