Connance Presents "How to Get the Most Credit For Your Charitable Activities"

Learn How to Get the Most Credit For Your

Charitable ActivitiesCharitable Activities

November, 2010

Learn How to Get the Most Credit for Your Charitable Activities

The following information is not intended as legal

advice and may not be used as legal advice. Legal

advice must be tailored to the specific facts and

circumstances of each case or inquiry. Every effort has

been made to assure that the information contained in

this presentation is up-to-date as of the date of

Proprietary and Confidential ©2010 Connance, Inc.

this presentation is up-to-date as of the date of

publication. It is not intended to be a full and

exhaustive explanation of the law in any area, nor

should it be used to replace the advice of your own

legal counsel.

Presenters

Neil Smithson is the Managing Member of

PARO Decision Support, LLC.

• Specialists in healthcare self-pay • Developer of the PARO Score, leading

analytic for identifying missed charity

Steve Levin is Chief Executive Officer of

Connance.


•• Products include scoring suite to work

smarter and vendor management to improve

outsourced operations

• Exclusive development partnership with

FICOTM

• Recommended healthcare scoring solution of

Ontario System’s

•analytic for identifying missed charity

• PARO is utilized by a number of non-profit

hospitals and health systems around the

country

• In 2010, the PARO charity score is expected

to benefit over 750,000 patients

nationwide.

Key Ideas

• Fully identifying and documenting charity services are increasingly important

• Commonly charity efforts miss significant portion of eligible patients– Eligible patients slipping through process and policy gaps

• Best charity processes share common attributes in:


• Best charity processes share common attributes in:– Mission

– Policy and Procedure

– Operations

– Technology

Extending Charity of Increasing Concern

• Scruggs Litigation pointed out disparity on charity care policy and administration of charity care

• State governments have increased pressure to prove non-profit status

• IRS objectified Community Benefits under the Rules for Form 990,

Over the past decade, extension of charity recognized as a

critical industry issue


• IRS objectified Community Benefits under the Rules for Form 990, Schedule H

• HFMA, AHA and other industry groups recognize the need to improve access to charity programs

• Federal government calls for defined, publicly available policies that are consistently applied

• Impact of Affordable Care Act on the Uninsured and how to identify the correct revenue cycle path for the consumer

Missed Charity is a Significant Issue

Today, a significant volume of charity ending up in bad debt*

% of Accounts in Bad-Debt That Qualify for Charity Classification

35%

40%

45%

50%

� Generating little cash

� Diluting agency efforts

and raising their costs


0%

5%

10%

15%

20%

25%

30%

V W X Y ZProvider

Source: PARO Decision Support

and raising their costs

� Creating patient

satisfaction risks

� Exposing provider to

compliance risks

*HFMA estimated that national average is 25% of accounts going to bad debt really charity.

Signs of “Charity Gap”

• Charity can only be granted with full documentation

• Open ended process, accounts can age forever

• Unable to handle illiterate or those lacking financial statements - No consideration for patients that are unable to apply

• If patient is missed by financial counselors, they are never evaluated

• No separate accounting for medically indigent, traditional


• No separate accounting for medically indigent, traditional and presumptive

• Manual process, no automation

• Rely simply on single income estimate, credit score or propensity to pay score for charity declaration

• Methodology on Form 990, Schedule H Question 3 with “best guess” or “manual count”– Question: What percent of bad debt is likely charity?

Elements For Successful Charity Programs

Policies

Mission

Four core components contribute to success


Operations / Organization

Technologies

Source: Verite Healthcare Consulting

• Commit to outreach efforts to deliver charity care

• Commit to a process that is fair and equitable

• Strive to eliminate barriers to the poorest and

most inaccessible

Exceptional Charity programs start in the institution’s mission

Mission: Success Starts Here


most inaccessible

• Commit to be proactive, not simply reactive

• Be accountable for performance

• Build a process that is CONSISTENT

Policies: Striving to Meet Community Need

Traditional policies and processes barriers for many, often

poorest, consumers

33% of the uninsured are high school 33% of the uninsured are high school dropouts compared to only 7% for

1 in 5 consumers are functionally 1 in 5 consumers are functionally illiterate and cannot complete an application process

US Department of Education


“Financial Shadows” are “Financial Shadows” are roughly 26 million consisting largely of minorities, low income and the young

The Federal Reserve

1 in 12 Families do not have 1 in 12 Families do not have household transaction accounts – 8.7% of US Population

The Federal Reserve

33% of the uninsured are high school dropouts compared to only 7% for insured patients

