Healthcare revenue cycle consultant Jonathan Wiik suggests healthcare providers must prepare their organizations for patients who need help paying increasing medical costs

When patients cannot pay their bills, all of healthcare—including clinical laboratories and anatomic pathology groups—also struggle. And, according to experts, medical laboratories already complying with federal value-based payment programs and precision medicine directives should expect increased pressure from patients seeking ways to pay for their services.

A recent analysis of this issue by TransUnion Healthcare (NYSE:TRU) states, “patients experienced an 11% increase in average out-of-pocket costs during 2017, rising from $1,630 in Q4 2016 to $1,813 in Q4 2017.” It is a development that should send up red flags to clinical laboratory managers seeking ways to maintain and increase revenues.

“Given the increased payment responsibility, being able to determine a patient’s ability to pay is increasingly important for hospitals,” noted Jonathan Wiik, Principal, Healthcare Strategy at TransUnion Healthcare (TRU). “In order to allow patients to focus on getting the care they need healthcare providers need processes and tools in place to help patients meet their financial obligations and to establish funding mechanisms that will benefit both the patient and provider.” Obviously, this also applies to clinical laboratories.

According to a news release, “The [TRU] analysis also revealed that in 2017, on average, 49% of patient out-of-pocket costs per healthcare visit were below $500; 39% were $501-$1,000; and 12% were more than $1,000.”

For providers, patients’ swelling unpaid balances mean more uncompensated care, the analysis also showed. And that means more unpaid balances for clinical laboratories as well.

“Increasing healthcare costs and patient responsibility is a continuing trend that does not seem to be slowing anytime in the near future,” noted Jonathan Wiik (above) Principal, Healthcare Strategy, at TransUnion Healthcare and author of the new book “Healthcare Revolution: The Patient Is the New Payer,” during a HIMSS 2018 presentation. (Photo copyright: Colorado Managed Care Collaborative.)

Patients Struggle to Pay Amounts Under $500

Each year, more healthcare consumers are forced onto high-deductible health plans (HDHPs) that make them responsible for thousands and even tens of thousands of dollars in upfront costs.

And according to another TRU news release, patients with commercial insurance plans experienced a 67% increase in their financial responsibility over five years. In other words, after insurance plans paid providers, patients still needed to pony up 12.2% of the total bill in 2017, as compared to 8% in 2012.

During the most recent year studied by TransUnion Healthcare, patients’ out-of-pocket costs increased 11%, rising to $1,813 in 2017 from $1,630 in 2016, a news release revealed.

And it doesn’t take a huge bill for patients to feel the pain. TransUnion’s data reveals that 68% of patients with medical bills below $500 did not fully pay what they owed, RevCycle Intelligence reported. This has major implications for clinical laboratories and anatomic pathology groups because many lab charges fall under $500 and TransUnion shows that almost 70% of patients do not pay the full amount of these bills.

According to TRU, medical specialties with the highest out-of-pocket estimated amounts due from patients include:

  • Orthopedics, $1,663;
  • Plastic surgery, $1,566;
  • Urology, $1,415; and,
  • Neurology, $1,241.

The average deductible was $1,200 in 2016, up from just $303 in 2006, a 176% increase, Healthcare Dive reported, citing a new Peterson-Kaiser Health System Tracker report.

And, as Dark Daily previously reported, affluent and self-employed people also feel the pinch, as deductibles can be as high as $5,000/year for individuals and more than $10,000/year for a families, whether plans are purchased through the Affordable Care Act (ACA) or employers.

What Happens When Patients Don’t Pay?

Dark Daily also reported on a 2017 TransUnion Healthcare analysis that showed 99% of hospital bills of $3,000 or more were not paid in full by the end of 2016. (See, “Hospitals, Pathology Groups, Clinical Labs Struggling to Collect Payments from Patients with High-Deductible Health Plans,” September 6, 2017.)

When patients cannot afford to pay their bills, hospitals’ bad debt and charity-care levels rise. Together, bad debt and charity care comprise a provider’s uncompensated care.

“A lot of patients can’t afford these bills, which is why uncompensated care has bounced,” Wiik told Modern Healthcare.

Indeed, uncompensated care was $38.3 billion in 2016, up $2.6 billion since 2015, according to an American Hospital Association (AHA) 2017 fact sheet.

Meanwhile, the Centers for Medicare and Medicaid Services (CMS) reported that Medicare bad debt (the effect of Medicare patients not paying deductibles and co-pays) increased to $3.69 billion in 2016 from $3.14 billion in 2012, a 17% bump, TransUnion Healthcare pointed out.

Consumers Say They Want Prices, Financing Plans

Consumers say healthcare providers are not transparent about costs for procedures, nor do they effectively offer financing options. That’s according to a HealthFirst Financial news release, which states, “More than three-quarters, or 77%, of healthcare consumers say it’s important or very important they know their costs before treatment and 53% want to discuss financing options before care. However, the vast majority of healthcare providers are not satisfying these consumer demands.”

And, according to a HealthFirst Financial Patient Survey of 1,011 adults nationwide:

  • “53% voice concern about the ability to pay a medical bill of less than $1,000;
  • “35% worried about the ability to pay a bill of less than $500; and,
  • “16% are concerned about the ability to pay a bill of less than $250.”

These numbers fall well into the amounts clinical laboratories charge for services rendered.

What Can Medical Laboratories Do?

To help their customers pay their bills and improve revenue, Dark Daily suggest labs:

  • Use software that enables ordering clinicians to process advanced beneficiary notices and prior authorizations for services;
  • Inform the customer prior to specimen collection about their financial responsibility for the test;
  • Ask for payment-due at time of the patient encounter;
  • Share key lab test price data in easily accessible and understandable ways;
  • Keep credit card information securely on-hand for agreed-to balances patients are responsible for paying; and,
  • Offer payment options, such as e-billing and financing plans.

As we’ve pointed out many times, because clinical laboratories are dependent on the physicians and hospitals they service, they are particularly vulnerable when patients stop paying their bills.

—Donna Marie Pocius

Related Information:

TransUnion Healthcare Analysis: Fight Rising Uncompensated Care

Patient Balances Continue to Increase in 2018, Driving Bad Debt and Uncompensated Care

Patient Payment Responsibility Increases 11% in 2017

Patient Financial Responsibility Increased 11% in 2017

It’s Never Too Soon to Communicate Pricing and Payment Options

Deductibles, Coinsurance on the Rise, But Cost of Copays Are Down

Growing Bad Debt Problem Illustrates Broken Billing System

American Hospital Association Uncompensated Care Cost Fact Sheet, December 2017 Update

From Millennials to Boomers, Patients Want to Discuss Healthcare Pricing and Payment Options Before Treatment

Even Higher Income Americans Are Frustrated with High Health Insurance Costs and Many Drop Coverage and Switch to Concierge Care

Hospitals’ Pathology Groups and Clinical Labs Struggling to Collect Payments from Patients with High Deductible Health Plans