Maximizing Schedule H Charity Reporting with Minimal Financial Impact

Maximizing Schedule H Charity Reporting with Minimal Financial

Impact

Presented By: Jack Hodge

Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.

Sen Grassley’s comments:

“…further evidence that there is no discernible difference between tax exempt hospitals and for profit hospitals…”

Financial Counselors

Charity Care Application

Approval based on measurement against each individual hospital’s charity care policies.

Current Processes

Patients who qualify for charity can be generally classified into two broad categories of behavior:

Category 1: Patients with means, but with no intentions of paying

Category 2: Patients with limited or no means

Category 2 patients pose the greatest challenge to us in that they choose not to communicate or cooperate knowing that:

Services will continue to be provided No impact on financial credit obligations or capacity No negative effect on credit scores

Examining the process further….

Medlytix Confidential and Proprietary

For the current process to work optimally, total patient cooperation is

required.

If not, how can charity care amounts be increased over current levels?

Optimal Current Processes???

A significant percentage of uninsured patients should qualify for charity care under most hospitals charity care policies.

Confirmed by low collection rates on the uninsured population. Currently about 30-40% of uninsured patients are provided charity care based on existing processes. These numbers could be significantly increased with more cooperation from patients or finding

alternative methodologies.

Non-Elderly Uninsured Profile


Percent of UninsuredAnnual Family Income<$20,000 50.1%$20,000-$39,999 27.4%$40,000+ 22.5%

Family Poverty Level<=138% 51.8%139%-399% 38.7%400%+ 9.5%

CitizenshipUS Citizens 81.0%Non-US Citizen 19.0%

Kaiser Commission on Medicaid and Uninsured

Characteristics of Non-Elderly Uninsured 2009

Accurately classify charity care

Increase the amount of charity care over current levels

Presumptive Charity Care Objectives . . .

Traditional Credit Scores *****

Should never be used Measures character not financial ability A millionaire late on Tiffany's or Dillards

card may have really low scores

Current Processes . . .used when patients provide limited/no information to identify presumptive charity care


Ratings GuideBest *****

Worst *****

Income Predictors *****

Directional, not absoluteProblem with no-hitsBlack Box


Worst *****


Manual examination of credit file and/or other sources *****

Intuitively correctLabor IntensiveProblem with credit file no hitsSubjective


Worst *****


Hospital Specific Charity Care Criteria *****

Automation of manual examinationEasily understood (not a black box)Objective100% coverage


Worst *****


Developing a custom charity care model Request a historical file from the hospital. For example: A hospital provides all patients discharged in 2009

Verified Charity

Medicaid

Other Insured

Uninsured


Credit BureausDemographic

DatabaseInternal

Information

Analyze over 700 pieces of data at each individual

patient level

Taking a peek inside the criteria…In order to validate the solution, data statistics correlated to financial means were reviewed for each charity score segment and assigned to High Means (“HM”) or Low Means (“LM”). The results of the analysis are illustrated below.

Credit and Demographics Statistics High Means Low Means

Household Income in Serviced Zip Code $33,268 $25,137

Age of Oldest Credit File Trade (in months) 170 61

% of Accts with Current or Prior Mortgage 42.79% 0.19%

% of Accts with Revolving Trade 83.96% 23.88%

Median Revolving Credit Limit $8,300 $300

Timing in the revenue cycle process

Charity care can be provided at different points along the revenue cycle process: At registration (Point of Service) During accounts receivable management Prior to bad debt placements

Results of our analysis on over 150 hospitals: On average, 3%-4% of uninsured patients have a change in Financial class in the

first 120 days On average, an additional 1.7%-3.2% of uninsured patients are identified as having

insurance during the bad debt process On average 2%-8% of uninsured patients with valid third party coverage are not

identified at all during the entire revenue cycle process >70% of patient payments occur between 30-90 days from discharge

Delaying the presumptive charity care assignment process to the maximum extent possible (prior to bad-debt) will help hospitals minimize opportunity costs (i.e. downstream patient payments, lost/unfound 3rd party payments)


Case Study: Right Timing ImpactThree health systems were selected to determine the impact on assigning charity at time of service versus at bad debt placement. The study was analyzed over a two year period. Provider demographics were as follows:

Provider A- 700+ Bed Urban, affluent to moderate incomeProvider B- 250+ Bed Rural average to below average incomeProvider C- 900+ Bed Academic Med Ctr varied ranges

*Revenue lost

Time of Service* Prior to Bad Debt*

Hospital Generic Score Generic Score Custom Criteria

Hospital A -$1,343,872 -$337,301 -$90,279

Hospital B -$279,247 -$50,176 -$9,724

Hospital C -$2,726,542 -$350,000 -$65,567

Recap There is no substitute for verified information

If your hospital intends to implement a presumptive charity care solution, the following criteria should be applied: Does the solution make intuitive sense?

A good understanding of the underlying characteristics that drive the solution

Ensure that the solution is unbiased and objective

Timing is everything, this should be a very important consideration

If possible, compare products to identify solutions with the lowest opportunity costs

Good News for Charity

Good News Clinics

• Good News Clinics (GNC), is a non-profit, faith-based charitable clinic that provides free healthcare services to indigent people who do not have insurance or cannot qualify for government-sponsored programs.

• GNC receives no State or federal funding.

• GNC is the largest free clinic in the State of Ga.

Northeast Georgia Health System

• NGHS is a not-for-profit community health system dedicated to improving the health and quality of life of the people of northeast Georgia and receives no tax support from local government for indigent care.

Northeast Georgia Health System

• NGHS is the largest employer in Hall County• Hall County is home to 47 Fortune 500 companies• 9.6% of families live below the poverty level • 19% are uninsured (www.healthyhall.com)• Medical staff of over 500 physicians• 557-bed hospital• Three Urgent Care Centers;• Mental health and substance abuse treatment center;• Numerous outpatient services.

http://www.healthyhall.com/

Good News Clinics

• The Medical Center Foundation contributed one million dollars through the Foundation’s first three-year Healthy Journey capital gifts campaign to help support expansion and service delivery. (The Medical Center Foundation is the philanthropic arm of NGMC.)

• Subsequently, NGMC has pledged to contribute over 25% of GNC’s annual operating budget.

• Services at GNC are provided by 45 physician volunteers, 46 dentist volunteers, and 2 employed nurse practitioners

Good News Clinics

Impact

A study conducted by Phaedra Corso, PhD and Angela Fertig, PhD, researchers at the Department of Health Policy and Management at the University of Georgia, researched the economic benefits associated with two free clinics in Georgia, one of which was the Good News Clinics.

According to the study in both communities and clinics,

•The costs associated with non-urgent ED care decreased 14% to 20% for a sample of patients in the year after they enrolled in the free healthcare clinic compared to the year before enrollment in the clinic

•In-patient related costs declined by 20% to 34% in both clinics

Good News Clinics

Top 5 issues keeping healthcare CEOs up at night By Rene Letourneau, Managing Editor Created 10/20/2011

CHICAGO – Based on conversations with hospital CEOs, healthcare consulting firm Huron Healthcare ranks the top 5 issues keeping healthcare leaders up at night: 1. Change management: With the amount of market-driven and reform-driven change affecting healthcare providers, CEOs are troubled by how they can prioritize cost and quality imperatives to allow their organization to thrive. 2. Community engagement: CEOs worry about how to reach beyond the walls of their organization – to public health authorities, non-profit groups and others – to engage with key community partners to help improve the health of diverse patient populations. 3. Clinical alignment and integrated care delivery: CEOs are challenged with the imperative of creating higher quality, more affordable, more accountable care models. Aligning physicians with this core aim may be easier in theory than reality. 4. ACOs: With uncertainty surrounding what accountable care means for providers, CEOs are unsure of how market and reform forces will move their organizations with regard to managing population health broadly. They also question if they should focus on creating integrated care models for certain populations. 5. New payment models: CEOs are concerned about effectively leading their organizations through the transition from a volume-based payment model to a value-based payment model.

Contact Info

Sharon Roseberry

704-616-4207

[email protected]

Good News Clinics

www.goodnewsclinics.org

Cheryl Christian, Ex. Dir

770-503-1369

mailto:[email protected]

http://www.goodnewsclinics.org/

Documents

Maximizing Schedule H Charity Reporting with Minimal Financial Impact