insideARM Blogs - Michael Klozotsky

Hospitals New Years Resolution 2009: More Aggressive Debt Collection Practices?

2008-12-22T12:45:25-07:00

A recent article in The Salt Lake Tribune suggests that Utah hospitals have begun to chase the money owed to them by patients more vehemently than in the past, even as the average unpaid balance is just $380 according to one healthcare collection agency in the Beehive State.

The November 28, 2008, article notes that “Utah's four largest hospital systems -- Intermountain Healthcare, University of Utah, MountainStar and Iasis Healthcare -- were owed $259 million in their 2007 fiscal years, a 77 percent jump from five years ago.”

It should come as no surprise to readers concerned about healthcare finance—directors and c-level business office personnel healthcare providers, healthcare collection mangers and executives, and medical debt buyers—that hospital and physician group bad debt is and has been on the rise. Nor it is any great revelation that placement volumes of medical paper to collection agencies have increased in 2008.

But hospitals have historically taken a kid gloves approach to internal and outsourced collection practices. Apparently, “auld acquaintance” should be forgot... and only brought to mind via a collection letter, or a property lien, or a knock on the door from the county sheriff.

According to The Salt Lake Tribune, “From July 2007 to June 2008, the nonprofit University of Utah seized $4 million in income tax returns from patients who had not paid medical bills. It also received judgments worth $500,000 on 69 of that period's 1.15 million accounts. Many more lawsuits were filed against patients whose debt occurred years before. Nonprofit Intermountain Healthcare does not take people to court. Instead, it reports patients who refuse to pay to credit agencies.”

In 1788, Robert Byrnes penned the now-ubiquitous lines to “that New Year’s Eve” song. The second verse to in the Scotsman’s tongue goes:

And surely ye’ll be your pint-stowp!
And surely I’ll be mine!
And we’ll tak a cup o’ kindness yet,
For auld lang syne.

For those readers who are Tartan-deficient, allow me to translate. The lyrics are traditionally understood to emphasize the last two lines: that it would be well and good to share a pint (medicine), all charitable-like, and reminisce about old times.

Read in the context of healthcare in 2009, the first two lines should be heard loud and clear as they echo from the halls of hospital business offices: You buy yours, and I’ll buy mine! Happy New Year: now pay me.

Unemployment and Uninsured Data Contaminate Traditional Holiday Mood

2008-11-25T12:42:32-07:00

According to the Kaiser Family Foundation, “A one percent rise in the nation's unemployment rate is projected to lead to 1.1 million additional uninsured and 1 million new Medicaid enrollees (600,000 children and 400,000 adults), increasing overall state Medicaid spending by $1.4 billion while tax revenues fall 3 to 4 percent.”

Data from the Bureau of Labor Statistics showed that nonfarm payrolls fell by 240,000 last month, increasing the nation’s unemployment rate to 6.5 percent in October, four-tenths of a percentage point higher than in September 2008. The October decline in jobs followed losses of 127,000 in August and 284,000 in September.

But the official BLS figures mask a somewhat more distasteful reality, not unlike the sugary marshmallow topping that covers many a Thanksgiving sweet-potato casserole. Alternative measures of labor underutilization point to an additional under-employment rate of 4.32% in October, up 10.5 percent from September and up 40% from January 2008. Combining the results for those formally unemployed, marginally attached workers, and individuals employed part-time for economic reasons nets a more precise U.S. unemployment rate of 11.8 percent.

In “Olden Tymes,” one might hear women and men of a Certain Age whispering the phrase “At least you’ve got your health,” over steaming cups of coffee, even in the toughest of times. Irrespective of the calamity preceding that phrase, a modicum of thanks was reserved for the solace that could be found in one’s health.

This Thanksgiving, with the U.S. economy (I think we can safely, finally say) “in recession,” hackneyed expressions of gratitude for healthiness bring only cold comfort. Time was that “Have you heard he lost his job?” could have been followed by “Well at least he has his health.” Today it is clear that employment and substandard healthcare go together like mashed potatoes and gravy.

