Open enrollment is upon us. While many are focused on which health insurance company has the best deal, health care sharing ministries (HCSMs) are quietly offering cheaper and less regulated alternatives to traditional coverage. Despite being an inadequate substitute, for some, they’re a welcome one.
What are HCSMs?
HCSMs are not health insurance; they are cost-sharing organizations. The idea is that members help each other directly cover medical costs. Members pay monthly contributions, similar to premiums, but can also make additional donations to cover specific bills from other members.
HCSMs are allowed to exclude pre-existing conditions from eligibility, exclude various health care services altogether, such as maternity care or contraception, and cap the lifetime financial assistance for which a member is eligible. They also do not guarantee claims will be reimbursed. (One review of HCSMs in Massachusetts found that only half of submitted claims were eligible for reimbursement.)
They are often, if not always, religiously affiliated. Members commit to a code of conduct, which may include abstaining from tobacco use and holding a traditional view of sex and marriage.
HCSMs and the Affordable Care Act
Because they are not insurance and because they are religiously affiliated, HCSMs are not regulated by the Affordable Care Act (ACA). They are not subject to minimal coverage guidelines and members are not subject to the individual mandate.
HCSMs are a notable exemption to the ACA. Supporters lobbied for the exemption based on a few reasons, including former President Obama’s promise that Americans could keep their coverage if they liked it. But the main motive was religious freedom. They argued that sharing health care costs was a “religious right and a privilege.” Congress agreed to the carveout to minimize religious opposition, and advocates lauded the decision as “Obamacare’s Silver Lining.”
The appeal of HCSMs
Some see HCSMs as a viable alternative to traditional health insurance and research suggests there may be a few reasons why.
Perhaps the most significant reason is freedom: freedom of religious expression and freedom from government oversight. The Bible encourages Christians to “bear one another’s burdens,” and HCSM members see their approach to health care costs as a fulfillment of that command. Additionally, many religious individuals oppose abortion and other medical services. As such, they may see HCSMs as a way to pay for their own health care needs without funding religiously prohibited services even indirectly.
HCSMs promote a sense of freedom beyond religion, including provider choice and less government interference. For example, members essentially pay out of pocket for health care, getting reimbursed later, so they can choose any provider that accepts self-paying patients. HCSMs also allow members to bypass “the system,” staying out of the carousel that is the heavily regulated health insurance industry.
A more tangible reason why some prefer HCSMs to traditional health insurance is thrift. Monthly contributions are typically less than monthly insurance premiums. This makes sense; HCSMs are set up to cover health care expenses after they’re accrued so upfront costs can be lower. Plus, the list of reimbursable services is often limited in exchange for even lower costs.
For healthy individuals, especially those who don’t use much health care, this kind of “low cost up front” arrangement can be enticing. But, if a member has an emergency or an extended hospital stay, or develops a chronic condition, they may be stuck with significant medical bills. Monthly contributions can also increase due to changes in health status, even common ones like weight gain.
While freedom and thrift are conscious reasons to prefer HCSMs, others may choose them due to inadequate health insurance literacy. Individuals less familiar with terms like coinsurance and deductibles may have difficulty choosing from a set of ACA-compliant health insurance plans. This difficulty likely extends to evaluating the relative costs and benefits of HCSMs.
Challenges differentiating between insurance and HCSMs may also increase when small businesses list HCSMs as a potential source of coverage for health care costs. Deceptive advertising by HCSMs and insurance brokers adds further confusion.
While HCSMs are an unregulated, risky alternative to traditional insurance coverage, some find the freedom and cost savings they provide attractive. Others don’t know of a better option and join an HCSM without understanding the potential consequences. Given that inadequate insurance coverage is associated with greater medical debt and delays in seeking necessary care, it’s important that consumers have clear, accurate information to facilitate coverage decisions.
2022 has disproven the old trope that “healthcare is recession-proof”. With the average family deductible nearing $4,000, a significant portion of healthcare services are exposed to consumer concerns about affordability. Reflecting the impact of the recession, health systems nationwide have reported sluggish volumes, particularly for elective cases, in the second half of the year.
One COO recently shared, “We’re 15 percent off where we expected to be on elective cases…We didn’t see the usual pick-up in early fall, after summer vacation. I’m not sure if it’s related to the economy, or whether demand changed during COVID, but this decline has eroded any possibility of a positive margin for the quarter.” The recession hit just as providers mostly finished working through the backlog of cases delayed by COVID in 2020 and 2021.
