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Implementation of 501(r) Compliant Financial Policies

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Presentation on theme: "Implementation of 501(r) Compliant Financial Policies"— Presentation transcript:

1 Implementation of 501(r) Compliant Financial Policies
West Virginia HFMA Winter Education Meeting January 15, 2015 Charleston, WV Leah Klinke, Director, Patient Financial Services

2 Teaching hospital with level 1 trauma
Magnet Certified 531 beds $1.5 billion gross revenue

3 Not-for-profit healthcare delivery system for the Eastern Panhandle introduced January 1, 2005.
Berkeley Medical Center is a 241 bed community hospital Jefferson Medical Center is a critical access hospital $400 Million in combined annual gross revenue

4 Key Objectives The Changing Landscape
WVUH & University Healthcare Initiatives related to ACA Overview of Section 501(r) Our Steps to Section 501(r) Compliance Challenges

5 The Landscape is Changing…
The Affordable Care Act was passed by Congress and then signed into law by the President on March 23, On June 28, 2012 the Supreme Court rendered a final decision to uphold the health care law.

6 The Landscape is Changing…

7 The Landscape is Changing…
Recent requirements from the Affordable Care Act... All Americans have access to affordable health insurance options. The Marketplace allows individuals and small businesses to compare health plans on a level playing field. Middle and low-income families will get tax credits that cover a significant portion of the cost of coverage.* Marketplace was opened in October 2013 for enrollment for 2014 coverage. In West Virginia, this meant a few products offered by Highmark Blue Cross *from

8 The Landscape is Changing
Recent requirements from the Affordable Care Act... And the Medicaid program was expanded to cover more low-income Americans.* In West Virginia, the qualifying income increased from 17% of the federal poverty limit to 138% (133% in 2015) of the federal poverty limit. Barriers to eligibility such as requiring dependents or disability were removed. The application process was simplified to speed up the application, approval and enrollment process. *from

9 The Landscape is Changing
Recent requirements from the Affordable Care Act... Price Transparency became a priority with requirements in the ACA that ... “Each hospital operating within the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.” Medicare IPPS 2015 final rule included guidelines for hospitals to make public either: (1) a list of their standard charges (“whether that be the charge master itself or in another form of their choice”), OR (2) their policies for allowing the public to view a list of their charges in response to an inquiry

10 The Landscape is Changing
Recent requirements from the Affordable Care Act... In 2014, hospitals were eagerly awaiting final requirements for tax exempt hospital organizations outlined in section 501(r) of the Affordable Care Act.

11 The Landscape is Changing
What did this mean for WVU Hospitals and University Healthcare?

12 The Landscape is Changing
Shift from Commercial volume to Medicaid/ Marketplace If you look at actual gross revenue dollars for 3 of our financial class buckets, you can see how volume is shifting from one bucket to the other. For the EAST facilities, you can see additional shifts in volume from commercial to Medicaid/Self pay/Marketplace

13 The Landscape is Changing
Payer mix shift under ACA has increased Medicaid net revenue % Both before and after ACA, True Self pay is a small fraction of our total payer mix as we typically collect less than 5% of these dollars. For all service areas, self pay represents < 0.5% of our total Net Revenue. WVUH Berkeley MC Jefferson MC

14 Landscape is Changing We have generally seen an increase in out of pocket expenses for the Exchange Blue Cross products vs. Traditional commercial products. Jefferson shows a different trend. They have a much higher concentration of inpatient volume for their exchange volume which shows no copays and low deductibles applied to the cases. JMH saw increased out of pockets for outpatient and physical therapy cases.

15 The Landscape is Changing
2014 Initiatives Related to ACA We have been very busy this year trying to keep our costs low, but cash benefit high for the new ACA regulations.

16 2014 Initiatives Related to ACA
Transitioning of Medicaid Eligibility to an in-house team (WVUH Only) – Net savings of $166,000 for 2014 *As of 12/15/2014

17 2014 Initiatives Related to ACA
Development of price transparency policies & tools

18 2014 Initiatives Related to ACA
Development of Patient Estimation tool to produce on demand estimates that include charges, estimated insurance expected allowable, and benefit information to determine the patient’s estimated out-of-pocket expense.

