Segmenting Hospital Accounts to
Maximize Cash
March 22, 2011
Garett Jackson, CFO
HCA National Patient Account Services
©2007 NPAS
1
Learning Objectives
• Understanding the Self Pay Portfolio
• How predictive models were incorporated
into the process
• What variables are within the data already
obtained from the patient?
• Future state of modeling and
segmentation
• Translating data into results
©2007 NPAS
2
Understanding the Self Pay Portfolio
Benchmark – Evaluate – Segment - Measure
©2007 NPAS
3
Front-End: Copay Responsibility Shift
Insurance plans are paying less of the overall bill.
Hospitals are left to get the remaining portion from the
patient.
Gains upfront are not offsetting the increase in
responsibility
©2007 NPAS
4
Front-End Efforts – Self Pay
More of the original balance was discounted.
Front-end collections from the patient are decreasing
at the same time.
©2007 NPAS
5
Economic Conditions Have Changed
Average Credit Score by Placement Month
700
600
500
400
300
200
200801 200802 200803 200804 200805 200806 200807 200808 200809 200810 200811 200812 200901 200902 200903 200904 200905
Private Pay - CoPay and Deductible
©2007 NPAS
Private Pay - Pure Self Pay
6
Last Fifteen Months
Monthly Average Credit Scores
700
650
600
550
500
450
400
350
Copay Avg Score
©2007 NPAS
201012
201011
201010
201009
201008
201007
201006
201005
201004
201003
201002
201001
200912
200911
200910
200909
300
Self Pay Avg Score
7
Negotiation: What to Expect
82% of SP
calls don’t
commit to
pay
©2007 NPAS
8
Collections Life Cycle
Front End
Collections
Back Office
(Early Out)
Collection Agency
Pre-admit payments
Payment from letters
Payment from credit
reporting
Payment at registration
Payment from contacts
Payment at discharge
Payment from re-billing
Payment from billing
Customer Service Focus
Identified as Facility
Bad
Debt
Payment from legal actions
Payment from aggressive
collection activity
Identified as collection
agency
Mission Based Collection Practices
NPAS Statistics
©2007 NPAS
9
HCA’s Bad Debt Action Plan
• HCA started implementing its Bad Debt Action
Plan in an effort to understand and attack the
issue quickly. Early out was a key focus of the
plan:
– What does the healthcare portfolio look like
compared to other industries?
– Is it possible to change the early-out collection
strategy to address the portfolio?
– Which resources (up-front, early-out, primary) are
best equipped to handle the inventory?
– Which key indicators have the largest impact on
collections?
©2007 NPAS
10
Credit Scoring Notes
•
•
•
•
•
•
Used the Equifax ERS 3.0 scoring
method, which ranges from 1 to
1000
Grouped number of accounts in
scored index ranges of 100
Scores of 0 mean that no data was
available
Scoring vendor provided six
industry comparisons done by
Equifax
Compared results against All
Industries, Auto Finance, and
Bankcard Industries
Work Effort is defined as Attempts,
Contacts and Letters
©2007 NPAS
•
•
•
•
Self Pay was analyzed for
comparative purposes. However,
the study compares Copay and
Deductible in general.