In an economic climate like this one, medical collections—and collection activities in general—are a hard sell, even if that sentimental perception is wholly divorced from the fact that creditors need to get paid in all 12 months (as opposed to just skipping that one containing the Christmas and Hanukah and New Years Eve stuff) of the calendar year.

But these are hard times for many consumers. Thanks may be difficult to give. And the ARM industry, (which, lest we forget, is made up of businesses confronting intense financial pressures in equal measure to the rest of the country), would do well at the outset of the holiday season to learn a Thanksgiving Lesson from the governor of Alaska before her memory fades into the wintry Juneau nights: one doesn’t have to pardon all turkeys, but reprieve in the face of slaughter is pretty difficult for most folks to swallow.

In a Dreadful Economy, Hospitals Should Maximize ARM Support Options

2008-10-23T09:27:20-07:00

Almost a full month into the fourth quarter of 2008, the healthcare industry—like many other major players in the U.S. economy—is looking a little peaked. Patients (too many of them un- or underinsured) are facing intense pressure simply to afford food, fuel, and four walls and a roof. Havoc on Wall Street has paralyzed credit markets and severely restricted hospitals’ ability to obtain bank financing.

In addition, insideARM’s Cynthia Wilson reported earlier this week (“New Regulatory Requirements for Hospitals Present ARM Opportunities," October 21) that fast-approaching regulatory changes are sure to cost hospitals substantial amounts of money in order be in compliance.

How’s that for adding insult to injury?

The mounting healthcare finance crisis won’t be easily solved, just as a lollipop at the end of a doctor visit is inadequate consolation if you’ve just been diagnosed with Hodgkin's disease. But some of the unavoidable costs tied to new regulatory mandates—especially in areas related to data security, accurate reporting of charity care buckets, and document management—might be mitigated if healthcare providers call on their business partners in the ARM industry to augment the products and services they currently provide.

For example, experienced—out of internal operational necessity—in protecting sensitive consumer information, a collection agency already engaged by a hospital to recover delinquent accounts may be able to advise its client on how to insure the proper safeguarding of medical records. Expanding established business relationships will certainly cost less than forging entirely new ones. And healthcare agencies—the inheritors of increased placement volumes but dwindling liquidation rates in the current economic environment—can seize an opportunity monetize existing (but underdeveloped) best practices.

We’re all familiar with the phrase, “If I had a nickel for every…” Under challenging economic circumstances, capitalizing on the business of “stuff you see and do everyday” is a sure way to create efficiencies and maximize value.

Organization to Accredit Healthcare ARM Firms Names Advisory Board

2008-10-03T10:19:13-07:00

At the end of July, insideARM announced the formation of a new not-for-profit organization, the Accredited Healthcare Business Associates (AHBA), to bring together ARM companies that serve the healthcare industry. AHBA members must demonstrate experience working medical acounts and adhere to a host of rigorous standards in order earn accreditation. The group's organizers originally planned to launch AHBA in September, but several infrastructure snags which have since been resolved (website development, for example) delayed the official kick-off.

Today, AHBA announced the members of its Advisory Board. The Board is currently in the process of reviewing final accreditation standards before application materials are sent to collection agencies, debt buyers, and vendors that operate in the healthcare market of the ARM industry.

AHBA Advisory Board Members include:

Ron Sargis, Esq., Attorney
Hefner, Stark & Marois, LLP

Tracy Campbell, V.P. Public Advocacy
California Hospital Association

Michael Klozotsky, Analyst
Kaulkin Ginsberg Company

Victoria Morgan, Former President
HFMA Southern CA Chapter

Sandy Lawrence, President
CMRE Financial Services, Inc.

Gail McCann, CDM Analyst
St. Mary Medical Center

Don Daly, President
G.T.M Recovery, Inc.

John H. Bedard, Jr., Attorney
Franzen and Salzano, P.C.

Once AHBA establishes a membership base of healthcare ARM companies, a second Board (elected from accredited members) will be formed to guide AHBA operations.

ARM companies who have not already done so may contact Jack Nixon, AHBA President, (jack@cmrefsi.com) or Michael Klozotsky(mklozotsky@kaulkin.com) for further information or to request membership application materials once available. AHBA intends to distribute AHBA applications, pending the completion of the Advisory Board’s document review, in the next four to six weeks.

