The amount of patient debt healthcare providers face depends on multiple, complex factors, including whether they engaged in Medicaid Expansion
Often the challenges facing hospitals and medical pathology laboratories are similar. So it is with patient debt. Blame that on two trends. One is the increase in the number of patients with high-deductible health plans. The other is the increase in the number of people enrolled via the Affordable Care Act (ACA) health insurance exchanges with similar high-deductible health plans.
These two factors are contributing to increased levels of bad debt that confront the nation’s hospitals, clinical laboratories, and anatomic pathology groups. However, in some states where Medicaid programs have been expanded, hospitals have reported declines in the level of patient bad debt.
When President Obama signed the Affordable Care Act into law in 2010, many people thought that fewer uninsured people would mean less bad debt for hospitals. Now, six years later, the reality is not so clear-cut.
Hospitals, clinical laboratories, and other entities within the healthcare system are seeing different levels of bad debt depending on what part of the country they are in, what kinds of policies they have enacted, and probably most importantly, whether or not the state in which they are located has expanded Medicaid.
Medicaid Expansion in Some States Leads to Reductions in Bad Debt
Although headlines like “ACA Causes Bad Debt to Spiral Out of Control!” or “Patient Debt Wiped Out by ACA” might sell newspapers, the truth is far more complicated. Some hospitals are seeing rising debt, but at the same time, others are seeing a decline in unpaid patient debt. Modern Healthcare reviewed the third-quarter bad debt figures reported by hospitals for 2013, 2014, and 2015, and found that “The median change over the period was a 5.6% decline.”
Dalton Huber, CFO, Campbell County Memorial Hospital (CCMH) in Gillette, Wyoming, stated in the Modern Healthcare article that his organization has seen a rise of 42% in bad debt since 2013. The economy in that area is closely linked to the oil and gas industry, which has seen a prolonged downturn. Additionally, Wyoming is one of 19 states that have not expanded Medicaid, according to Families USA, a nonprofit 501(c)3 organization focused on public policy analysis and advocacy.
On the other hand, an article published in Forbes noted that Universal Health Services (NYSE:UHS), a multi-state network of hospitals, reported a drop of 17% between 2013 and 2014 in what they call “doubtful accounts”—accounts likely to go unpaid. On May 1, 2016, Steve Filton, CFO at UHS, reported during UHS’ First Quarter Earnings Call that “[UHS’] ratio of debt-to-total capitalization decreased to 43.3% at March 31, 2016, as compared to 44.6% at March 31, 2015.” UHS participated in Medicaid Expansion.
High-Deductibles and Confusion Are Factors in Rise of Bad Debt
An analysis by Moody’s Investor Service, published in June 2015, found that “The hospitals in 29 states and Washington D.C. that expanded Medicaid experienced an average reduction in bad debt of 13%. The expense reduction was over 40% in some cases.”
Another factor that is affecting bad debt is the increase in high-deductible health insurance policies. The Federal Health Insurance Marketplace offers three tiers of insurance: Gold, Silver, and Bronze. Many of the plans in the Bronze bracket have very high deductibles ($5,000 to $10,000 in some cases).
Many consumers covered by those policies don’t have the funds to pay those high deductibles, and according to health and technology consulting firm Advisory Board, “As the financial obligation increases, the propensity to pay any portion of that obligation decreases—for all patients, at all income levels.”
To make matters worse patients may be confused. That’s according to Bird Blitch, CEO of Patientco, a payment technology company built specifically for healthcare. In a column he penned for MiraMed, Blitch stated that “The typical patient does not understand the dynamics between payers, providers, the government, vendors, or doctors.” He goes on to say, “In fact, the majority of patients have trouble understanding the basic tenets of health insurance coverage and how it affects their financial responsibility after an episode of care.”
Clinical Laboratories, Hospitals, Not Collecting Payments from Patients
Although neither hospitals nor pathology labs are generally set up to easily collect money directly from patients, in an effort to minimize bad patient debt, some hospitals are requiring up-front payments. However, in the Modern Healthcare article, Steve Forney, CFO, Verity Health System, stated that it is often easier to electronically submit bills to health plans than it is to call patients who may owe $5,000 or more in deductibles.
Another way to minimize bad debt is to ensure that patients are made aware of their financial obligation at the point of service. Advisory Board stresses that staff must understand the vital importance of collections, and be trained to discuss a patient’s financial obligations at different stages of care—from check-in to discharge.
The financial paradigm for the entire healthcare industry is undergoing change. Determining who is responsible for paying what is a complex issue. It’s clear however, that patients are often responsible for more of the cost of care than they traditionally have been. In order to survive and remain financially solvent, providers—including medical laboratories and pathology groups—must find ways to collect debt directly from patients.