The HIE Conundrum: Bad Debt and the Uncertainty Factor (Part 1 of 4)

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HRF-thumb1Is healthcare reform going to help or hurt your revenue cycle?

This question has plagued hospital executives since the day of PPACA’s conception. The answer, as with most elements of reform, is decidedly mixed, reports Rene Letourneau in the June issue of HealthLeaders magazine, especially in the area of health insurance exchanges.

Tim Nguyen, corporate controller at San Diego-based Palomar Health, describes an HIE “catch-22” that he believes will endanger a provider’s profit.

“With the Affordable Care Act coming out, more people are going to qualify to go to the exchanges,” he explained. “In the past, most of that would have been bad debt, and we would have to write it off and that hurts [us]. So, yes, this could potentially reduce our bad debt. But here’s the catch: The exchanges will have different tiers with different deductibles and copays.”

Meaning the patients, of course, will still have to pay. Since most of them can’t afford to pay much, they will probably choose the lowest premiums. Nguyen said, “That will increase our bad debt even though they have insurance.”

Beyond the premiums are the consumer tax credits that will be used to “subsidize insurance purchased through the exchanges,” Letourneau writes. In order to do this, Nguyen suspects the government will “reduce reimbursements to pay for the program. What they did on the front end, they will take back on the back end. When you put all these things together, you come out negative.”

And note that these are just the logistical issues involved with the exchanges. The uncertainty factor is still prevalent, since no one knows exactly how the HIEs will operate, mainly because the HIEs aren’t operational yet.

As Nguyen observes, “You can do analytics all day long, but the state and federal governments are still learning how to run it. Nobody knows. Right now it is all speculation. But you can’t just sit there and wait; you have to try to anticipate what is going to happen because there are concerns like cash flow and budgets.”

On its end, Palomar is enhancing its automation capabilities and is hoping to aid its staff by integrating software capable “of determining whether patients are eligible for insurance through the exchanges, getting authorizations before procedures are performed to make sure the health plan will consider it medically necessary, and estimating patient deductibles and copays.”

Nguyen is hoping this hybrid model will help the company avoid extensive loss from the influx of newly insured patients.

Of course, this influx introduces another complexity posed by healthcare reform and the HIE: determining who is qualified for the exchanges. We’ll cover this in more detail in our next post.

In the meantime, how are you and your organization preparing for HIEs and the addition of newly insured patients? How will your bad debt be affected, especially in light of reduced reimbursements?

-by Pete Fernbaugh

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