Scoring vendor provided scores for
approximately 241k accounts with
a 96% score rate
Used a random sample of closed
accounts
Statistical accuracy of sample is
95% +/- 4% as a valid
representation of our inventory
11
Early Out Inventory
Credit Scoring Index Ranges by Industry Compared to Recovery Rate at NPAS
70%
60%
90%
80%
77.31%
70%
50%
40%
50%
44.09%
40%
30%
27.93%
Recovery Percent
Percent of Total Accounts
60%
30%
20%
20%
17.65%
12.67%
10%
11.02%
7.69%
6.44%
6.92%
5.07%
0%
0%
901-High
801-900
NPAS (Hospital) Industry
©2007 NPAS
10%
701-800
601-700
Average of All Industries
501-600
401-500
301-400
Average of Auto Finance
201-300
Bankcard Industry
101-200
000-100
NPAS Recovery Rate
12
Upfront Collection Efforts
HCA Upfront Collections by Scoring Range
Percent Recovered Upfront
6.00%
5.0%
5.00%
4.00%
3.0%
3.00%
2.00%
1.8%
2.0%
1.0%
1.00%
0.7%
0.6%
0.6%
0.5%
0.6%
0.7%
00
100
10
0
0
N
on
-S
co
re
d
10
120
0
20
130
0
30
140
0
40
150
0
50
160
0
60
170
0
70
180
0
90
1H
ig
h
80
190
0
0.00%
Pct Recovered Upfront
©2007 NPAS
13
Copay/Deduct – Group Mix
Comparison of Net Placements and Recovery
Credit Scoring Index Ranges by Region Compared to Recovery Rate at NPAS
45%
40%
30%
IndexRange
000-100
101-200
201-300
301-400
401-500
501-600
601-700
701-800
801-900
901-High
Grand Total
90%
80%
70%
60%
25%
50%
20%
40%
15%
30%
10%
20%
5%
10%
0%
0%
000-100
©2007 NPAS
Recovery Rate
Percent of Accounts in Score Range
35%
100%
REGION 01
REGION 05
REGION 07
Percent of Net
Recovery Percent of Net
Recovery Percent of Net
Recovery
Placements
Rate %
Placements
Rate %
Placements
Rate %
17.5%
29%
24.7%
22%
19.2%
19%
4.3%
22%
6.2%
9%
8.2%
5%
5.9%
21%
7.1%
12%
9.0%
15%
4.8%
17%
7.4%
12%
6.2%
21%
6.5%
38%
6.0%
12%
6.6%
24%
3.9%
38%
5.7%
26%
5.6%
22%
3.0%
45%
6.0%
26%
7.1%
51%
5.0%
63%
5.1%
31%
5.2%
42%
6.8%
63%
7.8%
40%
7.8%
59%
42.3%
82%
24.2%
69%
25.1%
89%
100.0%
55%
100.0%
33%
100.0%
42%
101-200
201-300
301-400
401-500
501-600
601-700
701-800
801-900
901-High
REGION 01
- Percent of Net Placements
REGION 05
- Percent of Net Placements
REGION 07
- Percent of Net Placements
REGION 01
- Sum of Recovery Rate
REGION 05
- Sum of Recovery Rate
REGION 07
- Sum of Recovery Rate
14
Self Pay
Credit Scoring Index Ranges by Industry Compared to Recovery Rate at NPAS
70%
60%
60%
48.58%
50%
50%
40%
30%
30%
Recovery Percent
Percent of Total Accounts
40%
21.80%
20%
20%
12.22%
10%
10%
6.56%
4.48%
4.04%
2.15%
2.24%
2.03%
3.07%
0%
0%
901-High
801-900
NPAS (Hospital) Industry
©2007 NPAS
701-800
601-700
Average of All Industries
501-600
401-500
301-400
Average of Auto Finance
201-300
Bankcard Industry
101-200
000-100
NPAS Recovery Rate
15
Self Pay - Emergency Room
Credit Scoring Index Ranges by Industry Compared to Recovery Rate at NPAS
70%
60%
52.76%
60%
50%
50%
40%
31.79%
30%
30%
Recovery Percent
Percent of Total Accounts
40%
20%
20%
14.41%
10%
8.74%
10%
6.27%
4.44%
2.78%
2.79%
2.79%
3.24%
0%
0%
901-High
801-900
NPAS (Hospital) Industry
©2007 NPAS
701-800
601-700
Average of All Industries
501-600
401-500
301-400
Average of Auto Finance
201-300
Bankcard Industry
101-200
000-100
NPAS Recovery Rate
16
Self Pay - Inpatient
Credit Scoring Index Ranges by Industry Compared to Recovery Rate at NPAS
70%
40%
36.39%
35%
60%
30%
25%
40%
20%
30%
15%
11.63%
20%
8.95%
10%
10%
5%
3.28%
2.08%
2.10%
2.76%
0.45%
1.09%
0.74%
0%
0%
901-High
801-900
NPAS (Hospital) Industry
©2007 NPAS
Recovery Percent
Percent of Total Accounts