19 2014 Initiatives Related to ACA
Section 501(r)

20 Section 501(r) New regulations were proposed as part of the ACA specifically for Hospital organizations who are classified as exempt from federal income tax. Drafts of the regulations related to financial assistance, billing & collections were released in June 2012 and public comment was received in December 2012. Final regulations were published on December 29, 2014. Compliance with regulations required the first day of the first tax year after December 29, 2015

21 Section 501(r) The following sections relate to policies and practice requirements in order to be compliant: 501(r)(4) – Financial Assistance Policies (FAP) and Emergency Medical Care Policies 501(r)(5) – Limitation on Charges 501(r)(6) – Billing and Collection

22 Section 501(r) WVU Healthcare has always treated the complex medical needs of West Virginians, regardless of their ability to pay. We have assisted patients in applying for medical assistance if they are eligible. We have a generous charity program that provides 100% charity adjustments for patients with income less than 200% of the Federal Poverty Limit. More needed to be done to become 501(r) compliant, but where do you start?

23 Our Steps to Section 501(r) Compliance
Step 1: Inventory requirements outlined it the federal register Step 2: Assess how our current policies and procedures meet the outlined requirements. Step 3: Update existing policies to meet the requirements Step 4: Draft any new policies required by the rules Step 5: Get board to approve the updated policies as required by the regulation Step 6: Implement new policies by making procedure changes required by policies Step 7: Continuous evaluation

24 Step 1: Inventory Requirements
The law is tedious and my initial review of the final regulations proved even more tedious. Luckily, there are a lot of vendors out there that have done the work for us. Free webinars and assessments from existing vendors have helped a lot! This summary is from our partner, HealthFuse.

25 Step 2: Assess Policies & Procedures
Existing Policies Included: Financial Policy Financial Assistance Policy Emergency Medical Treatment and Labor Act (EMTALA) Items Covered by Existing Policies: Eligibility criteria for Financial Assistance Method for applying for financial assistance Treatment of emergency medical conditions regardless of eligibility for financial assistance Items Not Covered by Existing Policies: Measures to widely publicize the financial assistance policy in the community served by the hospital Actions hospital will take in case of non-payment Basis for calculating amounts charged

26 Step 3: Update Existing Policies
Financial Assistance Policy (FAP) Distribution of Financial Assistance Policy Notification and Application Periods Amounts Generally Billed (AGB) Financial Assistance Application Form Financial Policy

27 Distribution of Financial Assistance Policy (FAP) - Requirement
The FAP must be made available on a website, and without charge upon request in public locations in the hospital facility, and by mail. The hospital may use one or a combination of specific measures to widely publicize a FAP Website Provide for public inspection without charge at the hospital Patient access points Notification upon admission Publicizing to physicians and community health centers Distributing upon discharge Newsletters or magazines Postings in public areas Governmental reports Billing statements Local news media When discussing bill over the phone Social service agencies

28 Distribution of Financial Assistance Policy (FAP) - Requirement
Proposed regulations: The FAP must include four types of measures that the hospital facility will take to widely publicize the FAP Measures to make paper copies of Financial Assistance Policies, application form, and plain language summary of policy available to public Measures to publicize through conspicuous public display for visitors Measures to inform community who will require financial assistance Measures to make available on the website (including downloading, viewing and printing) Final regulations remove this requirement Instead clarify that the hospital facility must actually widely publicized the FAP, application form, and plain language summary in the community it serves.

29 Distribution of Financial Assistance Policy (FAP)– Policy Language
Distribution of Financial Assistance Policy - Information Regarding Financial Assistance will be available: through our website: by calling our Financial Counselors at (304) , or by calling Patient Financial Services at at patient access points and upon admission and/or discharge from the facility in plain language publications through postings in public areas of the facility (including admission areas, waiting rooms, and/or emergency room) on billing statements and/or appointment letters through in person and telephone conversations regarding bill payment other means that make the policy available to our patients and our community at large.

30 Notification Period & Application Period - Requirement
The hospital must have made reasonable effort to ensure the individual is FAP-eligible. This is done by: (i) notifying the individual of the FAP; (ii) providing the individual with the relevant information to complete the FAP application; and (iii) documents a determination as to whether the individual is FAP-eligible. In addition, the proposed regulations describe both a “notification period” and an “application period”. Notification period: Begins on the date care is given and ends the 120th day after the hospital facility provides the individual with the first post discharge billing statement. Application period: The hospital must accept and process FAP applications submitted by an individual during a longer period that ends on the 240th day after the hospital provides the individual with the first post discharge billing statement.

31 Notification Period & Application Period - Requirement
Incomplete applications: Incomplete applications during the “notification period” should result in suspension of ECAs for a reasonable period of time and written notification of what additional information is needed to complete the application with specific contact information. Incomplete applications during the “application period” should result in a suspension of ECAs until the individual fails to respond within a reasonable period of time given by the facility to respond.

32 Notification Period & Application Period – Policy Language
…the patient should return the application within 30 days. However, Financial Assistance Application Forms will be accepted up to 240 days from the first billing statement.

