©2007 npas1 garett jackson, cpa segmenting hospital accounts based on likelihood of payment using...

©2007 NPAS 1

Garett Jackson, CPA

Segmenting Hospital Accounts Based on Likelihood of Payment Using Predictive Models

©2007 NPAS 2

Agenda

• Understanding hospital accounts receivable

• How predictive models were incorporated into the process

• Are the variables within the data already obtained from the patient?

• Future state of modeling and segmentation

©2007 NPAS 3

HCA’s Bad Debt Action Plan

• HCA started implementing its Bad Debt Action Plan in an effort to understand and attack the issue quickly. NPAS was a key focus of the plan.– What does the healthcare portfolio look like compared to other

industries?– Is it possible to change the early-out collection strategy to

address the portfolio?– Which resources (up-front, early-out, primary) are best

equipped to handle the inventory? – Which key indicators have the largest impact on collections?

©2007 NPAS 4

Collections Life Cycle

Front End Collections

Pre-admit payments

Payment at registration

Payment at discharge

Payment from billing

Early Out Collections

(NPAS)

Payment from letters

Payment from contacts

Payment from re-billing

Customer Service Focus

Identified as Facility

Collection Agency

Payment from credit reporting

Payment from legal actions

Payment from aggressive collection activity

Identified as collection agency

Bad Debt

NPAS Statistics

Mission Based Collection Practices

©2007 NPAS 5

NPAS Credit Scoring Notes

• Used the Equifax ERS 3.0 scoring method, which ranges from 1 to 1000

• NPAS grouped number of accounts in scored index ranges of 100

• Scores of 0 mean that no data was available

• Search America provided six industry comparisons done by Equifax

• NPAS compared results against All Industries, Auto Finance, and Bankcard Industries

• Work Effort is defined as Attempts, Contacts and Letters

• Self Pay was analyzed for comparative purposes. However, the study compares Copay and Deductible in general.

• Search America provided scores for approximately 241k accounts with a 96% score rate

• Used a random sample of closed accounts from June through August 2004

• Statistical accuracy of sample is 95% +/- 4% as a valid representation of our inventory

©2007 NPAS 6

NPAS Inventory

77.31%

44.09%

27.93%

17.65%12.67%

11.02%

7.69% 6.44% 5.07%6.92%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0%

10%

20%

30%

40%

50%

60%

70%

901-High 801-900 701-800 601-700 501-600 401-500 301-400 201-300 101-200 000-100

Rec

ove

ry P

erce

nt

Per

cen

t of T

ota

l Acc

oun

ts

Credit Scoring Index Ranges by Industry Compared to Recovery Rate at NPAS

NPAS (Hospital) Industry Average of All Industries Average of Auto Finance Bankcard Industry NPAS Recovery Rate

©2007 NPAS 7

Upfront Collection Efforts

HCA Upfront Collections by Scoring Range

5.0%

3.0%

1.8% 2.0%

1.0%0.7% 0.6% 0.6% 0.5% 0.6% 0.7%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

