Sramana Mitra: Give me an example of a type of patient that you identify. How do you design their payment plan?
David Shelton: We run through a specific algorithm with a scoring process where we’ll anticipate a performance outcome based not only on their FICO score, payment history over the last 90 days, but most importantly their residual income. What kind of money do they have available in their household to be able to meet the hospital obligation?
Sramana Mitra: How do you get that information?
David Shelton: We incorporate it both through public access, the information they provide to the hospital as part of the registration, and through past experience that we’ve seen for how they handle their healthcare payment experience.
What we want to do is help the hospital registration team identify people that have the ability to be able to pay 100% right now. At the same time, if a patient has no ability to meet the obligation, we want to be able to help the hospital steer them into their charity programs and their other programs and be able to move that body as quickly as possible.
What’s most important is treating the patient respectfully, regardless of their score. Our goal is to have no patient complaints as we go through that process.
Sramana Mitra: Now that you highlight the problem, I can imagine that there’s quite a cumbersome process that hospitals have to go through to figure out which patients can pay and which patients need to be directed to a charity program.
Can you elaborate a bit more about charity programs? What is the significance of charity programs and hospitals? How does that work? Where does the money come from? How common and prevalent are those charity programs? Are they true for certain kinds of hospitals versus not?
David Shelton: The charity programs can encompass several things. You see them in those for-profits and non-profits. The emphasis sometimes is different. Each hospital has a charity program that’s based on the federal poverty level and the policies that the hospitals elect to use.
They’re complemented by different government payer programs. The hospital gets reimbursement back from the government for how they handle the volume of charity work that comes through.
Sramana Mitra: When you use the phrase capable of paying 100%, I presume you’re talking about people who are paying their copay and are otherwise reimbursed by their insurance coverage.
David Shelton: Yes. I think the challenge is, the average patient has a deductible of $2,000 or greater. The average US household savings right now is less than $1,000, and the average annual household spend in healthcare is more than $5,600 a year.
When you take an individual who has a $2,000 plus deductible, is spending $5,600 a year, and only has $1,000 in the savings account, you have to be flexible to find the solutions to meet their obligations. Our experience is the vast majority want to pay, but they need help.
Sramana Mitra: In that case, what is the solution that you are providing?
David Shelton: What a lot of hospitals do is put patients in the same box. If you’ve got an outstanding balance of X, we want to collect $50 a month from you or perhaps put you through a lending program that puts hardcore payment responsibilities for you. It doesn’t take into account the residual income or the amount of money the patient has available.
What ends up happening so many times is that people who have the ability to pay right now are offered payment plans that they take because there’s no interest. People that aren’t able to pay are offered payment plans that they may try to make, recognize they can’t, and the relationships just turn poor when the hospital had a great opportunity to build a relationship with that individual.