To determine whether demand declines are related to the current economic environment, or signal real shifts in care patterns, health systems are looking closely to see if the usual end-of-year swell of demand for elective care materializes, as patients max out their deductibles. But even if the demand is there, some systems are worried about being able to accommodate it: “We’ve been so short-staffed for nurses and surgical techs, we’ve had to intermittently take some ORs and units offline…If we get a big December spike in elective care, I’m not sure we’ll have the staff to accommodate it.” Facing the triple threat of sky-high costs, sluggish demand, and a worsening payer environment, the ability to accommodate this demand will be critical to securing margins as providers move into 2023.
Driven by the steady progress of Medicaid expansion and pandemic-era policies to ensure access to health insurance coverage, the US uninsured rate hit an all-time low of 8 percent in early 2022. Since the Affordable Care Act passed in 2010, the US uninsured rate has been cut in half, with the largest gains coming from Medicaid expansion.
However, using data from Commonwealth Fund, the graphic below illustrates how this noteworthy achievement is undermined by widespread underinsurance, defined as coverage that fails to protect enrollees from significant healthcare cost burdens. A recent survey of working-age adults found that eleven percent of Americans experienced a coverage gap during the year, and nearly a quarter had continuous insurance, but with inadequate coverage.
High deductibles are a key driver of underinsurance, with average deductibles for employer-sponsored plans around $2,000 for individuals and $4,000 for families.
Roughly half of Americans are unable to afford a $1,000 unexpected medical bill. Americans’ healthcare affordability challenges will surely worsen once the federal COVID public health emergency ends, because between 5M and 14M Medicaid recipients could lose coverage once the federal government ends the program that has guaranteed continuous Medicaid eligibility.
The process of eligibility redeterminations is sure to be messy—while some Medicaid recipients will be able to turn to other coverage options, the ranks of uninsured and underinsured are likely to swell.
Patients at North Carolina-based Atrium Health get what looks like an enticing pitch when they go to the nonprofit hospital system’s website: a payment plan from lender AccessOne. The plans offer “easy ways to make monthly payments” on medical bills, the website says. You don’t need good credit to get a loan. Everyone is approved. Nothing is reported to credit agencies.
In Minnesota, Allina Health encourages its patients to sign up for an account with MedCredit Financial Services to “consolidate your health expenses.” In Southern California, Chino Valley Medical Center, part of the Prime Healthcare chain, touts “promotional financing options with the CareCredit credit card to help you get the care you need, when you need it.”
As Americans are overwhelmed with medical bills, patient financing is now a multibillion-dollar business, with private equity and big banks lined up to cash in when patients and their families can’t pay for care. By one estimate from research firm IBISWorld, profit margins top 29% in the patient financing industry, seven times what is considered a solid hospital margin.
Hospitals and other providers, which historically put their patients in interest-free payment plans, have welcomed the financing, signing contracts with lenders and enrolling patients in financing plans with rosy promises about convenient bills and easy payments.
For patients, the payment plans often mean something more ominous: yet more debt.
Millions of people are paying interest on these plans, on top of what they owe for medical or dental care, an investigation by KHN and NPR shows. Even with lower rates than a traditional credit card, the interest can add hundreds, even thousands of dollars to medical bills and ratchet up financial strains when patients are most vulnerable.
Robin Milcowitz, a Florida woman who found herself enrolled in an AccessOne loan at a Tampa hospital in 2018 after having a hysterectomy for ovarian cancer, said she was appalled by the financing arrangements.
“Hospitals have found yet another way to monetize our illnesses and our need for medical help,” said Milcowitz, a graphic designer. She was charged 11.5% interest — almost three times what she paid for a separate bank loan. “It’s immoral,” she said.
MedCredit’s loans to Allina patients come with 8% interest. Patients enrolled in a CareCredit card from Synchrony, the nation’s leading medical lender, face a nearly 27% interest rate if they fail to pay off their loan during a zero-interest promotional period. The high rate hits about 1 in 5 borrowers, according to the company.
For many patients, financing arrangements can be confusing, resulting in missed payments or higher interest rates than they anticipated. The loans can also deepen inequalities. Lower-income patients without the means to make large monthly payments can face higher interest rates, while wealthier patients able to shoulder bigger monthly bills can secure lower rates.
More fundamentally, pushing people into loans that threaten their financial health runs against medical providers’ first obligation to not harm their patients, said patient advocate Mark Rukavina, program director at the nonprofit Community Catalyst.
“We’re dealing with sick people, scared people, vulnerable people,” Rukavina said. “Dangling a financial services product in front of them when they’re concerned about their care doesn’t seem appropriate.”