2008 MacArthur Fellow: Dr. Regina Benjamin Receives Genius Award

2008-09-30T02:21:30-07:00

Last Tuesday, in the midst of a financial storm on Wall Street, The John D. and Catherine T. MacArthur Foundation announced the 25 recipients of its 2008 Fellows Program. Among them was an Alabama physician who has dedicated her career to doing battle with the aftermath of Hurricanes Georges and Katrina.

While Washington scrambles to quell tempests largely derived of human greed, Dr. Regina Benjamin’s work strives to mend the bodies and lives of those “everyday folks” that are the mot du jour among political janitors these days. Dr. Benjamin’s clinical philosophy has been described as something akin to “pay what you can, we’ll figure out the rest.” (Please read more about Dr. Benjamin here.)

Some days I think we need more of that. Rights and responsibilities.

On a sad, related, and somewhat personal note, America lost one of its rare geniuses just eleven days before Dr. Benjamin’s award was announced. On September 12, David Foster Wallace, 46, hanged himself in his California home. Mr. Wallace, author of Infinite Jest, was a 1997 MacArthur Fellow.

In the fall of 2000 when I was teaching literature at the University of Illinois (and while Wallace was himself teaching writing just 50 miles up Interstate 74 at Illinois State University) I used one of DFW’s short stories as the basis for an exam. The entire text, including the title, is 86 words long. Short story was a deliberate understatement. My students looked at me as if I were insane. This barren page—this smattering of vowels and consonants—was the foundation of an entire exam?

I remember telling them unapologetically something like: “Wallace has given you what he can, you figure out the rest.”

Some days I think we need more of this.

Genius is fleeting. And a good friend to have on a rainy day.

CareFirst BlueCross BlueShield: Sorry, no credit. Dont ask.

2008-09-15T10:27:17-07:00

Picture this: A late summer Saturday. A farmers’ market. And the most pristine heirloom tomato you’ve ever spied—perhaps a plump Cherokee Purple or a juicy Mortgage Lifter—calling out to you from the grower’s table. Reaching into your pocket for some walking-around money, you quickly realize that the only way that delicious cultivar is coming home with you is on the back-end of a plastic transaction.

If you happened to be at one of ten farmers’ markets operated by the Northeast Organic Farming Association of Vermont that now accept debit cards and electronic benefit transfers, the goddess Ceres would be smiling down on your contemptible lack of legal tender.

Or imagine this: Just past midnight. Interstate 95 somewhere between Fayetteville, SC and Savannah, GA. The craving manifests itself in a single word: McNuggets. Four of them, nestled in their cardboard container, attractively priced at just a dollar. Delectable. But all your cash was exhausted hours ago on the New Jersey Turnpike. Relax. Swipe your card. $1.06. No need to sign your name. You’re back on the highway with edible gold as your co-pilot.

Monetary transactions between consumers and local farmers or International fast-food sellers have historically been sites of cash transactions. Who wants to pay interest charges on a Filet-o-Fish? But in the 21^st century, consumers value the efficiency of electronic payment methods, even for gastronomic impulse purchases. It seems logical that for higher priced, recurring, and invariable payments, buyers and sellers might champion electronic payment methods, but for a $4 bag of Kettle Korn at a community market?

Enter CareFirst, Inc., the not-for-profit, non-stock, parent company of CareFirst of Maryland, Inc. and Group Hospitalization and Medical Services, Inc. which, according to its website:

Is the largest health care insurer in the Mid-Atlantic region, serving nearly 3.1 million members;

Has more than 5,400 employees in District of Columbia, Maryland, North Carolina, Northern Virginia and West Virginia;

Has more than 80 percent of all of the Maryland/D.C./Northern Virginia region's health care providers participating in one or more of its provider networks.

In other words, CareFirst isn't a lemondade stand.

Data shows that more than 1.5 million people are members of self-insured plans in the State of Maryland; 44 percent of those are issued by CareFirst. At the start of 2008, CareFirst had a combined self-insured membership of almost 900,000 DC, Virginia, and Maryland residents. But none of those self-insured members can pay their monthly premiums online with a credit or debit card.

