As everyone knows by now, the Supreme Court upheld the constitutionality of state healthcare insurance exchanges subsidized by the federal government. If this decision had gone the other way, it could have had a significant impact on the percentage of insured patients currently, and in the coming years. With this decision, this key component of Obamacare seems to be a permanent part of the future financial core of healthcare reimbursement.
I was traveling when I heard the announcement. A few hours later, on CNN, I saw the news about large jumps in the value of stock for major healthcare insurance companies like Aetna, Cigna and United Healthcare. Many of these organizations were seeing increases of 15% to 40% in a single day toward the value of their shares. I began thinking about how this will impact my own company and healthcare delivery in general in the coming years.
I have been in the healthcare IT business now for 31 years, 29 years running my company. I have seen many changes in the industry regarding technology and the administration of healthcare. During this period, healthcare has fallen behind most other industries in the adoption of technology, in my opinion. Compared to banking, travel, entertainment, and almost any other market sector, healthcare seems slow to adopt new ideas and methods in using technology to reduce costs and improve their product/service.
This failure to adapt to new business conditions not only applies to the use of technology, but the inability to fix a broken financial model that has proven to be very expensive and inefficient during my entire career.
During this time, healthcare delivery was priced, billed and collected as if it was service voluntarily purchased by consumers. Then and now, Medicare provided reimbursement for the old and disabled and Medicaid for the poorest of our population. Everyone in between was responsible for paying list price for these services with very little opportunity for price shopping or negotiation.
During a large part of my career, patients without Medicare and Medicaid would receive an itemized bill when discharged listing all the products and services they had consumed during their recent illness or operation. They were then responsible for submitting this bill to their insurance company for payment, if they had one. After reimbursement by the insurance, they were then responsible for all expenses their insurance would not pay. If they were uninsured, they were responsible for the entire balance.
Healthcare institutions could purse this debt with the same procedures as any other creditor. This included empathetic approaches like discounts and payment plans as well as more aggressive tactics including all the legal tools of debt collection such as collection agencies and lawsuits and the associated defenses for these actions such as bankruptcy. All of these actions and their costs added to the total cost of healthcare delivery.
Over the last 30 years I have been an active member of Healthcare Financial Management Association (HFMA) a trade organization that supports educational efforts, mostly through conventions, for healthcare administrative personnel directly involved in running the financial side of hospitals and clinics. During this time, I attended many conventions to learn more about the financial side of hospital management. Working with my own customers, I learned about metrics like “AR Days”, “Patient Mix” and “Financial Class”. These metrics were used to determine the financial condition of healthcare organizations. One theme consistently held true in all of them. The less dollars you had in self pay services, the better off you were.
I would often hear hospitals complain about the inefficiencies of Medicare and Medicaid. How their payment rates were unfair and the procedures associated with revenue cycle management for their claims were grossly inefficient. But if you ever wanted to see a CFO go pale, start talking about their self-pay revenue.
Many healthcare institutions have found this issue so politically charged and difficult that they don’t even attempt to process these claims. Many send self-pay accounts to collection agencies immediately when they are billed through “early out” programs. These collection agencies fight tooth and nail for these accounts whittling down their profit margin in the process. When they get these accounts, they often pursue the debts aggressively with tactical communication procedures intended to coerce the patient to pay and legal action when these attempts don’t yield results.
At many of the HFMA conventions I attended, the vendors attending were predominately these collection agencies trying to land more hospital business. Many times they even outnumbered the actual provider representatives attending.
The expense of collecting this revenue was immense for both the providers and the patients involved. In my opinion, this aspect of healthcare delivery has been the largest failure in the administration of American healthcare in my lifetime. It has been very good for collection agencies and lawyers, but not for anyone else.
Regardless of your opinion, or mine, of Obamacare. It seems that we are making significant strides toward reducing the number of uninsured in this country, and just in the nick of time.
According the Kaiser foundation, 57% of people with private insurance did not have health insurance before Obamacare.
A gallup poll from January showed that the uninsured rate in the us fell to 12.9% at the beginning of the year. A significant drop from 17.1% a year earlier. The largest drop was among lower income Americans.
As this self-pay portion of healthcare revenue continues to drop, the quality of revenue for healthcare providers continues to improve, reducing collection costs and bad debt for all providers.
As we saw in the stock market last week when the Supreme Court decision was announced, this is not going unnoticed in Wall Street. Not only does this trend benefit insurance companies that will continue to expand to service the growing number of insured, but everyone else that depends on the stability of this revenue is impacted positively. This includes all ancillary healthcare businesses like technology companies such as mine.
Combined with the rising demand of services from the aging baby boomer population, the future looks bright for the healthcare sector of our economy. However, this does not mean that we can relax as healthcare providers or even those of us in the technology business. This opportunity for financial growth does not come in a vacuum. Investment funds will begin to move to healthcare related businesses at an increasing rate.
These funds will tend to go to new businesses and provider organizations with better models for delivering this care and related services efficiently. As long as these new organizations flourish, they will begin to take low hanging fruit from their less efficient competitors and then further leverage their processes to drive their less capable competitors out of business.
Similar to the early days of long distance phone companies, internet-based travel and insurance agencies, and even the video stores, what seemed originally like a business where you couldn’t fail, quickly turned into the survival of only a few efficient organizations who were able to continue to adapt and change their business models rapidly.
I believe we are experiencing the benefits of this early growth fueled by a decreasing self-pay population, but that this growth will come at a cost. In a short time, it will no longer be an option to avoid the use of current technology in healthcare delivery and record keeping. Providers who refuse to adopt this technology will find themselves too expensive to keep around. Meaningful use will no longer be the motivating factor to adopt healthcare IT. It will be the instinct to survive.
By Kalon Mitchell, President – MEDTranDirect