Rural hospitals are an essential pillar of America’s healthcare system, representing more than half of all hospitals in the country and serving almost 20 percent of the population. Despite this important role, many are in financial crisis. One hundred fourteen rural hospitals in the U.S. closed between 2011 and 2019, and another 15 closures were reported just past the midpoint of 2020. Nearly half of all rural providers were operating in the red even before the Covid-19 pandemic struck.
Rural hospitals’ ongoing and emerging challenges
Rural hospitals face long odds in the fight for survival. For decades, they’ve strived to provide affordable, high-quality healthcare amid inherently challenging circumstances. In rural communities, patient volumes are low and patients tend to be older, sicker, and poorer; hospitals depend heavily on lower government program reimbursements, and many facilities are outdated or lack needed equipment. In recent years, rural hospitals have begun grappling with the growing trend toward outpatient versus inpatient visits, higher rates of uncompensated care, the costs of complying with steadily increasing regulations, and other issues that add more weight to an already heavy financial burden. And, like every healthcare provider, rural hospitals must prepare for and manage crises such as the opioid epidemic and cyber-attacks, which can strain resources to the limit.
The Covid-19 pandemic may be the ultimate test. The National Rural Health Association (NRHA) says Covid-19 threatens the existence of up to 44 percent of rural hospitals and 25 percent of all U.S. hospitals. Revenue losses from delayed or canceled elective surgeries, increased costs of personal protective equipment (PPE), and patients hesitant to seek medical care have all contributed to dangerously thin operating margins. NRHA predicts rural hospitals with less than 90 days’ cash on hand may not survive another six months without proactive strategies to help strengthen their bottom lines. Among the tactics the association recommends is to build cash reserves by collecting receivables and reducing debt.
Collections difficulties magnified by the pandemic
Several financial realities in healthcare have forced many providers to add bill collection to their list of competencies. Patients with insurance have seen their payment responsibilities increase along with high deductible health plans, which for 2020, the Internal Revenue Service defines as having a deductible of at least $1,400 for an individual or $2,800 for a family. Almost half of rural Americans can’t pay an unexpected expense of $1,000 right away, much less deductibles and out-of-pocket medical costs that exceed those amounts. About 20 percent of rural residents say they can’t find doctors who accept their insurance, which means they have to cover the entire bill.
Fortunately, many health insurance companies temporarily waived deductibles and co-pays for Covid-19 testing and treatment, dentistry, telemedicine, and other services to encourage people to get the care they need. There is, however, a catch in some cases. Employers with self-funded health plans can opt-out of waiving Covid-19 out-of-pocket expenses, which means their employees are responsible for their own medical bills.
Uninsured patients pose another collection risk for providers, especially as the pandemic rages on. While unemployment fell slightly in August, more than 13 million Americans are still not working, leaving many without health insurance or ready cash to pay medical bills. People in rural areas are also more likely than their urban counterparts to churn between Medicaid eligibility and commercial insurance coverage based on income, which creates potential coverage gaps.
For people not on Medicaid or Medicare, health insurance choices tend to be more limited and more expensive in rural areas. Commercial insurers have difficulty competing due to low economies of scale, less favorable health outcomes, and other negative market dynamics. A report from the Centers for Disease Control and Prevention (CDC) showed that nearly 14 percent of people under age 65 living in rural areas had no health insurance of any kind in 2017.
Action steps for rural hospitals
Increasing collections in the current environment can seem like an uphill battle, but a comprehensive approach to patients’ financial experience has proven to yield significant improvements in revenue, cash flow, and bad debt for hospitals across the country. There are five essential steps in the process:
- Establish a relationship. This is particularly important in rural hospitals where patients and healthcare staff are often friends and neighbors. Upfront communication before services are delivered is an opportunity for registration staff to develop trust, reduce patients’ apprehension, and identify issues that may become barriers to payment. These conversations can be sensitive, so staff should be trained on how to address each patient’s unique needs.
- Confirm insurance coverage. Many people with health insurance are unsure of what their policies cover and what portion of medical bills they’re responsible for. A 2019 national survey showed that fewer than half of Americans can correctly define what health insurance deductibles and co-pays are. Registration staff should have tools to identify and verify coverage and obtain prior authorization if needed. Rural hospitals should also consider designating a patient advocate to identify federal, state, local, and third-party medical benefit programs that uninsured and underinsured patients may qualify for.
- Provide accurate estimates. Patients are more likely to pay their medical bills when they know in advance what they’ll owe and that the hospital will find a workable payment solution. Estimation tools should account for individual patient copays and deductibles to provide a clear picture of financial obligations. An online estimation tool on the hospital website is an excellent way to allow patients to enter their personal insurance information and generate an estimate even before making an appointment, and it will soon be a CMS requirement.
- Determine likelihood to pay. It is unlikely that insurance will cover 100 percent of most patients’ bills. Before designing a payment plan, the registration staff should evaluate the patient’s credit standing, payment history, and residual income to determine their unique financial circumstance. The most advanced tools use algorithms to score patients or guarantors on the spectrum from those least likely to pay to those who could write a check for the entire bill on the spot.
- Create a personalized payment plan. Armed with accurate bill estimates, insurance information, and propensity to pay, registration staff can tailor a payment plan most likely to fit the patient’s needs and collect the full amount owed.
Looking beyond the pandemic
To survive Covid-19 and beyond, rural hospitals must focus on collecting receivables, improving cash flow, and reducing bad debt. Fine-tuning financial clearance and personalizing patient payment solutions have proven to help providers increase upfront collections by up to 200 percent while simultaneously improving patient satisfaction.
Rural hospitals are vital to America’s healthcare system and significant economic engines for smaller communities. Though many are struggling, innovative financial solutions can help bridge the revenue gap and lead to increased efficiencies that will serve providers, patients, and communities now and into the future.
Photo: nito100, Getty Images