Jonathan G. Wiik, MSHA, MBA 501r – Are we there yet? Jonathan G. Wiik, MSHA, MBA May 11th, 2017

Agenda (3), (4), (5), (6) – Where they fit and Why you should care Components of 501(r) (3), (4), (5), (6) – Where they fit and Why you should care Compliance Gaps / Risks Strategies & Best Practice Tools and workflows

Deductibles are out of control and rising fast… 63% increase in Deductibles since 2011; outpacing Inflation (6%) and Earnings (11%) Average deductible quadrupled: 2003 = $518 2016 = $2069 WIIK Percent of workers with deductibles: 2003 = 52% 2016 = 83% Source: Kaiser Family Foundation, kff.org

$1200 / $400 deductibles respectively ACA exchange plan deductibles are resulting in more funding gaps for patients in 2017 Bronze $6100 deductible Silver $3600 deductible Gold $1200 / $400 deductibles respectively Platinum WIIK Government is pushing patients to the bronze plans. $5000 deductible. People do not have that type of disposable income. People think they have bought insurance, but in fact, have purchased more debt. Source: Healthpocket

Scary problems for families because medical bills FAMILY PAIN… 1 in 4 have an unpaid at risk health care bill 1 in 5 are paying a medical bill over time Almost 1 in 10 have a bill that cannot pay at all

Adults with medical bill problems had lingering financial problems because of their medical bills Commonwealth Fund – The problem of underinsurance and how rising deductibles make it worse

Hospitals have increased Financial risk… As more consumers are insured and their self-pay responsibility increases, healthcare providers need to update their collections approach to making sure revenue is coming in. Accounts receivable (A/R) from insured self-pay patients increased 13 percent in the past year. Total A/R over the same time period from uninsured self-pay patients decreased 22 percent, mostly as a result of high financial risk patients joining Medicaid in expansion states. For every one uninsured self-pay patient payment dollar in the first quarter this year, there were approximately 22 insured self-pay patient payment dollars. Source: ACA International, http://www.acainternational.org/healthcaremarket-research-shows-shift-in-hospitals-financial-risk-36795.aspx

Components of 501(r) (3), (4), (5), (6)

501(r) Background: PPACA added to the IRS code and proposed in 2012 Imposes new requirements on 501(c)(3) organizations (aka “Not- for-profit”) Outlines general requirements on a facility-by-facility basis for: Financial Assistance P&Ps Charge ceiling for “eligible individuals” Insulate non screened patients from “extraordinary” collection actions Effective in 2016 based on the facilities FY end

Components of 501(r) 501(r) has 4 primary sections that are impactful 501(r)(3) Community Health Needs Assessment (CHNA) 501(r)(4) Financial Assistance Policy (FAP) 501(r)(5) Limitation on Charges – Amounts Generally Billed (AGB) 501(r)(6) Extraordinary Collection Actions (ECA)

501(r)(3) Community Health Needs Assessment (CHNA) Conduct a CHNA every three (3) years… “not only the need to address financial and other barriers to care but also the need to prevent illness, to ensure adequate nutrition, or to address social, behavioral, and environmental factors that influence health in the community.” Components: Joint CHNA reports and implementation allowed Governmental public health should be involved Defining the needs of community - Solicit input from persons representing the broad interests of the community Widely available – available on website and upon request* Excise tax – total or partial failures

501(r)(4) – Financial Assistance Policies Financial Assistance Policy 2 Plain Language Summary 3 Reasonable Efforts for notification 4 Widely Publicized Criterion 5 Emergency Medical Care Policy

501(r)(4) – Financial Assistance Policies Financial Assistance Policy Plain Language Summary Reasonable Efforts for notification Widely Publicized Criterion Emergency Medical Care Policy CLEARLY specify the eligibility criteria (charity or discounted care) for receiving financial assistance Document, document, document - If you do not request any documentation you cannot deny based upon lack of documentation What’s NOT covered – is it listed? Which -physicians are included (employed/non-employed?) TIMETABLES – how long is it effective, when is it rechecked?

501(r)(4) – Financial Assistance Policies Financial Assistance Policy Plain Language Summary Reasonable Efforts for notification Widely Publicized Criterion Emergency Medical Care Policy A simple written summary, explaining Financial Assistance and distributed as: Available at Admissions and Emergency Department Translated for patients typically treated at your facility Mailing with the Final Notice

501(r)(4) – Financial Assistance Policies Financial Assistance Policy Plain Language Summary Reasonable Efforts for notification Widely Publicized Criterion Emergency Medical Care Policy DOCUMENTATION of “Reasonable Efforts” Three (3) bills Written (Dunning Cycle, FINAL notice) vs Oral (not conversational) Plain language summary (included with statements?)