Employment Policy Institute

Policies: Multiple Charity Classifications

• Traditional Charity Care − Patient Engaged and completes process

− Usually contains documentation from the patient and is most accepted by auditors and for reimbursement purposes

• Medically Indigent − Out of pocket expense exceed a specified amount or ratio to household income or

assets

Include thorough Presumptive Charity classification


• Presumptive Charity − Patients unresponsive or incapable of completing traditional process

− May not be accepted for reimbursement or disproportionate share

− Provider able to document specific indicative conditions• Patient already qualifies for means-tested public program

• Deceased with no estate or known family

• Transient, homeless persons

• Persons estranged from family with no support group

• Persons with unknown identity

• Validated 3rd party score establishing charity-qualified conditions

Operations: Process Focus

Work processes must connect different efforts under set

timelines

Treatment “Bad Debt”

Program Eligibility Efforts Presumptive

Charity


Charity DocumentationCharity

� No indefinite aging

� Must exhaust funding sources

Operations: Integrate Third Parties

• Establish process checks to avoid assigning patients to a bad debt collection prior to: – Attempting to qualify patients for Medicaid or other programs

and funding sources

– Offering a reasonable payment plan

– Testing for presumptive charity

Third parties often are key agents to properly implementing

charity policies


– Testing for presumptive charity

• Align and guide outsourcer’s efforts– Motivate to identify charity eligible and return

– Set specific rules for posting at credit bureaus on possible-charity

• Maintain connection of internal effort with external effort– E.g. accounts newly qualified with earlier accounts in bad debt

• Have capability to monitor agency activity conformance– Control core to filing and regulatory review

Technology – Using Outside Data to Support your Process

Model Type

• Models are built from historical behaviors to predict future

outcomes

• The solution should be a charity model that was built for

healthcare

• There is not a one-size fits all model for charity & collections

• The database should be applicable to all consumers and not

Third party data critical to comprehensive and consistent

process – cost can often be counted as community benefit


Consumer

Data

Decision

Outcome

• The database should be applicable to all consumers and not

biased to established consumers or “average consumers”

• Poverty proven to be correlated with socio-demographic

data, represented by public record information

• Does it have FCRA implications?

• Models should use multiple datasets

• Decisions for charity should include multiple decision points

and not solely based on score or income

Technology – Income Estimates and Poverty

Making charity acceptance based on estimated income ignores

known error in databases. Triangulation best

� Sample of 10,000

accounts and $11.4MM

in charges

� Compared income-

based only (red) with


based only (red) with

socio-economic (yellow)

− Public record FPL

� Income alone would

over qualify:

− 2,070 patients for

− $1.9 million in

charges

Technology: Picking A Charity Analytic

The key questions to answer:

• What was the model built to predict?

• What data is utilized and will that be useful for the very young , very poor and the homeless?

• Is the decision for presumptive charity based on multiple rules? What is my risk in over-qualifying?

• Is the application calibrated to the local economy and the


• Is the application calibrated to the local economy and the Hospital’s historical policy?

• What support is available to me in crafting updates to the existing charity policy and defending audits?

• Can the model be consistently applied so that presumptive charity becomes proactive as opposed to reactive?

Technology: Deployment Options

1) Reclassification of prior year bad debt- Reactive approach to Community Benefit classification

- Should extend benefit to consumers (recall accounts)

- Caution: Do not over-qualify

2) Reclassification prior to bad debt assignment- Proactive approach to Community Benefit classification

- Likely to improve Agency performance

- Leading practice for presumptive charity processing

3) Admission or Discharge scoring


3) Admission or Discharge scoring- Should be used to triage the patient through Financial Counseling

- Allows for opportunities to convert to other funding sources and obtain documentation for full charity classification

- Caution: Should not be used to automatically claim charity

Charity Checklist

• Board-level commitment to charity program

• Include traditional, medically indigent and presumptive classes and account for each separately

• Evaluate all patients, regardless of patient’s responsiveness or pro-activity, prior to bad debt assignment

– Step-wise through enrollment efforts to documented charity to presumptive charity

Policies


Mission


documented charity to presumptive charity

– No account declared bad debt without a consistent and equitable check

• Deploy the policy consistently, fairly and comprehensively across the network and outsource partners

– Avoid accepting data inaccuracy or bias for ease

• Keep current through routine refreshers and mystery shopping


Technologies

Source: Verite Healthcare Consulting

Questions / Follow-up

Steve Levin

[email protected]

Neil Smithson


Neil Smithson

[email protected]

Verite Healthcare Consulting, Keith Hearle, [email protected]

Economy & Finance

Connance Presents "How to Get the Most Credit For Your Charitable Activities"