Debt upon debt for patients, as finance firms get a cut of payments
Nationwide, about 50 million people — or 1 in 5 adults — are on a financing plan to pay off a medical or dental bill, according to a KFF poll conducted for this project. About a quarter of those borrowers are paying interest, the poll found.
Increasingly, those interest payments are going to financing companies that promise hospitals they will collect more of their medical bills in exchange for a cut.
Hospital officials defend these arrangements, citing the need to offset the cost of offering financing options to patients. Alan Wolf, a spokesperson for the University of North Carolina’s hospital system, said that the system, which reported $5.8 billion in patient revenue last year, had a “responsibility to remain financially stable to assure we can provide care to all regardless of ability to pay.” UNC Health, as it is known, has contracted since 2019 with AccessOne, a private equity-backed company that finances loans for scores of hospital systems across the country.
This partnership has had a substantial impact on patient debt, according to a KHN analysis of billing and contracting records obtained through public records requests.
Most patients in 2019 were in no-interest payment plans
UNC Health, which as a public university system touts its commitment “to serve the people of North Carolina,” had long offered payment plans without interest. And when AccessOne took over the loans in September 2019, most patients were in no-interest plans.
That has steadily shifted as new patients enrolled in one of AccessOne’s plans, several of which have variable interest rates that now charge 13%.
In February 2020, records show, just 9% of UNC patients in an AccessOne plan were in a loan with the highest interest rate. Two years later, 46% were in such a plan. Overall, at any given time more than 100,000 UNC Health patients finance through AccessOne.
The interest can pile on debt. Someone with a $7,000 hospital bill, for example, who enrolls in a five-year financing plan at 13% interest will pay at least $2,500 more to settle that debt.
How a short-term solution ‘leads to longer-term problems’
Rukavina, the patient advocate, said adding this burden on patients makes little sense when medical debt is already creating so much hardship. “It may seem like a short-term solution, but it leads to longer-term problems,” he said. Health care debt has forced millions of Americans to cut back on food, give up their homes, and make other sacrifices, KHN found.
UNC Health disavowed responsibility for the additional debt, saying patients signed up for the higher-interest loans. “Any payment plans above zero-interest terms/conditions in place with AccessOne are in place at the request of the patient,” Wolf said in an email. UNC Health would only provide answers to written questions.
UNC Health’s patients aren’t the only ones getting routed into financing plans that require substantial interest payments.
At Atrium Health, a nonprofit system with roots as Charlotte’s public hospital that reported more than $7.5 billion in revenues last year, as many as half of patients enrolled in an AccessOne loan were in one of the company’s highest-interest plans, according to 2021 billing records analyzed by KHN.
At AU Health, Georgia’s main public university hospital system, billing records obtained by KHN show that two-thirds of patients on an AccessOne plan were paying the highest interest rate as of January.
A finance firm calls such loans ’empathetic patient financing’
AccessOne chief executive Mark Spinner, who in an interview called his firm a “compassionate, empathetic patient financing company,” said the range of interest rates gives patients and medical systems valuable options. “By offering AccessOne, you’re creating a much safer, more mission-aligned way for consumers to pay and help them stay out of medical debt,” he said. “It’s an alternative to lawsuits, legal action, and things like that.”
AccessOne, which doesn’t buy patient debt from hospitals, doesn’t run credit checks on patients to qualify them for loans. Nor will the company report patients who default to credit bureaus. The company also frequently markets the availability of zero-interest loans.
Some patients do qualify for no-interest plans, particularly if they have very low incomes. But the loans aren’t always as generous as company and hospital officials say.
AccessOne borrowers who miss payments can have their accounts returned to the hospital, which can sue them, report them to credit bureaus, or subject them to other collection actions. UNC Health refers unpaid bills to the state revenue department, which can garnish patients’ tax refunds. Atrium’s collections policy allows the hospital system to sue patients.
Because AccessOne borrowers can get low interest rates by making larger monthly payments, this financing system can also deepen inequalities. Someone who can pay $292 a month on a $7,000 hospital bill, for example, could qualify for a two-year, interest-free plan. But a patient who can pay only $159 a month would have to take a five-year plan with 13% interest, according to AccessOne.
“I see wealthier families benefiting,” said one former AccessOne employee, who asked not to be identified because she still works in the financing industry. “Lower-income families that have hardship are likely to end up with a higher overall balance due to the interest.”
Andy Talford, who oversees patient financial services at Moffitt Cancer Center in Tampa, said the hospital contracted with AccessOne to make it easier for patients to manage their medical bills. “Someone out there is helping them keep track of it,” he said.
But patients can get tripped up by the complexities of managing these plans, consumer advocates say. That’s what happened to Milcowitz, the graphic designer in Florida.
