Regional Health is in the midst of retooling its patient bill payment options in an effort to better balance the need to cover its costs with the need to serve uninsured patients.

The health care system will outsource a portion of its billing procedures to a Billings-based company, Revenue Cycle Partners, that promises a positive financial return to health care systems while improving patient satisfaction regarding billing, according to its Web site.

The change should mean more options for how most of the health system's patients pay their bills. Revenue Cycle Partners will handle all "self-pay" accounts. This includes bills for the uninsured as well as the portion of the bill that an insured person pays himself.

If a person with a bill wants to pay in full immediately, the client will pay Regional Health, but if the patient needs any kind of payment plan or to apply for a charity care bill reduction, he or she will work with Revenue Cycle Partners.

The change will not typically affect a person whose health care comes under Medicaid or Indian Health Service.

Although some of the changes are still in the works, the health system has already eliminated the 20 percent "prompt pay discount" for people who pay their bills in full within 30 days of billing, John Vetsch, director of revenue cycle for Regional Health, said.

That option was originally created to give the uninsured a break and as an incentive for them to pay the bill quickly, either with cash or by taking out a personal loan at a lower rate than what the hospital could offer.

But an evaluation showed the discount was not being used primarily by the uninsured, Vetsch said. Only about 0.5 percent of uninsured people paid in full within 30 days. Rather, it was used by people who have insurance with a reasonable deductible but saw the opportunity to save by paying immediately. Six percent of the total patient population took the discount.

"It wasn't serving that target audience," Vetsch said.

He said the health system may bring back some kind of prompt pay discount under its new billing program, but no plans have been made yet.

The discount was created three years ago, the last time Regional made significant changes to its billing, Vetsch said.

At the time, there was concern that uninsured patients were being charged "full retail price" while insured patients received a discount negotiated by their insurance companies.

In response, Regional offered a one-time debt-amnesty program and then made revisions to how it managed billing for uninsured patients.

The changes included a 10 percent discount off retail price for the uninsured, new income guidelines that qualified more people for charity care, a cap or "catastrophic" maximum payment level depending on income, and the 20 percent "prompt pay discount."

With recent changes in the economy affecting how patients pay their bills, Regional is evaluating how well those updates from three years ago are working and will be making some adjustments.

More people are requesting a payment plan instead of paying in full, Vetsch said. And the system has seen its bad debt rise and people paying off debt more slowly.

Combined bad debt and charity care were at $36.3 million in the 2006 fiscal year, and dropped to $33.3 million in 2007 as a result of some of the changes in billing, said Mark Thompson, vice president of finance for Regional Health. But since then, they have increased, he said.

Bad debt and charity care were back to $36.3 million in 2008 and hit $44.5 million in the 2009 fiscal year, which ended June 30, Thompson said.

While the bad debt and charity care has actually decreased slightly in those years as a percentage of the health system's gross revenue - from 5.5 percent to 5 percent - the growing dollar figure is a serious concern, especially since in that same time frame, payment shortfalls from government programs including Medicare and Medicaid have increased from 45 percent to 49 percent, forcing the health system to find that difference through efficiencies in other areas of its budget, Thompson said.

The several changes in the works with billing aim to address the rise in bad debt through better customer service and more payment options.

"We are very cost-conscious," Vetsch said. "We know we have to collect as much as we can to cover our costs and to do things that are sound business practice, but I'm also balancing that with we are a not-for-profit health care system providing services to a community."

Among the changes, which are not all finalized:

• The uninsured will pay less for clinic visits. These visits typically generate smaller bills than hospital stays and in the past did not always qualify for income-based reductions. Now, uninsured clients may have to pay a co-pay but not the full clinic bill, depending on income limits.
• Until now, patients have been able to finance their bills through the health system at 12 percent to 14 percent interest. The health system is in negotiations with a bank to provide financing at closer to an 8 percent rate, Vetsch said.
• The health system has not finalized its plan for how bills will be resolved through Revenue Cycle Partners, but Vetsch said there will be more options. The company's Web site says it offers "patient-friendly" billing, online payments and statements, financial assistance and charity care processing, among other services. The company says its focus is to work with, not against, patients in helping them understand why they owe the bill and how to best pay it.
• Regional Health will eliminate the 20 percent prompt pay discount.
• No Regional Health jobs will be eliminated when the system switches self-pay billing to Revenue Cycle Partners. Rather, people who work in this area will be reassigned to focus more on working with insurance claims, an area that has become more complex with new regulatory issues and increasing audits from insurers.

More hospitals are outsourcing billing in this way to improve patient satisfaction, Vetsch said.

"If we're spending a lot of time trying to understand those regulatory concerns, then we look at our customer and say, are we really addressing their concerns and meeting their needs?"

Contact Barbara Soderlin at 394-8417 or Barbara.soderlin@rapidcityjournal.com