Charity Update WV HFMA May 16, 2013 Sandra J Wolfskill, FHFMA Wolfskill and Associates, Inc.

Today’s Agenda  Opening Exercise  Quick Review of the Basics  ACA – Collection and Billing  Compliance  Best Practices  Getting Started  A Patient’s Experience  Challenges Ahead 2

Opening Exercise  In your group, identify the top three challenges facing providers in the area of charity care. Then, identify the top three opportunities for improving charity care operations in your organizations.  Challenges: 1. _________________________________________________________________________ _________________________________________________________________________ 2. _________________________________________________________________________ _________________________________________________________________________ 3. _________________________________________________________________________ __________________________________________________________________________  Opportunities: 1. _________________________________________________________________________ _________________________________________________________________________ 2. _________________________________________________________________________ _________________________________________________________________________ 3. _________________________________________________________________________ __________________________________________________________________________ 3

Opening Exercise ChallengesOpportunities 4  Distributing FAP info & applications to patients  Getting completed applications returned  Meeting deadlines set in FAP  More charity dollars approved than have budgeted  Getting correct discount applied  Unable to contact patient via mail, or telephone  Pre-discharge, mailing with initial billing statement  Follow-up work queues  Setting staffing to meet volumes of work  C-suite/ BOD (they approved the policy!)  Automate  Address checking software, skip tracing service

Guidelines for Reporting Bad Debts & Charity Care 5  HFMA Principles and Practice Board Statement 15: Valuation and Financial Statement Presentation of Charity Care and Bad Debts by Institutional Healthcare Providers  Bad debts = deduction from patient service revenue  Functions the same as contractual adjustments in that when an account is classified as a bad debt, the receivable is reduced and the deduction from revenue is recorded  Charity = eliminated from both revenue and receivables  In effect, eliminates both the receivable and the revenue from the financial statements  Disclosure of charity care policy and amount provided required  Included in the community benefit information provided on the IRS 990 filing as well as any state filing requirements  Shown as a footnote to the financial statements Source: 2011 AICPA audit guide, Accounting Standards Codification and ASC

Importance of Bad Debts vs. Charity Classifications 6  Measurement of revenue cycle effectiveness, or ineffectiveness (bad debts)  Consumption of resources for which no compensation is received (charity)  Demonstration of fulfillment or organization’s charitable purpose (charity)  Accurate statement of one portion of community benefits (charity)  Compliance, discounting based on financial needs (charity and bad debts) Source: HFMP Principles and Practices Board Statement 15 (December, 2012)

Components of Charity Care 7  Financial assistance policy requirements  Formal policy approval  Application form  Eligibility criteria  Restrictions on ECA during application period  Publication and communication to patient population  Communication in “plain language”

ACA Requirements 8  Proposed regulations published by Department of the Treasury – June 26, 2012  Applies to 501(c)(3) organizations, beginning with taxable years after March 23, 2010, except …  Section 501 (r)(3) – Community Needs Assessment – taxable years after March 23, 2012  Section 501 (r)(4 – 6), on or after date published as final or temporary regulations; providers to use proposed regulations as guidance until final or temporary rules issued  Summary of sections:  (r)(1) – Definitions  (r)(2) – Reserved  (r)(3) – Community Health Needs Assessment  (r)(4) – Financial assistance policy and emergency medical care policy  (r)(5) – Limitation on charges  (r)(6) – Billing and collections

ACA Requirements, continued 9  501 (r)(4) – Financial assistance policy and emergency medical care policy  Written policy that applies to all emergency and other medically necessary care provided by hospital  Includes eligibility criteria for financial assistance and whether such assistance includes free or discounted care  Includes basis for calculating amounts charged to patients  Includes method for applying for financial assistance and timeframe(s)  Description of actions that may be taken in the event of non- payment  Timeframe and incomplete applications ( = WHAT??)