Welcome to the dark ages.

Despite the data from a 2002 Federal Reserve report suggesting that the use of paper checks is still prevalent in the U.S. (although the data also includes checks paid by depository institutions, U.S. Treasury checks, and postal money orders), the only people I regularly encounter writing personal checks for purchases over $100 are renters and the octogenarians in front of me at the supermarket who singlehandedly, or en masse, render the term “Express Lane” meaningless.

For a large company like CareFirst whose customers remit the same amount of money to month after month, year after year, the “Sorry, no credit” policy is not only archaic, it sets into motion the machinery of delinquent receivables. Stamps and envelopes cost money. Writing out “One hundred eighty three and 00/100” takes time. And the USPS is less than punctual.

Perhaps CareFirst should think about catching up with McDonald’s when in comes to getting paid. But as it stands now, all those Big Macs bought electronically will be catching up to its members’ arteries long before the insurance company ever sees the light.

Once Upon a Time in a Hospital

2008-08-13T12:22:05-07:00

Last night on NPR’s "All Things Considered," Ted Robbins relayed the puzzling story of a patient at the University Medical Center in Tucson known only as “Adobe.”

UMC staff members have no idea who the man they call Adobe might actually be; the few belongings that were transported to the hospital with Adobe, among them a photo ID issued in Mexico, turned out not to be his. The predicament is that Adobe doesn’t know his true identity either, responding to almost any question with the single word “Cindi.”

The list of “facts” that UMC knows would fit in a Petri dish. Adobe was transported to UMC with a traumatic brain injury at the end of April following what must have been a horrific truck accident; four people died, 18 were injured and shuffled to various Arizona hospitals, and another 20 left the scene (Public service announcement: don’t get into what NPR describes as a “pickup truck” with 41 other people). All involved in the wreck were believed to have been illegal immigrants*. Adobe prefers to eat fish and melon. And for someone who can’t remember his own name, the question of health insurance is pretty much a moot point. There’s your Petri dish.

Were it not for the fact that the melodramatic aspects of this tale involve a living human being, Adobe’s story would be prime fodder for a cinematic treatment. An overloaded truck. “Foreigners.” A gruesome highway accident. A massive head injury. Amnesia. Caring medical staff. Ice Cream. An international quest for answers.

Were it not for the fact that UMC has to have spent hundreds of thousands of dollars—at minimum—caring for one patient who will more than likely never be able to reimburse the hospital for his care, it would be easy to forget that Adobe’s story is a worrisome parable for the healthcare industry.

The NPR report quotes a well-intentioned UMC nurse who remarks, “[Adobe] doesn’t have any family, so we’ve become his family.” Melodrama 1, Parable 0. The fact is, Adobe is not a member of that nurse’s family, nor is he the orphaned child of an anthropomorphized UMC. He’s a man with a serious brain injury who is unlikely to pay his escalating medical bills, whose life was saved by the medical arm of an organization while it’s other arm—the financial one—slits its own throat.

Adobe’s story is a melodrama and a parable. It’s soon to become a tragedy for one or both parties involved as well.

*It is my opinion that Adobe’s immigration status is immaterial to this story. Were he an American billionaire, insured to the eyeballs and in the same medical predicament, the financial implications for UMC would remain the same.

Medical Mettle: New Organization to Accredit Healthcare Agencies

2008-07-24T11:44:32-07:00

Earlier today insideARM announced the formation of a unique business association that seeks to more closely unite healthcare finance professionals and ARM industry companies by establishing an accreditation process replete with rigorous standards, business mix prerequisites, and an actual enforcement mechanism to ensure member compliance.

The Accredited Healthcare Business Association (AHBA), designed by industry veteran Jack Nixon of CMRE Financial Services, will soon begin building a stable of member agencies and medical debt buyers who will assent to comply with a thorough list of aboveboard business practices in the recovery of delinquent healthcare receivables.

In plainspoken terms, the need for a barometer to gauge the integrity of healthcare collectors’ business processes is the elephant in the corner for hospital A/R executives.

