Challenges getting paid likely to continue as high deductibles make patients responsible for paying much more of their healthcare bills

Rising out-of-pocket costs for healthcare consumers is translating into increasing amounts of red ink for hospitals and healthcare providers struggling to collect bills from patients with high-deductible health plans (HDHPs). Clinical laboratories and pathology groups are unlikely to be immune from these challenges, as increasing numbers of patients with smaller healthcare debts also are failing to pay their bills in full.

That’s according to a recent TransUnion Healthcare analysis of patient data from across the country. It revealed that 99% of hospital bills of $3,000 or more were not paid in full by the end 2016. For bills under $500, more than two-thirds of patients (68%) didn’t pay the full balance by year’s end (an increase from 53% in 2015 and 49% in 2014). The study also revealed that the percentage of patients that have made partial payments toward their hospital bills has fallen dramatically from nearly 90% in 2015 to 77% in 2016.

Increased Patient Responsibility Causing Decrease in Patient Payments

“The shift in healthcare payments has been taking place for well over a decade, but we are seeing more pronounced changes in how hospital bills are paid during just the last few years,” Jonathan Wilk, Principal for Healthcare Revenue Cycle Management at TransUnion (NYSE:TRU), said in a statement.

Millions of Americans are in high-deductible health plans. And, as the graphic above illustrates, that number has been increasing since the ACA was signed into law in 2010. (Graphic copyright: Reuters.)

While the Affordable Care Act (ACA) has increased the number of Americans receiving medical coverage through Medicaid or commercial insurance, TransUnion noted in its statement that hospitals still wrote off roughly $35.7 billion in bad debt in 2015. By 2020, TransUnion predicts that figure will continue to rise, with an estimated 95% of patients unable to pay their healthcare bills in full by the start of the next decade.

“Higher deductibles and the increase in patient responsibility are causing a decrease in patient payments to providers for patient care services rendered. While uncompensated care has declined, it appears to be primarily due to the increased number of individuals with Medicaid and commercial insurance coverage,” John Yount, Vice President for Healthcare Products at TransUnion, said in the TransUnion statement.

Collecting Patients’ Out-of-Pocket Costs Upfront

According to Reuters, hospitals in states that did not expand Medicaid under Obamacare have witnessed a more than 14% increase in unpaid bills as the number of people using health plans with high out-of-pocket costs increased. For hospitals in those states, HDHPs are impacting their bottom lines.

“It feels like a sucker punch,” declared Chief Executive Officer John Henderson of Childress Regional Medical Center, Texas Panhandle Region, in a Bloomberg Business article. “When someone has a really high deductible, effectively they’re still uninsured, and most people in Childress don’t have $5,000 lying around to pay their bills.”

A recent report from payment network InstaMed found that 72% of healthcare providers reported an increase in patient financial responsibility in 2016, a trend that coincides with a rise in the average deductible for a single worker to $1,478, more than double the $735 total in 2010.

In response to the increase in patient responsibility, hospitals and other providers are turning to new tactics for collecting money directly from patients, including estimating patients’ out-of-pocket payments and collecting those amounts upfront.

Hospital Systems Offer Patients Payment Options

Venanzio Arquilla is the Managing Director of the healthcare practice at The Claro Group, a financial management consultancy in Chicago. In an interview with Crain’s Chicago Business, he stated that hospitals are working overtime to get money from patients, particularly at the point of service.

“Hospitals have gotten much more aggressive in trying to collect at time of service, because their ability to collect on self-pay amounts decreases significantly when the patient leaves the building,” Arquilla noted. “You can’t say, ‘Give me your credit card’ to someone in the emergency room bleeding from a gunshot wound, but you can to someone going in for an elective procedure.”

Revenue loss due to unpaid medical bills among states that complied with Medicaid Expansion under the ACA has increase so dramatically, some hospitals are now offering patients prepayment discounts and no-interest loans to ensure payments. Clinical laboratories and anatomic pathology groups should develop strategies to respond to the increase collections from patients at the time of service. (Graphic copyright: Reuters.)

Richard Gundling, a Senior Vice President at the Healthcare Financial Management Association (HFMA), told Kaiser Health News that an estimated 75% of healthcare and hospital systems now ask for payment at the time services are provided. To soften the blow, some healthcare systems are providing patients with a range of payment options, from prepayment discounts to no-interest loans.

Novant Health, headquartered in North Carolina, is among those healthcare systems offering patients new payment strategies. Offering no interest loans to patients has enabled Novant to lower its patient default rate from 32% to 12%.

“To remain financially stable, we had to do something,” April York, Senior Director of Patient Finance at Novant Health, told Reuters. “Patients needed longer to pay. They needed a variety of options.”

Providers Must Adapt to New Patient Procedures

“Doctors need to understand the landscape has changed. A doctor’s primary concern use

to be whether a patient had insurance. Now, it’s the type of insurance,” Devon M. Herrick, PhD, a Senior Fellow at the National Center for Policy Analysis (NCPA) in Dallas, told Medical Economics.

While clinical laboratories and anatomic pathology groups traditionally have not collected money directly from patients, Herrick says healthcare providers must accept that the rules of the game have changed. “Patients are more cost-conscious now. That means patients will question their physicians about costs for procedures,” he adds.

Dark Daily has advised clinical laboratories in the past to develop tools and workflow processes for collecting payments upfront from patients with high-deductible health plans (See, “Growth in High Deductible Health Plans Cause Savvy Clinical Labs and Pathology Groups to Collect Full Payment at Time of Service,” Dark Daily, July 28, 2014). Not doing so can amount to millions of dollars in lost revenue to the medical laboratory industry.

—Andrea Downing Peck

Related Information:

Bad Debt Is the Pain Hospitals Can’t Heal as Patients Don’t Pay

Out of More Pockets

Patients May be the New Payers, But Two in Three Do Not Pay Their Hospital Bills in Full

Feel Like the Hospital Is Shaking You Down Over that Bill? It Probably Is

The Seventh Annual Trends in Healthcare Payments Report Is Here

Doctors and Hospitals Say, ‘Show Me the Money’ before Treating Patients

Ballooning Bills: More US Hospitals Pushing Patients to Pay before Care

Growth in High Deductible Health Plans Cause Savvy Clinical Labs and Pathology Groups to Collect Full Payment at Time of Service

Higher Annual Deductibles and Co-Payments Cause Hospitals to Intensify Efforts to Collect Directly from Patients; Medical Laboratories Now Feel Similar Financial Squeeze

Because of Sizeable Deductibles, More Patients Owe More Money to Clinical Pathology Laboratories, Spurring Labs to Get Smarter about Collecting from Patients