Fair Isaac Collections and Recovery of Post-Treatment Medical Payments
The rising cost of healthcare has led to an increase in the late payment or non-payment of medical bills by many patients after they have been treated. This trend is forcing healthcare providers into the collections business where they have little experience.
To make up for their loss in revenue healthcare providers also have been forced to raise their rates, creating an unhealthy spiral in costs which is borne by all consumers. Fair Isaac is developing analytic tools to help healthcare providers manage their revenue cycle better and mitigate the cost spiral, while preserving their positive relationships with patients. The following information provides an introduction to our work in this field.
Overview
Why is Fair Isaac interested in medical payments?
As the leader in analytics and decision management, Fair Isaac has a great deal to contribute to solving one of the most confounding problems facing the healthcare sector, namely payment processing. With the continuing rise in healthcare costs, patients have become responsible for paying a larger portion of their medical bills. As happens in other areas where consumers are strained to pay bills, a portion of this debt will become delinquent. Consequently, healthcare providers are being forced into the collections business, an area where they have little experience. The following illustrates why this has become an urgent problem for many healthcare providers.
- Increasing out-of-pocket patient expenses — According to Modern Healthcare, for every $1 spent on healthcare in 2005, 13¢ was paid directly by consumers. This number is expected to increase as insurers and employers shift more of the financial burden for healthcare to consumers. The proliferation of high deductible or "consumer driven" health plans will contribute to further increases in out-of-pocket expenses by patients through co-pays, deductibles and excluded procedures.
- Growing number of uninsured and under-insured. According to a recent report by the Commonwealth Fund, 75 million working adults were either uninsured or underinsured in 2007, compared to 61 million in 2003.
- Epidemic of uncompensated care for healthcare — The American Hospital Association estimates that in 2006, more than $31.2 billion of annual hospital revenue was instead bad debt, representing 5.7% of hospitals' expense. For healthcare providers operating on thin margins, increased uncompensated care and corresponding weak cash flow can force them into financial failure.
Isn't uncompensated care just another overhead cost for hospitals?
Uncompensated care today poses a significant and growing dilemma for hospitals. To remain solvent, hospitals have to make up for the uncompensated care by raising their rates for healthcare services. As a result, all of us in the U.S. pay higher rates for medical services. This aspect of inflation in healthcare costs will only get worse unless hospitals get better tools for managing their patient payment processes. At Fair Isaac, we believe we can develop solutions to help healthcare providers address this problem.
But shouldn't hospitals focus on treating patients rather than on bill collections?
Hospitals are first and foremost focused on treating patients. However, the reality for most hospitals is that without a reasonable level of financial performance it is difficult to support their mission to care for patients. Financial health requires spending substantial — and increasing — amounts of time and money trying to help patients understand and respond to their payment responsibility. Many hospitals will invest upwards of two years working with a patient to collect an unpaid patient bill. Many state and federal guidelines require substantial paperwork before charity status can be conferred on a patient. For patients who do not qualify for charity treatment, hospitals' and physicians' business offices invest considerable time and resources to find other financial solutions.
Will Fair Isaac tools be used to deny medical care to some patients?
No. Fair Isaac's work is unrelated to a healthcare provider's decision to treat a patient. In fact, in most circumstances it is illegal to consider the patient's ability to pay when deciding treatment for patients who require immediate care. The Emergency Medical Treatment and Active Labor Act (EMTALA) of 1986 prohibits a provider from even inquiring about an emergency patient's ability to pay before providing treatment.
What experience does Fair Isaac have in this field?
Fair Isaac has a 50-year history of innovation in analytics that help its customers to be more successful, including analytic-based tools and decision systems for use in collections and recovery. Today our collections and recovery solutions are used primarily in the financial services and retail industries. These offerings address the entire collections life cycle from day-one collections to post charge-off and debt-sale stages. Our solutions in this area have addressed:
- Workflow automation
- Monitoring of resource performance
- Integration of collection analytics
- Improving agency and channel management
- Integrating recovery analytics
Partnership with Connance
Who is Connance?
Connance is a recently formed company founded by healthcare industry executives. The company is developing technology-based solutions to help hospitals improve patient collections and solve the increasing problems associated with patient liabilities. It is based in Waltham, Massachusetts and formerly was known as Healthcare Analytics, Inc.
What is Fair Isaac's relationship with Connance?
We are a strategic development partner and an investor in Connance. We help them leverage and apply our technology and know-how to the healthcare sector. Our efforts focus on developing analytic-based solutions for use by the business offices of healthcare providers in order to improve their post-service patient revenue recovery, while at the same time preserving positive patient relationships.
Why don't hospitals just use Fair Isaac's existing products for managing collections and recovery?
The healthcare industry has unique challenges that require an approach substantially different from those used in other industries. For example, the healthcare industry has unique regulatory requirements. It also faces complex challenges in managing healthcare payments for which the patient — not an HMO or insurer — is responsible. And the healthcare industry upholds time-honored ethical standards for treating patients which are virtually unique in the business world.
Consumer Data
What kind of data are you using in this area? We have studied healthcare co-payments, deductibles and receivables, and data related to health care services. This data has been supplied by healthcare providers for research purposes, and all personal information is removed before the data is shared with us. We look for significant patterns in a large number of data records to better predict consumer behavior.
Are you building credit profiles or medical profiles on individuals?
No. Fair Isaac and Connance do not own any financial or medical information about specific patients. The data used for developing products in this field has been stripped of all identifying information.
In this work have you used credit history data from any of the national credit reporting agencies?
No.
How does Fair Isaac know that its data is secure? Should consumers be concerned about the potential for a breach of data?
Fair Isaac and Connance take substantial measures to ensure data privacy and security. Both companies also are ensuring that research and products are designed and maintained to be in full regulatory compliance with the Health Insurance Portability and Accountability Act (HIPAA), and other privacy and related laws. Throughout its long history, Fair Isaac has managed confidential data securely and in compliance with all legal and regulatory requirements. It's a responsibility that we take very seriously.
Agency Manager
What is Agency Manager?
Agency Manager is the first product produced by Connance. It is based on a technology platform that Fair Isaac has been using successfully in other industries. Agency Manager is a web-based solution that handles the placement, monitoring and management of patient billed accounts sent to collection agencies and other third-party vendors.
What does Agency Manager do specifically?
Agency Manager helps hospitals manage the collections agencies they hire. For example, it provides superior visibility into daily collection efforts, helping to ensure that agencies maintain the collection standards mandated by the hospital. The platform also limits the risk that a single account could be being pursued by multiple agencies at the same time which in the past has been a common issue.
What is the market for Agency Manager?
Connance initially is marketing Agency Manager to hospitals, hospital networks, technology partners and third-party collections agencies.
When did Agency Manager become available?
Connance introduced Agency Manager publicly on June 2, 2008. Potential buyers should contact Connance for more information.
"medFICO" MYTH
What is "medFICO?"
"medFICO" does not exist, nor will any product exist with that name. The term was originally used as a metaphor by some people in the healthcare sector to convey the idea of an analytic "score" to help healthcare providers manage their collections and recovery processes. However some consumers misinterpreted the term to mean something very different — an alleged credit-based score used to determine a person's eligibility for critical medical care.