Coding, Billing & Collections

South African Laboratory Company Builds National Business that Includes Serving Patients with Health Savings Accounts

Enrollment in Health Savings Accounts (HSAs) continues to increase in the United States.  However, in South Africa, HSAs have been prominent for more than a decade. Laboratories in this country have already developed successful ways to deal with the billing issues created by HSAs.  Peter Cole of Lancet Laboratories  in South Africa presented at the Executive War College  in Miami, FL this year on how his laboratory adapted its business to successfully serve, bill, and collect from patients with HSAs.  His laboratory serves 15,000 patients daily and has learned important lessons on how to serve HSA patients and successfully collect for these lab testing services.

60% of South Africans have HSAs.  The South African healthcare system has evolved to form a risk pool of HSA-insured beneficiaries. This risk pool is used to cross-subsidize different HSA plans to offset the effects of adverse selection and other underwriting concerns. A limited portion of member contributions may be paid into an HSA.  These funds are typically used to pay for day-to-day discretionary expenses.  In 2005, U.S.$5.2 billion was paid into risk pools, while about U.S.$0.5 billion (10%) was paid into HSAs. 

Lancet Laboratories found a number of advantages to HSAs:

• 1. Consumers are more likely to question health care expenses that previously were not scrutinized

• 2. Tax-free HSAs accumulate money over several years and turn into a sizable health care nest egg for healthy people with low medical expenses

• 3. High Deducible Health Care Plans (HDHPs) linked with HSAs tend to be cheaper for patients

Lancet Laboratories also recognized several disadvantages:

• 1. Shopping for health care was difficult for HSA holders, because the South African health system has yet to produce the detailed information needed to support comparison shopping

• 2. HSA holders bought more alternative medical products (massages, acupuncture, etc), sometimes depleting the amount in their HSA available for medical necessities

• 3. Schemes with HSAs have administration costs 33% higher than schemes without HSAs

• 4. Laboratories experienced risk-shifting to HSAs over time. The first impact was in outpatient tests. The second impact was increased patient bad debt

After working with HSA holders, Lancet developed several initiatives to make it easier to work with HSA patients.  These included billing the correct entity, confirming patient eligibility, identifying benefit options, applying testing rules, applying billing rules, supplying proper codes, improving cash flow, and reducing bad debt.  To achieve these goals, Lancet Laboratories implemented: 1) patient forms to confirm eligibility; 2) a paperless system for real time movement of information; 3) automation using a Laboratory Information System (LIS); 4), electronic trading; and, 5) an improved bad debt collection program.

One result of Lancet's efforts to better manage its HSA patients was an improved patient intake form that more fully captured all necessary information about the patient's health care benefits.  Now, over 30,000 of these patient intake forms are scanned into a central database each day.  Every Lancet location can electronically access any patient record, making it easy to deal with repeat patients.  Lancet also developed an electronic cardholder file system that scans and stores all information about card-carrying HSA holders into an electronic file at the time when they present their card.

In retrospect, Lancet Laboratories acknowledges that it should have done more to try and keep laboratory testing benefits as a part of the South African risk pools. That would have reduced the need to collect a larger percentage of the total laboratory bill directly from the patients' health savings accounts.  Peter Cole also pointed out that another strategy would have been to develop low-cost testing options for patients and educating clinicians about rules-based testing, so that clinicians did not order too many tests all at once, for which patients might have trouble paying.

Dark Daily laboratory readers in the United States can learn a great deal from looking at case studies from South Africa and other countries where HSAs have been a fixture for decades.  American laboratories can also be proactive in preparing to deal with an influx of HSA account holders in the coming years.  To view Peter Cole's complete Power Point presentation delivered at the Executive War College, visit:  http://www.executivewarcollege.com/PDFs/05-Cole.pdf

Additional Information:

• In South Africa, Insurer Gives Points For Healthy Living

• A Brief History of Health Savings Accounts