501(r)(4) – Financial Assistance Policies Financial Assistance Policy Plain Language Summary Reasonable Efforts for notification Widely Publicized Criterion Emergency Medical Care Policy Signage - “Conspicuous Public Displays” Website Emails / flyer Community notification Statement (final notice) inclusion

501(r)(4) – Financial Assistance Policies Financial Assistance Policy Plain Language Summary Reasonable Efforts for notification Widely Publicized Criterion Emergency Medical Care Policy Written policy that requires the hospital, without discrimination, to care for emergency medical conditions to individuals regardless of whether they are FAP-eligible Prohibits debt collection activities in the emergency department or in other areas of the hospital facility where such activities could interfere with the provisions, without discrimination, of emergency medical care

501(r)(5) Amounts Generally Billed (AGB) Requires hospital organization not to use gross charges and to limit amounts charged for care provided to individuals eligible for assistance to not more than the amounts generally billed to individuals who have insurance

Does NOT allow calculation to be limited to just commercial insurance 501(r)(5) AGB Two Methods Look-back Prospective Uses Medicare fee-for-service and private health insurers paying claims to the hospital facility Calculate AGB percentages at least annually Estimate the amount it would be paid by Medicare, Medicaid, Medicare and Medicaid together, and “discount” as if the patient were a Medicare fee-for-service beneficiary. Does NOT allow calculation to be limited to just commercial insurance

501(r)(5) AGB “Uh oh…” IRS 501r open forum “The Treasury Department and the IRS note that section 501(r)(5) does not distinguish between insured and uninsured FAP‐eligible individuals. Accordingly, the final regulations continue to apply the AGB limitation of section 501(r)(5) to all individuals eligible for assistance under the hospital facility’s FAP, without specific reference to the individual’s insurance status.”

501(r)(5) AGB When - calculated/updated Standard Operating Procedure Considerations for AGB: When - calculated/updated Where - stored/available/accessed – in FAP (best) How – communicated Why - Plain language summary implications?

501(r)(5) AGB When - calculated/updated Standard Operating Procedure Considerations for AGB: When - calculated/updated Where - stored/available/accessed – in FAP (best) How – communicated Why - Plain language summary implications?

501(r)(6) – Extraordinary Collection Actions (ECA) May not engage in “extraordinary collection actions” before an organization has made “reasonable efforts” to determine whether individual is eligible for financial assistance for the care provided.

501(r)(6) – ECA What are ECAs? Upfront collections before medically necessary or emergency care Deferral or Denial of Care based upon nonpayment of one or more bills for previously provided care Reporting the individual to consumer credit reporting agencies or credit bureaus Legal actions such as garnishing wages or liens / foreclosure

501(r)(6) – Extraordinary Collection Actions (EAC) What are NOT ECAs? Listing with a collection agency Calling a patient by telephone Writing off the account to Bad Debt Sending a patient a bill Charging interest – considered extension of credit Filing bankruptcy claim Upfront Collections for the current care Others…

Strategies & Best Practices Workflows and tools to ensure compliance and efficiency

So What? Risk of 503(c) tax exemption Non compliance penalties ($50k excise tax per facility) Patient Satisfaction Collection Costs Community Benefit

Good enough, versus the risk? 501(r) requirements affect almost every aspect of a hospital's financial operations Noncompliance can trigger sanctions ranging from a simple correction of a minor error to revocation of exempt status Even at the most careful facility, the current guidance makes it clear that no violation is too small to be ignored Source: Michalowski, CPA, Washington June 30, 2015; http://www.thetaxadviser.com/issues/2015/jul/tax-clinic-05.html

How does 501(r) Impact Providers? Providers must adapt their financial screening, billing and collections strategies: Financial Assistance should be offered and DOCUMENTED on all self pay and high balance accounts Upfront collections critical to capture whole or partial payments Patient payment discussions should occur throughout the treatment process Medical bill financing services, either directly or through partnerships, are an option to allow patients to pay over time Charity care plans will need to incorporate underinsured patients

Tax Exempt Status Risks… “Not-for-profit hospital will pay up in tax dispute as exemptions draw widespread heat”... New Jersey hospital has agreed to pay $26 million to the town where it's located to end a dispute over the hospital's property tax exemption Judge Vito Bianco: “…then for purposes of the property-tax exemption, modern nonprofit hospitals are essentially legal fictions.” Michael Meissner, a tax partner at Squire Patton Boggs - “I think a hospital that is in a city with financial challenges, which pretty much describes most cities, ought to be aware of the changing landscape …include keeping records about how a hospital is benefiting its community and tracking its programs in case they're questioned…” SOURCE: “Not-for-profit hospital will pay up in tax dispute as exemptions draw widespread heat”. Schencker, Lisa. Modern healthcare 11/11/15. www.modernhealthcare.com/article/20151111/NEWS/151119974

More non-compliance legal opinion for tax exemption The rejections could be costly. If a non-profit hospital loses its tax-exempt status, it likely would have to shell out millions of dollars a year in property taxes http://www.chicagobusiness.com/article/20110817/NEWS03/110819886/non-profit-hospitals-baffled-over-losing-tax-exempt-status

