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The Self-Pay Tipping Point

Lyman Sornberger
President and CEO, LGS Health Care and
Chief Health Care Strategy Officer, Capio Partners, Cleveland, OH

Along with all the merits of healthcare reform come certain consequences, namely those that impact revenue cycle management. Declines in reimbursement, new payer models, pay for performance, and ICD-10 are among the factors that lead to a specific and undeniable conclusion: that self-pay accounts, which are the patient’s responsibility for payment of services rendered isn’t just here to stay—it is expected to experience significant increases regardless of the demographics. If you look deeply into the insurance exchanges, higher out-of-pocket models and various employer strategies that aim to curtail the cost of healthcare, such as high-deductible plans, it becomes clear that patient responsibility will invariably increase.

While providing quality care is, and should be, the first priority of any reputable healthcare provider, generating revenue is also paramount. Whether for profit or not, providers need adequate financial resources to sustain their ability to recruit world-class talent, purchase cutting edge technology and have facilities available to people who need care.

In 1999, only five percent of reimbursement came from patients. In 2014, we hit 40 percent. In 2015, experts predict that as much as 50 percent of reimbursements will come from patients. Not only are more patients paying out of pocket, the amount of money for which they are responsible is also greater than ever.

The financial landscape within which providers have become so accustomed to working is shifting dramatically. Healthcare exchanges, new payment models, a major coding transition, declining reimbursement for several medical procedures and a major redistribution of responsibility in the payer mix are among the key causes of this shift.

The result is that your number three payer after Medicare and Medicaid is now the patient. If you are a non-profit, couple that with the impending 501r statute of the new IRS code, initiated by the Patient Protection and Affordable Care Act and it’s just a “perfect storm.” Healthcare providers will need to adjust their processes accordingly to ensure they can reap the financial rewards of this new healthcare system.

The following highlights the factors that will have a significant effect on self-pay this year and outlines strategies that are proving to be an essential component of a comprehensive revenue cycle strategy.

The future is going to magnify the patient financial responsibility. Here’s what providers can expect as a result.


With healthcare reform, many patients and members will opt for high-deductible health plans (HDHPs) to keep their premiums low. It’s also likely that more currently insured patients will move to HDHPs as their employers change plans in an effort to control costs. Health providers will need to adjust their current collections processes to address this shift in payer mix. More insured patients will result in more claims, and more claims mean more denials and/or liability to the patient. Health systems need to address this increased volume with internal and external strategies.

The increase in patients with HDHPs will place an emphasis on upfront eligibility, estimator and collections solutions. Health systems need to determine what each patient’s responsibility will be and make every effort to collect this payment (or make payment plan arrangements) prior to the service being rendered or at the point of delivery.


More and more programs are converting from federal to state insurance exchanges which offer medical insurance coverage, not realizing that the federal programs have a significant out-of-pocket patient responsibility. The most prevalent federal program is the “Silver” state exchange health plan, which holds the patient responsible for 40 percent of the total due to the provider.


The other major challenge happening today is payers denying coverage because members are not paying their premiums. And, guess what? Payers are not consistent with when they deny the service back to the provider. Some are denying the service when the premium is first missed, while others are denying after the 30-day notice to the member has been issued and the premium is still unpaid. This leads to an increase in self-pay.


ICD-10 is a hot topic with a mixed bag of reactions. Some are taking it seriously, while others have adopted more of a wait-and-see attitude. Will providers, payers and vendors be ready? Even if they are, can they support the operational impact of this major change? It’s reported that coder productivity will decline by at least 50 percent. So, will providers be prepared to potentially double their staff? Can providers handle the volume? It’s inevitable that some providers will begin to engage the patient.

What will happen with self-pay post ICD-10? While much of the concern for ICD-10 support is focused on investing in sufficient training and coding resources leading up to the October 2015 deadline, at least one ICD-10 authority warned providers not to overlook the need for post-transition support.

“The service most people aren’t talking about is that of post ICD-10 remediation services,” says Jim Morrison, senior VP of Operations at McKesson. “The pain associated with an ICD-10 transition won’t end in October 2015. Support will be needed long after the deadline to ensure a smooth transition.”


Another big part in addressing the rise in patient self-pay will be patient education. A healthcare provider can’t assume that a patient understands his or her coverage. Providers need to ensure the patient knows their financial responsibility at the point of service to avoid surprises and unfavorable patient satisfaction scores. Educating patients about their financial responsibilities will be a key step in successful revenue cycle management processes going forward.

Healthcare has embraced a consumerism model to improve patient satisfaction through education and treating the patient appropriately. The pressures of the numerous changes can create inappropriate engagement of the patient. This may feel like the right thing to do at the time, but it can have significant, adverse downstream effects on patient satisfaction. And then, externally, how are you going to handle the ICD-10 code set changes? Do you have safety nets in place? Do you, perhaps, have coders in the wings and partnerships with outsourcers to protect your interests?

By focusing attention on the five areas discussed in this paper, a provider will be better prepared to handle the financial challenges that are sure to have an effect on “business as usual” in healthcare.

Lyman Sornberger, President and CEO for LGS Health Care and Chief Health Care Strategy Officer for Capio Partners. Prior to his roles at LGS Healthcare and Capio Partners, Sornberger was the Executive Director of Revenue Cycle Management for Cleveland Clinic Health Systems (CCHS) from 2006 – 2012. This role comprised of the Revenue Cycle Management for all 11 Cleveland Clinic Health Systems Ohio and Florida Hospitals and 1,800 Foundation Physicians. His responsibilities included all CCHS Patient Access Services, Health Information Management and Billing. Prior to his affiliation with CCHS Mr. Sornberger was with the University of Pittsburgh Medical Center for 22 years as a leader in revenue cycle management. Sornberger is a graduate from the University of Pittsburgh with a BS and Masters Degree in Business. He can be reached at 216-337-4472 or lyman. This email address is being protected from spambots. You need JavaScript enabled to view it..

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