33 Amounts Generally Billed (AGB) - Requirement
The FAP must have language stating that following a determination of FAP-eligibility, an individual will not be charged more than AGB for emergency or other medically necessary care. The FAP must also state which of the permitted methods the hospital facility uses to determine AGB. Finally, the FAP must either state the percentage(s) of gross charges the hospital facility applies to determine AGB and how those AGB percentage(s) were calculated or explain how members of the public may readily obtain this information in writing and free of charge.

34 Amounts Generally Billed (AGB) – Policy Language
Although the regulations specifically apply to patients who have been deemed to be financial assistance eligible, there could be exposure if we do not adequately screen patients for charity and charge them based on full billed charges. We have made the choice to apply the AGB discount to all uninsured patients. The final regulations also specify that the AGB limitation applies regardless of an individual’s insurance status.

35 Amounts Generally Billed (AGB) – Policy Language
Amounts Generally Billed (AGB): Individuals not meeting the criteria listed above, but who have no third party coverage (governmental or commercial) will be eligible for discounted care. The discount is an estimate of Amounts Generally Billed (AGB) to Commercial and Medicare patients. A discount of 45% will be applied to all hospital charges billed by WVUH. Detail of how this discount was calculated can be found in Exhibit III to this policy. We are considering adding language that indicates that insured patients may also be eligible for the AGB discount if their liability is greater after the insurance pays.

36 Amounts Generally Billed (AGB) – Sample Calculation
Payer Group Total Inpatient and Outpatient Charges for 2013 Total Inpatient and Outpatient Discounts for 2013 Discount Rate for 2013 Inpatient and Outpatient Services for 2013 Medicare Fee for Service $428,138,636 $277,417,956 65% All Private Health Insurers 298,109,646 48,095,048 16% Combined Medicare and Insurance Reimbursement $726,248,282 $325,513,004 45%

37 Financial Assistance Application
The application has been condensed from 7 pages to 2 pages. A majority of the requested information is the same, but it has been reformatted to make it easier to handle and less cumbersome to complete.

38 Financial Policy Billing and collections information was removed from the financial policy and has been moved to a detailed Billing and Collections Policy as indicated in the regulations

39 Step 4: Draft New Policies
Billing and Collections Policy Financial Assistance Policy Exhibit III – Calculation of Amounts General Billed (AGB)

40 Billing & Collections Policy
A new billing and collections policy has been drafted that details the process that a patient’s account goes through in the collections cycle. The policy includes: Discussion of amounts charged and any discounts the patient may be entitled to Extraordinary collection actions (ECAs) that the hospital uses Information on applying for financial assistance The step by step process of the patient collection process including primary collection cycle, presumptive financial assistance, the bad debt collection process and how billing disputes will be handled.

41 Amounts Generally Billed (AGB)

42 Step 5: Board Approval Present policies to the board highlighting relevant changes.

43 Step 6: Implement Policy Changes
For us, this includes… Working with finance to implement updated patient discounting (AGB) Automating discounting where possible Statement Redesign Website Revamp Implementation of presumptive charity scoring Working with Marketing on “conspicuous displays” Working with Marketing on updated distribution materials including “Plain Language Summary”. Retraining of customer service staff and early out/bad debt vendors on the scripting for verbally offering financial assistance. Walking through current self pay workflows to validate that we are compliant with new policies

44 Plain Language Summary
The proposed regulations required a hospital to distribute a plain language summary of the FAP before discharge from the hospital, with at least 3 billing statements, and during oral communication. “Plain Language” is described as written at a 9th grade reading level. The final regulations provide some relief from this requirement. Require Hospitals to offer a plain language summary as part of the intake or discharge process Require conspicuous notification of the availability of financial assistance on all statements including contact information for applying or learning about financial assistance. Requires conspicuous displays in public areas notifying patients about the financial assistance policy.

45 Challenges Finding the time to work through the details
Getting everyone on board for changes in self pay dollars Pre-discounting self pay Changes in longstanding financial assistance policies Manual vs. Automatic workflows Marketing department (image)

46 The Landscape is Changing
0.14% of Net Revenue 0.21% of Net Revenue 0.35% of Net Revenue Payer mix shift under ACA has increased Medicaid net revenue % Both before and after ACA, True Self pay is a small fraction of our total payer mix as we typically collect less than 5% of these dollars. For all service areas, self pay represents < 0.5% of our total Net Revenue. WVUH Berkeley MC Jefferson MC

47 ACA… It is a new day in healthcare

48 Contact Information Leah Klinke, Director – Patient Financial Services West Virginia University Hospitals

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