Milcowitz, 51, had set up a no-interest payment plan with Moffitt to pay off $3,000 she owed for her hysterectomy in 2017. When the medical center switched her account to AccessOne, however, she began receiving late notices, even as she kept making payments.
Only later did she figure out that AccessOne had set up two accounts, one for the cancer surgery and another for medical appointments. Her payments had been applied only to the surgery account, leaving the other past-due. She then got hit with higher interest rates. “It’s crazy,” she said.
Lenders see a growing business opportunity
While financing plans may mean more headaches and more debt for patients, they’re proving profitable for lenders.
That’s drawn the interest of private equity firms, which have bought several patient financing companies in recent years. Since 2017, AccessOne’s majority owner has been private equity investor Frontier Capital.
Synchrony, which historically marketed its CareCredit cards in patient waiting rooms, is now also inking deals with medical systems to enroll patients in loans when they go online to pay bills.
“They’re like pilot fish eating off the back of the shark,” said Jonathan Bush, a founder of Athenahealth, a health technology company that has developed electronic medical records and billing systems.
As patient bills skyrocket, hospitals face mounting pressure to collect more, which can make financing arrangements seem appealing, industry experts say. But as health systems go into business with lenders, many are reluctant to share details. Only a handful of hospitals contacted by KHN agreed to be interviewed about their contracts and what they mean for patients.
Several public systems, including Atrium and UNC Health, disclosed information only after KHN submitted public records requests. Even then, the two systems redacted key details, including how much they pay AccessOne.
AU Health, which did not redact its contract, pays AccessOne a 6% “servicing fee” on each patient loan the company administers. But like Atrium and UNC Health, AU Health refused to provide any on-the-record interviews.
Other hospital systems were even less transparent. Mercyhealth, a nonprofit with hospitals and clinics in Illinois and Wisconsin that routes its patients to CareCredit, would not discuss its lending practices. “We do not have anyone available for this,” spokesperson Therese Michels said. Allina Health and Prime Healthcare also wouldn’t talk about their patient financing deals.
Bush said there’s a reason so few hospitals want to discuss their financing deals: They’re embarrassed. “It’s like they quietly write someone’s name on a piece of paper and slide it across the table,” he said. “They don’t want to be a part of it because they have in their institutional memory that they are supposed to look after patients’ best interests.”
Some hospitals and banks still offer interest-free help
Not all hospitals expose their patients to extra costs to finance medical bills.
Lake Region Healthcare, a small nonprofit with hospitals and clinics in rural Minnesota that contracts with Missouri-based Commerce Bank, charges no interest or fees on payment plans. That’s a decision that spokesperson Katie Johnson said was made “for the benefit of our patients.”
Even some AccessOne clients such as the University of Kansas Health System shield patients from interest. But as providers look to boost their bottom lines, it’s unclear how long these protections will last. Colette Lasack, who oversees financing for the Kansas system, noted: “There’s a cost associated with that.”
Meanwhile, large national lenders such as Discover Financial Services are looking at the patient financing business.
“I’ve had to become more of a health care marketer,” said Matt Lattman, vice president for personal loans at Discover, which is pitching the loans to people with unexpected medical bills. “In a world where many people are ill prepared to cover their health care costs, the personal loan can provide an opportunity.”
Tuesday marked the start of the tenth season of open enrollment in the ACA’s health insurance exchanges. Last year, a record 14.5M Americans obtained coverage through the exchanges, and this year’s total is expected to surpass that. That’s thanks to the extended subsidies included in the Inflation Reduction Act, a fix to the “family glitch” that prevented up to 1M low-income families from accessing premium assistance, and expanded offerings by most major insurers, who have been enticed by the exchanges’ recent stability. The average unsubsidized premium for benchmark silver plans in 2023 is expected to rise by about four percent, but the enhanced financial assistance will lower net premiums for most enrollees.
The Gist: ACA marketplace enrollment has grown nearly 80 percent since opening in 2014, and exchange plans now cover 4.5 percent of Americans. After enrollment lagged during the Trump administration,the combination of policy fixes and improved risk pools are attracting insurers back into the exchanges, where enrollees are finding more affordable plans than ever before.
We consider this a commendable first decade, but the success of the exchanges over the next ten years remains subject to political winds. Congress must revisit the extended subsidies by 2025, and a different administration might deprioritize marketplace advertising and navigation support, policies have which proven crucial to the exchanges’ recent growth.
All signs point to a crushing surge in health care costs for patients and employers next year — and that means health care industry groups are about to brawl over who pays the price.