Perc

en

t R

eco

vere

d U

pfr

on

t

Pct Recovered Upfront

©2007 NPAS 8

NPAS Self Pay

48.58%

21.80%

12.22%

6.56% 4.48%4.04%

2.15% 2.24% 2.03%3.07%

0%

10%

20%

30%

40%

50%

60%

0%

10%

20%

30%

40%

50%

60%

70%

901-High 801-900 701-800 601-700 501-600 401-500 301-400 201-300 101-200 000-100

Rec

ove

ry P

erce

nt

Per

cen

t of T

ota

l Acc

oun

ts



©2007 NPAS 9

NPAS Self Pay - Emergency Room

52.76%

31.79%

14.41%

8.74% 6.27%

4.44%2.78% 2.79%

2.79% 3.24%

0%

10%

20%

30%

40%

50%

60%

0%

10%

20%

30%

40%

50%

60%

70%

901-High 801-900 701-800 601-700 501-600 401-500 301-400 201-300 101-200 000-100

Rec

ove

ry P

erce

nt

Per

cen

t of T

ota

l Acc

oun

ts



©2007 NPAS 10

NPAS Self Pay – Inpatient

36.39%

11.63%

8.95%

3.28% 2.08% 2.76%

0.45%1.09% 0.74%

2.10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0%

10%

20%

30%

40%

50%

60%

70%

901-High 801-900 701-800 601-700 501-600 401-500 301-400 201-300 101-200 000-100

Rec

ove

ry P

erce

nt

Per

cen

t of T

ota

l Acc

oun

ts



©2007 NPAS 11

NPAS Self Pay – Outpatient

68.54%

29.17%

21.12%

18.94%

7.42% 9.19%6.95%

4.16% 3.22%

5.88%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0%

10%

20%

30%

40%

50%

60%

70%

901-High 801-900 701-800 601-700 501-600 401-500 301-400 201-300 101-200 000-100

Rec

ove

ry P

erce

nt

Per

cen

t of T

ota

l Acc

oun

ts



©2007 NPAS 12

NPAS Self Pay - Surgery

52.85%

26.24%

21.83%

14.31% 12.76%

2.70%3.87%

5.46%3.42%

8.86%

0%

10%

20%

30%

40%

50%

60%

0%

10%

20%

30%

40%

50%

60%

70%

901-High 801-900 701-800 601-700 501-600 401-500 301-400 201-300 101-200 000-100

Rec

ove

ry P

erce

nt

Per

cen

t of T

ota

l Acc

oun

ts



©2007 NPAS 13

NPAS Self PayWork Effort vs. Recovery Rate

5.6

6.1

5.75.6

5.35.1 5.0 5.0 5.0

4.748.6

%

21.8

%

12.2

%

6.6%

4.5%

4.0%

2.1%

2.2%

2.0% 3.

1%

901-High 801-900 701-800 601-700 501-600 401-500 301-400 201-300 101-200 000-100

Average Work Effort Versus Recovery Rate by Index Ranges

Avg Workeffort Recovery Rate %

©2007 NPAS 14

NPAS Credit Scoring Flow (Self Pay)

Score account

Day 2, receivecredit score

Category =Low ?

Letter 1 Hold 20 days Final Notice Letter Wait 30 days

No

Yes

FC 99Day 1

Current Flow

To Agency

Note:No match, match no score and typos will follow current flowPhase II - No match may go into low

©2007 NPAS 15

NPAS Copay and Deductible

83.72%

58.98%

47.25%

36.58%

27.61%25.15%

21.57%

17.88%

13.22%

22.32%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0%

10%

20%

30%

40%

50%

60%

70%

901-High 801-900 701-800 601-700 501-600 401-500 301-400 201-300 101-200 000-100

Rec

ove

ry P

erce

nt

Per

cen

t of T

ota

l Acc

oun

ts



©2007 NPAS 16

NPAS Credit Scoring Flow(Copay and Deductible)

SP Letter

Wait 30 daysCategory =

Low ?

Final Notice Letter

Wait 30 days

No

Yes

Non FC99Day 1

Current Flow

To AgencyNotes: No match, match no score and typos will follow current flow Phase II - No match may go into low

Score Accounts Day 31Contact with

Patient or paymentreceived?

Current Flow

Yes

No

©2007 NPAS 17

Results: Credit Scoring Segmentation

Copay and Deductible-Low Score <$1,000

% Change

Net back % +0.47%

Average Attempts -91.64%

Average Contacts -65.96%

Average Letters -30.52%

Age at NPAS -34.38%

Self Pay-Low Score <$1,000

% Change

Net back % 1150.0%

Average Attempts -88.66%

Average Contacts -65.96%

Average Letters -4.02%

Age at NPAS -17.10%

©2007 NPAS 18

Copay/Deduct – Group MixComparison of Net Placements and Recovery Rate

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

000-100 101-200 201-300 301-400 401-500 501-600 601-700 701-800 801-900 901-High

Rec

over

y R

ate

Per

cent

of A

ccou

nts

in S

core

Ran

ge

Credit Scoring Index Ranges by Region Compared to Recovery Rate at NPAS

REGION 01 - Percent of Net Placements REGION 05 - Percent of Net Placements REGION 07 - Percent of Net Placements