Plagued by rising bad debt on one front, healthcare creditors are also made patently uneasy by the risk of negative community image brought about by a disreputable outsourcing partner on anther front.

But this type of duality is actually shared by both the healthcare sector of the ARM industry and patients as well.

Agencies that work medical paper know they must establish reputations with healthcare creditors that surpass their counterparts in other ARM market segments. That’s all well and good, but without an autonomous body to validate their policies and procedures, any media report about abusive collection practices virtually erases even the best agencies standing in the healthcare industry.

And patients… well, one does not need a divining rod to figure out consumers’ general perception of debt collectors. Think hirsute ruffians with tire irons. At the same time, the financial and psychological burdens of unpaid medical bills are probably as onerous to patients as disease itself. Dignity is a watchword for healthcare providers; I suspect that patients who fall behind on their hospital bills expect the same from collectors.

So there’s that elephant. Just sitting there. And curiously enough, it’s the same elephant (in some ways) for the healthcare creditors, ARM companies, and U.S. consumers who all share a room with it.

As both a healthcare receivables analyst and member of the AHBA Advisory Board, I have been long convinced that—particularly for healthcare ARM—the concept of accreditation would legitimately benefit patients, agencies and debt buyers, and hospital creditors.

Knock, Knock. It’s AHBA at the door. They’re here to let your elephant out.

If you are an ARM industry firm currently working in the healthcare market, or a healthcare industry professional responsible for accounts receivable outsourcing, and would like more information about the Accredited Healthcare Business Association, please contact Michael Klozotsky, Analyst, Kaulkin Ginsberg Company, at 240-499-3836 or mklozotsky@kaulkin.com.

Kaulkin Ginsberg is the parent company of insideARM.com.

Medicare on Life Support: Access to Care as a Socioeconomic Ill

2008-07-09T09:40:49-07:00

However you slice it, the current political dogfight surrounding cuts to the federal Medicaid program—and efforts underway as I write to stop them—is both an economic and social problem. Major newspapers including the Wall Street Journal and the New York Times have recently covered both facets of the debate in broad strokes. And yesterday insideARM’s Cynthia Wilson’s “Tug-of-War” article engaged the issue from a receivables management perspective.

I’d like to push Ms. Wilson’s perspective a bit further. As groups on each side of the Medicare reimbursement dispute begin to lay their cards on the table, some medical practitioners have raised the stakes in the game by suggesting that if the proposed payment cuts are not rescinded, they will be forced to turn away Medicare patients in order for their practices to remain financially viable.

Access to care is conventionally understood to be a social factor in discussions about the U.S. healthcare system. But in the present context, more limited access to care for the nearly 40 million elderly Americans who rely on Medicare has grave economic consequences for healthcare creditors, patients, and ARM companies that collect delinquent medical receivables.

Mr. Smith’s local physician informs him that she will no longer see Medicare patients. Mr. Smith then has to find a new doctor whose office happens to be 20 miles from his hometown. Mr. Smith doesn’t drive. His daughter takes him to the doctor, using leave time from her job. Mr. Smith offers to pay for his daughter’s gasoline, at $4.19 per gallon in July… then at $4.37 per gallon in August… then…

They say time is money. If you drive a car, you know all too well that gas is money. For many elderly Americans on Medicare and with finite incomes, the social “annoyance” of having to travel farther to see a doctor quickly becomes a real dollars and cents problem that affects not only the patient, but potentially families, friends, and communities.

Mr. Smith now spends part of his household budget on gas. His daughter now spends part of her household budget on added car maintenance. Neither person has grown his or her income, but they might be growing their debt loads. The social turned economic. But don’t worry; it won’t stay an exclusively economic issue for long. When Mr. Smith can’t pay a hospital bill next winter, and the past due notices and collection calls start coming, healthcare providers and collection agencies will quickly see just how ugly a newspaper feature on the social audacity of “squeezing” elderly Americans for delinquent medical bills can be.

The economic turned social once again.

Family (De-)values: Caesarian Sections as Pre-existing Conditions

2008-06-19T10:35:40-07:00

Here’s a new one for you.

