Hospitals turn to credit checks to reduce financial risk

The information in a patient's credit report can be extremely valuable to health care providers.

In the midst of financial complications, health care providers have been forced to better strategize their revenue cycle management. Though the practice isn't new, more hospitals are now implementing credit checks as a way to both calculate a patient's ability to pay and mine population health data.

"The new self-pay accounts receivable is rising at an uncontrollable rate, creating an accounts receivable headache," said Jordan Levitt, partner and co-founder of Payor Logic, a vendor offering patient credit checks to hospitals, in an interview with Healthcare Finance News. "They owe money, hospitals need a way to assess risk."

An overview of this new financial risk
With more insured patients enrolled in a high-deductible health plan, the cost of care is still expensive for a significant part of the country. Levitt noted that insurance is now a larger portion of income than it used to be, in some cases being as much as 30 percent of it. For this reason, more hospitals have had a much bigger risk in receiving payment directly from patients.

This trend was indicated in a 2015 study from Crowe Horwath LLP. According to the data, the amount of insured self-pay patients has increased 13 percent in one year. In the first quarter of this year, there were 22 insured self-pay patient payment dollars for every one uninsured self-pay patient payment dollar. The study said that the lower payment averages from the insured self-pay patients were more of a burden on a provider's bottom line.

How credit checks are helping
To better navigate this risk, credit reports are being used on both front and back ends, according to attorney David Esquivel in an interview with Healthcare Finance News. On the front end, he said, the report can help hospitals determine ability to pay. On the back end, it can help them collect debt and other owed payments.

For the latter purpose, credit checks help collection agencies see which unpaid bills are worth pursuing. In one example, if a patient has a history of not paying, that pattern would be indicated in a credit report and could help hospitals avoid spending resources on trying to collect that payment.

With the level of detail on credit reports now, a credit check can uncover all of a patient's spending habits, even certain lifestyle choices. Plus, with a 2015 change by the three major credit bureaus, medical debt is even more transparent to providers. While the cost for each credit check can rack up $15,000 each month, Levitt told Healthcare Finance he believes that investment is easily returned in increased cash flow.

For more solutions on how to better manage your revenue cycle, contact Professional Medical Services today.