Becker's Hospital Review

44 FINANCE Beating the Self-Pay Problem: How 3 Hospitals Developed Patient Loan Programs By Brooke Murphy H ospitals and health systems are looking for creative ways to tackle a thorny and growing problem: how to collect self- pay accounts associated with a growing number of high- deductible health plans. Today, patients with high-deductible policies are grappling with significantly greater out-of-pocket costs. Kaiser Family Foundation reports the average annual out-of-pocket costs per patient rose almost 230 percent between 2006 and 2015. As consumers shoulder greater financial responsibility for their care, hospitals and health systems are interfacing more than ever with patients to collect on accounts many individuals simply can't afford. For insured patients, management consulting firm McKinsey & Company estimated the rate of bad debt is increasing at well over 30 percent each year in some hospitals. As providers revisit their collection methods, some healthcare institutions are using patient loan programs to alleviate patients' financial burdens and reduce bad debt. Orlando-based Florida Hospital has offered medical loans to cash-strapped patients for more than decade. In that time, the program has evolved significantly to suit patients' increasing financial obligations. Before contracting with a third-party financing vendor, the hospital self- administered its own loan program and charged patients interest rates upward of 18 percent. However, low patient acceptance levels indicated the need for repayment terms that were more flexible and less punitive. Florida Hospital partnered with patient financing firm ClearBalance in 2007 in a concerted effort to transform its patient pay strategy from one of collections to one of resolution and repayment. For Florida Hospital, this meant striking interest rates from its loans altogether. Since implementing a zero-percent loan option, more patients have participated in CB's program than ever before, says Jeff Hurst, senior vice president of finance at Florida Hospital. In fact, Mr. Hurst says the program has out-performed all other repayment tactics, including staff follow-up, early-out and bad debt collections, for the past three years. e program is successful, in part, because it addresses patients financially in a non-threatening way, Mr. Hurst adds. Few patients control their need for medical care, and interest-free, non-qualifying loans relieve much of the financial anxiety affecting patients' psyche during a stressful time. Zero-percent interest loans show a hospital is not out to turn a profit from the ill fate of the sick or injured. is good faith better positions hospitals to engage patients in financial conversations at any point during the episode of care and offer a friendly way to meet their obligation, says Bruce Haupt, ClearBalance president and CEO. Patient loan programs make repayment less confusing for patients, however, they can add strain on a hospital with limited resources. at's why many hospitals have turned to a new wave of financing vendors for help. Dedicated financing firms offer a level of expertise that is imperative to navigating a heavily regulated and complex industry like credit. Vendors like ClearBalance actually offer their clients return on investment because they can manage and collect a greater number of accounts at a lower operating cost. But vendor companies aren't the only option available to hospitals considering alternative financing programs. Some banks are tailoring programs to meet hospitals' unique needs. St. Louis-based SSM Health implemented an interest-free patient financing program in partnership with Commerce Bank in 2014. e bank advances financing with three- and five-year terms to eligible SSM patients in the health system's four-state footprint — Missouri, Illinois, Oklahoma and Wisconsin. Paul Sahney, vice president of revenue management for SSM Health, says partnering with a financial institution made sense for SSM, as the system's hospitals don't have the resources or capacity to effectively manage monthly payment plans. e program has been wildly successful since its start two years ago. SSM and Commerce Bank have extended around $24 million in financing to 14,000 patients. "We encounter so many patients who feel dignity in meeting their financial obligation, but don't have the cash on hand," says Mr. Sahney. "We are helping to meet a very clear need in our community." As a faith-based, nonprofit health system, SSM Health isn't necessarily interested in making an ROI on its financing program. For accounts that default on payments, SSM pays Commerce the remaining balance in full. e account is transferred back to SSM, written off as bad debt "As a faith-based organization, we have a vested interest in supporting our patients as much as we can. By helping them fulfill their financial obligations, they see us as a true partner in care." — Paul Sahney, Vice President of Revenue Management for SSM Health

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