REGION 01 - Sum of Recovery Rate REGION 05 - Sum of Recovery Rate REGION 07 - Sum of Recovery Rate

REGION 01 REGION 05 REGION 07

IndexRangePercent of Net Placements

Recovery Rate %

Percent of Net Placements

Recovery Rate %

Percent of Net Placements

Recovery Rate %

000-100 17.5% 29% 24.7% 22% 19.2% 19%101-200 4.3% 22% 6.2% 9% 8.2% 5%201-300 5.9% 21% 7.1% 12% 9.0% 15%301-400 4.8% 17% 7.4% 12% 6.2% 21%401-500 6.5% 38% 6.0% 12% 6.6% 24%501-600 3.9% 38% 5.7% 26% 5.6% 22%601-700 3.0% 45% 6.0% 26% 7.1% 51%701-800 5.0% 63% 5.1% 31% 5.2% 42%801-900 6.8% 63% 7.8% 40% 7.8% 59%901-High 42.3% 82% 24.2% 69% 25.1% 89%Grand Total 100.0% 55% 100.0% 33% 100.0% 42%

©2007 NPAS 19

Keys to Implementation of Scoring

• Tools: Do you have the right tools to manage workflow with a score?

• Workflow: Determine what will be done with the score ahead of time

• Segmentation: What accounts will be scored? Cost can be an issue.

• ROI: What will happen to FTEs that might be working these accounts?

• Risk Tolerance: There will be accounts that are not correctly predicted

• Board Acceptance: Charity and Bad Debt processes require approval

©2007 NPAS 21

As Balance Size Increases, Recovery Rate Decreases in Private Pay

0

5

10

15

20

25

30

35

40

Balance Size

Re

co

ve

ry P

erc

en

tag

e

Relationship of Balance Size and Recovery Rate

For Private Pay - Pure Self Pay

0

10

20

30

40

50

60

70

Balance Size

Re

co

ve

ry P

erc

en

tag

e

Relationship of Balance Size and Recovery Rate

For Private Pay - Co-pay and Deductibles

©2007 NPAS 22

Key Indicators Cont’d

R² = 0.970

0%

10%

20%

30%

40%

50%

60%

0 to 30 Days

31 to 60 Days

61 to 90 Days

91 to 120 Days

121 to 150 Days

151 to more Days

Age Placed Related to Recovery Rate

R² = 1

0%5%

10%15%20%25%30%35%40%45%50%

No Yes

Bad Address Related to Recovery Rate

R² = 1

0%

10%

20%

30%

40%

50%

60%

No Yes

Bad Phones Related to Recovery Rate

R² = 0.924

0%

10%

20%

30%

40%

50%

60%

70%

80%

High Probability Medium Probability Low Probability

Low Scoring AccountsRelated to Recovery Rate

©2007 NPAS 23

Key Indicators Cont’d

R² = 0.075

0%10%20%30%40%50%60%70%80%90%

Letters Sent Related to Recovery RateR² = 0.890

0%10%20%30%40%50%60%70%80%90%

Phone Contacts Related to Recovery Rate

R² = 0.998

0%10%20%30%40%50%60%70%80%90%

Insurance Private Pay -CoPay and Deductible

Private Pay - Pure Self Pay

Financial Class Related to Recovery Rate

R² = 0.933

0%

10%

20%

30%

40%

50%

60%

70%

Emergency Room Inpatient Surgery Outpatient

Patient Type Related to Recovery Rate

©2007 NPAS 24

Goals of Predictive Modeling

• Utilize the right resources for working accounts

• Minimize the need for external information to determine the best segmentation philosophy

• Business Analytics – will a predictive model support a conclusion driven by something other than data?

©2007 npas1 garett jackson, cpa segmenting hospital accounts based on likelihood of payment using...

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