50%
701-800
601-700
Average of All Industries
501-600
401-500
301-400
Average of Auto Finance
201-300
Bankcard Industry
101-200
000-100
NPAS Recovery Rate
17
Self Pay – Outpatient
Credit Scoring Index Ranges by Industry Compared to Recovery Rate at NPAS
70%
80%
68.54%
70%
60%
60%
50%
40%
40%
30%
30%
29.17%
21.12%
20%
20%
18.94%
10%
7.42%
9.19%
5.88%
6.95%
4.16%
10%
3.22%
0%
0%
901-High
801-900
NPAS (Hospital) Industry
©2007 NPAS
Recovery Percent
Percent of Total Accounts
50%
701-800
601-700
Average of All Industries
501-600
401-500
301-400
Average of Auto Finance
201-300
Bankcard Industry
101-200
000-100
NPAS Recovery Rate
18
Self Pay - Surgery
Credit Scoring Index Ranges by Industry Compared to Recovery Rate at NPAS
70%
60%
52.85%
60%
50%
50%
40%
30%
26.24%
30%
Recovery Percent
Percent of Total Accounts
40%
21.83%
20%
20%
14.31%
12.76%
8.86%
10%
10%
5.46%
3.42%
3.87%
2.70%
0%
0%
901-High
801-900
NPAS (Hospital) Industry
©2007 NPAS
701-800
601-700
Average of All Industries
501-600
401-500
301-400
Average of Auto Finance
201-300
Bankcard Industry
101-200
000-100
NPAS Recovery Rate
19
Incorporating Predictive Results
©2007 NPAS
20
Self Pay – Work Effort
Average Work Effort Versus Recovery Rate by Index Ranges
6.1
5.7
5.6
5.6
48.6%
5.3
5.1
5.0
5.0
5.0
401-500
Avg Workeffort
©2007 NPAS
301-400
201-300
101-200
3.1%
501-600
2.0%
601-700
2.2%
701-800
2.1%
801-900
4.0%
901-High
4.5%
6.6%
12.2%
21.8%
4.7
000-100
Recovery Rate %
21
Credit Scoring Flow (Self Pay)
FC 99
Day 1
Score account
Day 2, receive
credit score
Category =
Low ?
No
Current Flow
Yes
Letter 1
Hold 20 days
Final Notice Letter
Wait 30 days
To Agency
Note:
No match, match no score and typos will follow current flow
Phase II - No match may go into low
©2007 NPAS
22
Copay and Deductible
Credit Scoring Index Ranges by Industry Compared to Recovery Rate at NPAS
70%
90%
83.72%
80%
60%
70%
50%
Percent of Total Accounts
40%
50%
47.25%
40%
30%
36.58%
Recovery Percent
60%
58.98%
30%
27.61%
20%
25.15%
22.32%
21.57%
20%
17.88%
13.22%
10%
10%
0%
0%
901-High
801-900
NPAS (Hospital) Industry
©2007 NPAS
701-800
601-700
Average of All Industries
501-600
401-500
301-400
Average of Auto Finance
201-300
Bankcard Industry
101-200
000-100
NPAS Recovery Rate
23
Credit Scoring Flow
(Copay and Deductible)
Non FC99
Day 1
SP Letter
Wait 30 days
Contact with
Patient or payment
received?
No
Score Accounts
Day 31
Category =
Low ?
No
Current Flow
Yes
Yes
Current Flow
Notes:
 No match, match no score and typos will follow current flow
 Phase II - No match may go into low
©2007 NPAS
Final Notice Letter
Wait 30 days
To Agency
24
Results: The Reason for Scoring
2010 Recovery vs Work Effort
70.00%
8.00
62.7%
7.00
7.4
60.00%
50.9%
40.00%
6.00
6.3
50.00%
4.9
5.00
5.4
5.1
4.5
4.5
4.4
4.00
27.2%
30.00%
3.00
20.00%
2.00
11.8%
10.00%
3.3%
1.5%
1.0%
1.5%
401-500
301-400
201-300
0.00%
.00
901-999
801-900
701-800
601-700
Avg Work Effort
©2007 NPAS
1.00
501-600
Recovery Rate
25
Results: Credit Scoring Segmentation
Copay and Deductible
-Low Score <$1,000
%
Change
Net back %
+0.47%
Average Attempts
-91.64%
Average Contacts
-65.96%
Average Letters
-30.52%
Age at NPAS
-34.38%
Self Pay
-Low Score <$1,000
%
Change
Net back %
1150.0%
Average Attempts
-88.66%
Average Contacts
-65.96%
Average Letters
Age at NPAS
©2007 NPAS
-4.02%
-17.10%
26
Keys to Implementation of Scoring
• Tools: Do you have the
right tools to manage
workflow with a score?