ACA Requirements, continued 10  501 (r)(5) – Limitation on charges  For FAP-eligible patients, limitation = not more than amounts generally billed to individuals covered by insurance covering such care (AGB-amounts generally billed)  AGB methodologies  Look-back method  Annual calculation  Medicare fee for service as primary payer, plus all private health insurers primary payments, or Medicare fee for service as primary payer only  May use one aggregate discounting percentage or may calculate by as detailed as separate service lines, as long a calculated for emergency medical and all medically necessary care provided  Prospective Medicare method  Treat the FAP eligible as Medicare fee for service patient with AGB based on Medicare and beneficiary amounts expected as due

ACA Requirements, continued 11  501 (r)(6) – Billing and collections  Extraordinary collections actions (EACs) limitations  Actions that require legal or judicial process, such as  Liens  Foreclosure  Attachment of bank accounts or seizure of other personal property  Civil action  Cause arrest  Cause individual to be subject to a writ of body attachment  Wage garnishment

ACA Requirements, continued 12  501 (r)(6) – Billing and collections, continued  Reasonable efforts to determine eligibility defined:  Distribute plain language summary of the FAP and offers application form before discharge  Includes plain language FAP summary with all billing statements (at least 3)  Informs individual about FAP in all oral communications about the amount due during the notification period  Provides at least one written notice that  Identifies ECAs provider may pursue if no FAP application received by deadline or amount due is not paid by specified deadline (specified in notice) that is no earlier than the last day of the notification period  Is provided at least 30 days before the deadline specified in the written notice

ACA Requirements, continued 13  501 (r)(6) – Billing and collections, continued  Submission of complete or incomplete application satisfies notification requirement  If no application submitted, documentation of notification efforts required  Incomplete applications – one notification required, within specified timeframes  Presumptive eligibility permitted  Signed waiver does not constitute reasonable efforts

Compliance 14  What’s your plan to ensure compliance with FAP regulations? ___________________________________________

Compliance Thoughts 15  Review and update your FAP in light of proposed regulations  Update notifications (pre-discharge and post service)  Automate documentation of notices  Automate application processes  In-house software tool  Main system tool  Outsource to Medicaid eligibility service  Other ?????  Strengthen financial counseling unit and workflows  Random, structured audits:  Accounts with FAP write-offs  Completed FAP determinations  Denied FAP applications  Accounts sent to bad debt

High Performers – HFMA MAP Data MAP Keys 2012 DataBad DebtCharity Care Median MAP Award Data2%3% MAP Award – 10 th Percentile1% MAP Award – 25 th Percentile1%2% Your Hospital’s Data  What is your potential for improvement? Source: HFMA’s ANI PreCon (PCW2), 2012

Ideal Flow – Charity and Bad Debt 17  What’s the starting point for a charity or bad debt work flow?  Pre-service (i.e., scheduling and pre-registration)  Time of service (Unscheduled patients)  Post service (Everyone!)

Getting Started: Self Assessment  Document your current state of affairs for each segment: ActivityPre-ServiceTime of ServicePost Service Patient financial education provided Application form initiated with patient Application approved or denied System generated approval or denial notice produced and mailed Adjustment posted Appeal process activated and resolved

The Patient’s Experience Matters! 19  Examine the 4 pages of the patient’s bill and record your observations!

20 The Patient’s Experience Matters!

21 The Patient’s Experience Matters!

22 The Patient’s Experience Matters!

Challenges Ahead 23  Final regulations - ?  Internal process redesign and resources  Medicaid expansion  Insurance exchanges

Reference Materials and Contact Information 24  Proposed regulations: Federal Register/Vol 77, No. 123/Tuesday, June 26, 2012/Proposed Rules  HFMA Valuation and Financial Statement Presentation of Charity Care and Bad Debts for Institutional Providers, December, 2012 –  “Financial Assistance Policies of Charitable Hospitals”, An HFMA White Paper, September, 2012 –  Contact Information: Sandra Wolfskill, FHFMA