Significant Risk under the new guidelines: If collections actions are underway and the patient applies for assistance, the hospital is responsible for reversing all of those collection actions Hospitals cannot deny financial assistance for missing or incomplete information from the patient. Even an incomplete charity application is not a basis for refusing aid You might be able to correct the mistake, but you may have lost a patient and damaged your reputation in the process Source: Michalowski, CPA, Washington June 30, 2015; http://www.thetaxadviser.com/issues/2015/jul/tax-clinic-05.html

Presumptive Eligibility 1 Cannot use presumptive determinations for ineligibility 2 Consider using presumptive determinations to assess which patients are unlikely to be eligible (e.g. above a FPL of 500%) 3 EOSP / collection agency partner should KNOW which patients they can perform ECAs on…

Presumptive Eligibility (PE) Use third party data to presumptively determine eligibility for FAP! The use of third party data facilitates a consistent (unbiased) method for identifying patient eligibility for financial assistance PE allows more efficient identification of patients - sooner in the revenue cycle Automatically qualify a subset of individuals without having to interview them and have them prove their eligibility through supporting documentation This can result in increased/accelerated cash flow as well as save money by converting manual workflows into automated processes 501r requires documentation of screening efforts on all potential FAP recipients for eligibility before sending them to collections or employing extraordinary collection actions

Presumptive Eligibility Approaches: Demographic Scrub – “Community Rating” Credit Check – Soft Hit (only can be seen by the patient) Tools and datasets available from TU to help perform these functions effectively

Sample Workflow SELF-PAY / HIGH BAI Ask for payment Payment collected? YES NO Done, patient proceeds Credit info returned? Cascade to Community-Based Model Probability of financial aid? Potential Charity Need application FPL 201%-350% 100% Charity No FA required FPL < 200% No FA required, collection zero Collect FA, collect payment, sliding scale, based on AGB Not eligible for Charity FPL > 500% Payment required or reschedule services Potential Charity Need application FPL 351%-500% Payment of AGB on uninsured, pay difference between allowable and AGB if insured For self-pay you want to see if they qualify for charity You’re at 100% risk so you want to put into deposit or charity bucket right away Gateway to putting something on an OR schedule

In Summary…. 1 Get a team together – Risk, Compliance, Finance, Revenue Cycle, BOD update 2 Update your Financial Assistance Policy(s) and Application Process(es) 3 Scrub and update your Signage, Statements, Flyers, Website, etc… 4 Standard work for - AGB (Amount Generally Billed) 5 Evaluate a Billing and Collection Policy addition 6 Billing Statements Audit and Language Update 7 Referral Base Inventory (physicians) and align with Financial Assistance (employed vs non-employed) 8 DOCUMENT, DOCUMENT, DOCUMENT (did I say document???) 9 Identify gaps – put processes and tools in place

QUESTIONS?

THANK YOU

Jonathan G. Wiik, MSHA, MBA Principal - Revenue Cycle Management Health Care Solutions jwiik@transunion.com

Appendix

Best Practice Checklist Community Health Needs Assessment: CHNA defines community served and how that community was identified CHNA assesses needs of community and outline methods used CHNA has a prioritized list of community health needs and criterion used CHNA defines potential resources and measures utilized to meet community needs CHNA is “widely available” to community CHNA reflects collaboration and input from a health department community resources at the local, state, or regional level CHNA describes how broad interests of the community were represented CHNA reflects input received from underserved, low- income, minority population(s) in the community CHNA outlines hospital’s implementation strategy intends to meet the community needs, AND clearly defines which community needs it does NOT intend to meet CHNA outlines the hospital’s implementation strategy anticipated impact and plan to evaluate impacts

Best Practice Checklist Financial Assistance Policies: FAP language that clearly defines non-covered and discounted services FAP specifies amounts charges to patients and how discounts are applied FAP describes the method(s) in which patients can apply FAP outlines the collections process and what actions are taken for non-payment FAP lists the discount applied under the AGB provision for the charges ceiling and outlines the method FAP Policies Reviewed Annually Method of how FAP is “widely publicized” is described Website Charity Assistance Information - Prominent Charity Signage in Place at all Waiting / Intake Areas FAP outlined ECTP and “conspicuous” signage is in place Documentation of FAP in EMR/HIS/Other (each patient)

Best Practice Checklist Extraordinary Collections Actions: Process for ECA suppression for non-screened patients Procedure for incomplete, not received, or in process FA applications EOSP/TPCA Education and P&Ps Updated Debt Collection Policy Reviewed Annually Statement Language for Charity Assistance in place Financial Waiver/HIPAA HITECH opt out form in place Financial Counselors (or CAS) educated to new rules

Financial Clearance Workflow These are some high level workflows that are very effective. There is a kit we can send you where you can get a larger, more detailed version. These are based on industry-best practice, and follow a path to ensure patients and the provider are on the same page.

High-balance patient account workflow These are some high level workflows that are very effective. There is a kit we can send you where you can get a larger, more detailed version. These are based on industry-best practice, and follow a path to ensure patients and the provider are on the same page.