• Workflow: Determine
what will be done with the
score ahead of time
• Segmentation: What
accounts will be scored?
Cost can be an issue.
©2007 NPAS
• ROI: What will happen to
FTEs that might be
working these accounts?
• Risk Tolerance: There
will be accounts that are
not correctly predicted
• Board Acceptance:
Charity and Bad Debt
processes require
approval
27
Key Performance Indicators
Evaluate – Adjust – Confirm - Predict
©2007 NPAS
28
Key Performance Indicators
©2007 NPAS
29
Credit Scores vs Recovery
Copay and Deductible - Trend Performance
110%
100%
90%
80%
Self Pay Trends
70%
100%
60%
90%
50%
80%
40%
30%
70%
20%
60%
10%
50%
0%
200
300
400
500
600
700
2009 Copay and Deduct
2010 Copay and Deduct
2010 Avg
Poly. (2009 Copay and Deduct)
40%
800
900
1000
2009 Avg
30%
Poly. (2010 Copay and Deduct)
20%
10%
0%
200
300
2009 Self Pay
©2007 NPAS
400
2010 Self Pay
500
2009 Avg
600
2010 Avg
700
800
Poly. (2009 Self Pay)
900
1000
Poly. (2010 Self Pay)
30
©2007 NPAS
$
50
50
$
or
to
Recovery Percentage
0
le
ss
10 $
0 10
$
to 0
20 $
2
0
to 00
$
30 $ 3
0
$
to 00
40 $
4
0
$
to 00
50 $
5
0
to 00
$
60 $ 6
0
$
to 00
70 $
7
0
$
to 00
80 $
$ 0 t 8 00
90 o $
$ 0 to 9 00
10
$1
0
$ 0 to 0 00
12
5 $1
$ 0 to 250
15
0 $1
$ 0 to 500
17
5 $1
$ 0 to 750
20
0 $2
$ 0 to 000
30
0 $3
$ 0 to 000
40
0 $4
$ 0 to 000
50
0 $5
$ 0 to 000
60
0 $6
$ 0 to 000
70
0 $7
$ 0 to 000
80
00 $8 0
$
90 to 00
00 $9
00
$1 to $ 0
00 1 0
00 00
an 0
d
up
$
Balance Size vs Recovery Rate
Relationship of Balance Size and Recovery Rate
For Private Pay - Co-pay and Deductibles
70
60
50
40
30
20
10
Balance Size
31
Key Indicators Cont’d
Bad Address Related to Recovery Rate
Age Placed Related to Recovery Rate
60%
50%
R² = 0.970
40%
30%
20%
10%
0%
0 to 30
Days
31 to 60
Days
61 to 90
Days
91 to 120
Days
121 to 150 151 to more
Days
Days
Low Scoring Accounts
Related to Recovery Rate
80%
R² = 1
No
Yes
Bad Phones Related to Recovery Rate
60%
50%
70%
40%
60%
50%
30%
40%
R² = 1
30%
R² = 0.924
20%
20%
10%
10%
0%
0%
High Probability
©2007 NPAS
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Medium Probability
Low Probability
No
Yes
32
Key Indicators Cont’d
Phone Contacts Related to Recovery Rate
Letters Sent Related to Recovery Rate
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
R² = 0.075
Financial Class Related to
Recovery Rate
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
R² = 0.890
Patient Type Related to Recovery Rate
70%
R² = 0.933
60%
50%
40%
30%
R² = 0.998
20%
10%
Insurance
©2007 NPAS
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Private Pay CoPay and
Deductible
Private Pay - Pure
Self Pay
0%
Emergency Room
Inpatient
Surgery
Outpatient
33
Goals of Predictive Modeling
• Utilize the right resources for working accounts
• Minimize the need for external information to
determine the best segmentation philosophy
• Business Analytics – will a predictive model
support a conclusion driven by something other
than data?
