Dignity Health and Ooda Health are growing their partnership that aims to streamline the payment process.
The health system and the healthcare billing-focused startup are expanding their revenue cycle pilot program to two hospitals and a physician practice in Sacramento, building off its current pilot in two Arizona hospitals. They aim to launch in September, with the ultimate goal of scaling the program across Dignity’s network. Dignity merged with Catholic Health Initiatives in February to form CommonSpirit Health.
Executives compared it to a credit-card statement, where every patient is listed on a single bill that Ooda gives to Dignity, which is reimbursed in full. Ooda then presents a consolidated invoice to the patient and handles reimbursement, claiming that it can better respond to patients with its access to payer and provider data and develop a long-term relationship.
“With patient cost-sharing responsibility and bad debt on the rise, we as providers have had to try to do something different,” said Steve Scharmann, vice president of finance and revenue cycle management services agreement operations at Dignity Health. “We have tried for over a decade to get a single bill and make it a one-stop shop. Now, a patient can make a single phone call and talk to someone who has sight to the health plan and providers.”
Collecting bills from patients has always been a pain point for providers, and it has created friction with payers, said Seth Cohen, co-founder, president and chief operating officer of San Francisco-based Ooda.
“We are able to settle a bill in real time without the administrative back and forth,” he said. “We want to get to a place where a patient can check out of a hospital like a hotel.”
Administrative costs eat up a large share of total healthcare spending as payers and providers spend significant resources working through pre-authorization and other billing issues.
The cost of billing and insurance-related activities will amount to $496 billion in 2019, left-leaning think tank The Center for American Progress estimates. A 2018 study by Harvard and Duke academics published in JAMA found that up to 25% of emergency department visit revenue at an academic medical center went toward billing costs.
“The opportunity to resolve something is so powerful,” said Cohen, noting credit-card companies’ relatively simple transaction dispute resolutions.
Administrative toil inflates healthcare costs, often in the form of higher premiums. And as consumers shoulder more out-of-pocket costs, hospitals’ bad debt levels continue to grow, weakening their balance sheets.
There was an 88% increase in total hospital revenue attributed to patient balance after insurance from 2012 to 2017, a TransUnion Healthcare analysis found. Meanwhile, uncompensated care, a combination of bad debt and charity care, increased from $36.1 billion in 2015 to $38.4 billion in 2017, according to the American Hospital Association.
Medicare bad debt, which is the result of beneficiaries not paying their deductibles and co-insurance, increased from $3.14 billion in 2012 to $3.69 billion in 2016, a 17% increase, per Medicare cost reports.
Hospitals have historically not done a good job at collecting outstanding bills, healthcare executives said.
“It is not their core competency,” said Dr. Edmondo Robinson, chief transformation officer at Christiana Care Health System.
The median number of days that it takes not-for-profit and public hospitals to collect outstanding invoices was 46.4 in 2018, slightly down from 49.6 in 2014, according to Moody’s Investor Services most recent data. While health systems have gradually improved, larger organizations often have thousands of employees solely dedicated to revenue-cycle management.
But volumes continue to either stagnate or decline, which means hospitals will not be able to grow to mask rising bad debt levels. Thus, they are turning to specialists to try to lower the time and cost to collect. They often cobble together different technology that adds complexity.
“The core infrastructure of how claims get paid and collected seems to be relatively unchanged for decades,” Cohen said.
Dignity reported provision of bad debts of $587.3 million in 2018, up from $547.8 million in 2017. That number grew to $979 million on a pro-forma basis for the first nine months of fiscal year 2019 as the system added Catholic Health Initiatives to its balance sheet.
Executives said they don’t yet have data on the exact reduction of bad debt or time and cost to collect since the pilot was launched in September, but the feedback they have gotten from customers who are surprised to receive one bill has resonated, they said.
“The No. 1 goal in the pilot is not increasing the yield, it is prioritizing the member experience,” said Cohen, adding that Ooda offers discounts for creating online payment plans and 0% financing.
Providers and payers have advocated for resolving what has typically been an adversarial relationship. But few have reached a collaborative middle ground.
“There is a groundswell happening,” Scharmann said. “I would say it has been lip service for many years, and to a certain degree it still is. But I see more payers and providers coming to the table to try to do this better.”