Health insurers often deny coverage, especially in the individual insurance market, for a range of recognizable pre-existing conditions: Emphysema, Type A Diabetes, HIV/AIDS, etc. Insurers argue that such maladies are rarely, if ever, curable and would cost underwriters and consumers millions of dollars annually if covered. And while some of the diseases that frequently appear on exclusion lists are attributable to lifestyle choices, few arise as a result of a common medical procedure.

Enter the C-section.

According to the New York Times, if you are a woman who has had a Caesarean in the past, the likelihood that you will be deemed insurable in the individual market is remote. If you can get coverage, prepare to pay more for coverage. A lot more.

C-sections typically cost more than vaginal births. In some instances the procedure elevates the risk of surgical complications that increases reimbursement costs for insurers. Women who have had Caesarians in the past are often more likely to require the procedure in the future. And many insurance companies beleive that, all too often, the practice is elective rather than medically necessary.

But for many women, Caesarians are not simply a result of a cavalier desire for convenience. And with few (and widely varied) state regulations governing what conditions insurers can designate for coverage, the C-section has become—albeit for only one gender in the U.S. population—a pariah.

Systemic misogyny aside, such policies lead to a proverbial rock and a hard place for women seeking individual coverage. Pay exorbitant premiums, hope for an uncomplicated natural birth, or consent to sterilization (yes, you read that correctly: compulsory tubal ligation as a trade-off for access to health insurance).

As more and more consumers are funneled into the individual insurance markets while simultaneously expected to carry the mantle of American Virtue (by populating the country), many women will find themselves financially burdened by unsustainable premium hikes or without coverage at all. Denials from one insurer can lead to subsequent rejections from other companies, the quintessential definition of insult to injury. In the absence of affordable access to health insurance, those mothers-to-be face significant risk of incurring medical debt that, more likely than not, will turn from a financial obligation into bad debt, defaults, or bankruptcy.

What a way to bring a child into the world.

Michael Klozotsky will be at the HFMA ANI conference next week. If you wish to meet with him, call him at (217) 369-4075 or email him, even once you arrive in Las Vegas. He'd love to talk with his devoted readers.

Collecting Medical Debt: Whos Your Bogeyman?

2008-06-04T09:21:37-07:00

Yesterday’s Wall Street Journal article, “Hospitals Put Patients’ Debt Up for Auction,” explores another tool the healthcare industry has at its disposal to redress the crisis of unpaid receivables.

Note the “agent,” the subject, the “do-er” in that sentence: the healthcare industry. Patients who don’t or can’t pay their medical bills owe that money to a hospital (for example). The hospital will try to collect on the account internally. The hospital may then outsource the collection effort to a contingency agency specializing in healthcare paper, or sell the account outright to a medical debt buyer—with many safeguards and strings attached. The hospital is the prime mover of all collection efforts, internal or external. But agencies and debt buyers wear a scarlet letter (which might just be an “A” like Hester Prynne’s, but typically is inferred to mean something a little more off-color than “adultery”) that credit issuers somehow escape.

Consider this quotation from the WSJ article: “’The hospital is an institution in the community, has a reputation, in many cases has a nonprofit mission to uphold,’ says Anthony Wright, executive director of the consumer-advocacy coalition Health Access California. ‘Once it goes to collections, that starts a process that can get a lot more antagonistic, a lot more aggressive, and a lot more damaging to a family's credit history and financial future.’”

In other words, hospitals have reputations (are reputable?), missions, and are members of communities. Collection agencies are antagonistic, aggressive, and damaging to patients’ financial pasts and futures.

Literature and the movies provide a useful analogy here. Ask ten people on the street to describe Frankenstein and here’s what they’ll likely say: bolts, fire, green, monster, aaarrrrgh! What they won’t say is “Victor.” Dr. Victor Frankenstein. The man who created a creature that the world misunderstood, came to hate, and tried to destroy.

Calling Victor’s creation “Frankenstein” is a misnomer, a misstep, a misapprehension. But that big green guy is a lot more entertaining as a bogeyman than boring old Victor. And so it is with the accounts receivable management industry.

Torches are lit, pitchforks are raised, and the mob chases blindly after a shadow of the Good Doctor (hospital?) who gave birth to this mess in the first place.