©2007 NPAS
34
How to Use a Predicted Value
Total Population
Prediction
Category
Predict
Probability
©2007 NPAS
Won’t Pay
Low: 99% to
75% Sure
90% P =
(1.90)*1000
= 100
Score
80% P =
(1.80)*1000
= 200
Score
Med-Low:
75%-50%
Sure
60% P =
(1.60)*1000
= 400
Score
50% P =
(1.50)*1000
= 500
Score
Will Pay
Med-Hi: 50%75% Sure
50% P =
(.50*1000
) = 500
Score
60% P =
(.60*1000
) = 600
Score
High: 75%99% Sure
80% P =
(.80*1000
) = 800
Score
90% P =
(.90*1000
) = 900
Score
35
Cost-Reliability of Models
Timing Relevance
Data Relevance
Final Notice
Initial Phone
Contact
Initial Letter
Credit Score
Prior Payment
History
Balance Size
Financial Class
Placement
Patient Type
©2007 NPAS
36
Ideal Predictive Workflow
Prediction Made
©2007 NPAS
37
HCA’s Results - Measuring Success
Secondary ChampionChallenger with BPO
partner. Used same
technology and same
processes, but BPO
allowed to hire, train
and manage own staff.
Result:
HCA processes
performed 18% better
than the BPO on an
alpha-split champion
challenge over a one
year period.
Of the 40% Lift over
external vendors, HCA
can attribute 18% to
people management,
or roughly 45%.
©2007 NPAS
38
Questions?
• National Patient Account Services
2700 Blankenbaker Pkwy Ste 100
Louisville, KY 40299
• www.npasweb.com
• 1-866-882-3582
• Garett Jackson, CPA
– Chief Financial Officer
– Garett.jackson@hcahealthcare.com
©2007 NPAS
39
Overcoming Objections
Identify – Understand – Overcome - Negotiate
©2007 NPAS
40
Balanced Scorecard – Incentive Plan
Weighted Factors
Gold, Silver, and
Bronze payouts on
bonus points
Bonus Points – 70%
measuring efficiency
and effectiveness of
CSP
30% - Other quality
measures
Red figures are
below team avg
(coaching opp.)
RED LINE: Must be
above to bonus
©2007 NPAS
41
Balanced Scorecard - Unit
Unit Performance Index
Accumulated unit averages from bonus
plan monthly with same weightings
Ranked over prior year and previous
months
Index above 1.000 means better than
average performance of other months
Incentivize Managers to increase results
©2007 NPAS
42
CSPs must Overcome Objections
•
•
•
Reasons Why People Object:
1.Avoidance 2. Confusion 3. WIIFM
Types of Objections
1. Feeling 2. Fact 3. Hidden
Remember the six steps to overcome
objections:
1. Listen
3. Explore and Probe
5. Playback
©2007 NPAS
2. Empathize
4. Agree
6. Solve
43
Negotiating for Money
THE MOST MONEY AS QUICK AS POSSIBLE
•
Make sure you are not automatically setting due dates out 30 days
• Post Dated/Recurring Checks
• Balance Resolutions
•
•
•
©2007 NPAS
Explore Non Linear Resolutions
• Before issuing a final notice make sure you explore a non linear
arrangement. Ask probing questions! It’s possible that the
customer’s current situation may only be temporary
Negotiate!
• Statistics show that 97% of the cash collected comes from accounts that pay
in full.
• Settlement offers do not have to automatically be max %
• Negotiate in increments
Sixty months is not always the right amount of time
• Make sure that 60 months is your last option!
• Remember this option exists only as a LAST OPTION
44
Other Payment Sources
• Selling A/R
– Cash infusion for best credit accounts only
– Ensure a low-cost effort is done prior
– Lots of players entering market, some are losing money
• Longer Partial Payments
– Time/value of money is irrelevant if you don’t receive payment
– Collection agencies charge between 10% and 35%
• Partially Paid Settlement
– Combination of partial payments and settlements
– Traditional settlements require a large one-time payment that
does not usually help a cash-strapped GN
– Negotiation of both what the amount needs to be, and how long
to pay it off are the two basic tenets of a financial transaction.
©2007 NPAS
45