Even clinical laboratories and pathology groups are reporting increased patient bad debt because more patients have high annual deductibles, often $5,000 or more
Hospital executives are anticipating a deluge of new patient debt associated with a dramatic increase in high-deductible health plans. Some hospital systems have even launched loan programs to help patients pay for their share of the cost for care provided and to stem the rising tide of uncollectible patient debt.
Patient Bad Debt Trend Should Be Watched by Clinical Lab Managers
It is important for clinical laboratory managers and pathologists to understand that these actions by hospitals to address bad debt is a reminder that medical laboratories will have a similar problem of collecting monies due to them from patients who have high deductibles and will need to pay 100% of the cost of their lab testing.
It is not just high-deductible health plans contributing to greater levels of patient bad debt at the nation’s hospitals. It is predicted that the rollout of the Affordable Care Act (ACA) in January will increase the number of patients with low-cost, high deductible insurance plans. This comes on top of existing trends where increasing number of employers are shifting employees to high-deductible plans.
Some Exchange Plans Only Cover 60% of Health Costs
The newly established federal insurance exchange, for instance, includes bronze- and silver-tier plans that cover just 60% or 70% of costs, respectively. These plans could leave patients with thousands of dollars of debt. Additionally, a recent report from the Kaiser Foundation found that one-third of people insured through an employer currently have a deductible of $1,000 or more.
The ACA caps maximum out-of-pocket payments for insured patients at roughly $5,300 per year for individuals and $12,700 per year for families. Experts point out that these amounts will put a strain on lower- and middle-income family budgets.
With patient debt climbing, hospital collection efforts have become more aggressive and sophisticated, noted the Modern Healthcare article. One strategy to cope with patient bad debt is to offer new financing options, such as hospital loans, and attempts to settle bills before or during patient visits. However, these tactics have renewed scrutiny of hospital billing practices by public officials, as well as patient and consumer advocacy groups.
Hospitals Working with Banks to Provide Patient Loans
“We don’t want economics to be a barrier to appropriate care,” declared Michael Blaszyk, Dignity’s Senior Vice President and Chief Financial Officer. He acknowledged the need to help patients pay their bills.
Health systems that recently launched loan programs report that banks have agreed to adhere to new ACA billing and collection policies. The banks will return delinquent patient accounts to the healthcare provider, noted the Modern Healthcare report.
Melissa Jacoby, a consumer law professor at the University of North Carolina School of Law, pointed out in the Modern HealthCare report that, although ACA sets new rules for billing and collection, nonprofit hospitals are discouraged from “acting like creditors.”
Hospitals Developing Payment Plans to Meet Patient Financial Means
Patient payment plans are nothing new for hospitals. What is new is more attention to the design of payment plans to make them more affordable for patients. For example, Palomar Medical Center in Escondido, California, launched a two-year financing plan prior to the 2009 recession that burdened many patients with payments of $200 per month. The hospital has since changed its loan-term policy to six years of interest-free financing. It will reset the clock at any point to extend the payback period for the patient.
Similarly, Hanover Hospital in Pennsylvania established a patient loan program in 2010 that charged 10% interest on the unpaid balance. Public backlash, noted the Modern HealthCare article, caused the hospital to reduce that interest rate to 3.9%.
Health System to Back Its Patient Loan Program
Blaszyk said Dignity Health is considering a way to offer patients credit at low-interest rates, regardless of their credit score. Dignity will back the loans. The organization currently uses its own cash to finance long-term, zero-interest payment plans, but a deluge of newly insured patients needing credit would tie up an inordinate amount of cash, he noted.
Furthermore, under new ACA financial rules, nonprofit hospitals—which represent 60% of the nation’s hospitals—cannot engage in “extraordinary” collection actions before making a reasonable effort to identify patients eligible for financial aid, noted the Modern Healthcare report. Nonprofit hospital governance boards are required to approve written financial aid and emergency medical policies that set new limits on charges for poor patients. Violators could lose their tax-exempt status.
Business Insights for Labs and Pathologists
Clinical laboratories and pathology groups are serving the same patients with high-deductible health insurance plans. To avoid an increase in uncollectible debt, medical laboratories and pathology groups may also want to consider different payment options for patients with high-deductible plans, when appropriate. At a minimum it is smart to begin asking patients to pay their deductibles at the time when their lab specimens are collected.