Why it matters: The surge could build pressure on Congress to stop ignoring the underlying costs that make care increasingly unaffordable for everyday Americans — and make billions for health care companies.
[This special report kicks off a series to introduce our new, Congress-focused Axios Pro: Health Care, coming Nov. 14.]
This year’s Democratic legislation allowing Medicare to negotiate drug prices was a rare case of addressing costs amid intense drug industry lobbying against it. Even so, it was a watered down version of the original proposal.
But the drug industry isn’t alone in its willingness to fight to maintain the status quo, and that fight frequently pits one industry group against another.
Where it stands: Even insured Americans are struggling to afford their care, the inevitable result of years of cost-shifting by employers and insurers onto patients through higher premiums, deductibles and other out-of-pocket costs.
But employers are now struggling to attract and retain workers, and forcing their employees to shoulder even more costs seems like a less viable option.
Tougher economic times make patients more cost-sensitive, putting families in a bind if they get sick.
Rising medical debt, increased price transparency and questionable debt collection practices have rubbed some of the good-guy sheen off of hospitals and providers.
All of this is coming to a boiling point. The question isn’t whether, but when.
Yes, but: Don’t underestimate Washington’s ability to have a completely underwhelming response to the problem, or one that just kicks the can down the road — or to just not respond at all.
Between the lines: If you look closely, the usual partisan battle lines are changing.
The GOP’s criticism of Democrats’ drug pricing law is nothing like the party’s outcry over the Affordable Care Act, and no one seriously thinks the party will make a real attempt to repeal it.
One of the most meaningful health reforms passed in recent years was a bipartisan ban on surprise billing, which may provide a more modern template for health care policy fights.
Surprise medical bills divided lawmakers into two teams, but it wasn’t Democrats vs. Republicans; it was those who supported the insurer-backed reform plan vs. the hospital and provider-backed one. This fight continues today — in court.
The bottom line: Someone is going to have to pay for the coming cost surge, whether that’s patients, taxpayers, employers or the health care companies profiting off of the system. Each industry group is fighting like hell to make sure it isn’t them.
Hospitals in the United States are on track for their worst financial year in decades. According to a recent report, median hospital operating margins were cumulatively negative through the first eight months of 2022. For context, in 2020, despite unprecedented losses during the initial months of COVID-19, hospitals still reported median eight-month operating margins of 2 percent—although these were in large part buoyed by federal aid from the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The recent, historically poor financial performance is the result of significant pressures on multiple fronts. Labor shortages and supply-chain disruptions have fueled a dramatic rise in expenses, which, due to the annually fixed nature of payment rates, hospitals have thus far been unable to pass through to payers. At the same time, diminished patient volumes—especially in more profitable service lines—have constrained revenues, and declining markets have generated substantial investment losses.
While it’s tempting to view these challenges as transient shocks, a rapid recovery seems unlikely for a number of reasons. Thus, hospitals will be forced to take aggressive cost-cutting measures to stabilize balance sheets. For some, this will include department or service line closures; for others, closing altogether. As these scenarios unfold, ultimately, the costs will be borne by patients, in one form or another.
Hospitals Face A Difficult Road To Financial Recovery
There are several factors that suggest hospital margins will face continued headwinds in the coming years. First, the primary driver of rising hospital expenses is a shortage of labor—in particular, nursing labor—which will likely worsen in the future. Since the start of the pandemic, hospitals have lost a total of 105,000 employees, and nursing vacancieshave more than doubled. In response, hospitals have relied on expensive contract nurses and extended overtime hours, resulting in surging wage costs. While this issue was exacerbated by the pandemic, the national nursing shortage is a decades-old problem that—with a substantial portion of the labor force approaching retirement and an insufficient supply of new nurses to replace them—is projected to reach 450,000 by 2025.
Second, while payment rates will eventually adjust to rising costs, this is likely to occur slowly and unevenly. Medicare rates, which are adjusted annually based on an inflation projection, are already set to undershoot hospital costs. Given that Medicare doesn’t issue retrospective corrections, this underadjustment will become baked into Medicare prices for the foreseeable future, widening the gap between costs and payments.
This leaves commercial payers to make up the difference. Commercial rates are typically negotiated in three- to five-year contract cycles, so hospitals on the early side of a new contract may be forced to wait until renegotiation for more substantial pricing adjustments. “Negotiation” is also the operative term here, as payers are under no obligation to offset rising costs. Instead, it is likely that the speed and degree of price adjustments will be dictated by provider market share, leaving smaller hospitals at a further disadvantage. This trend was exemplified during the 2008 financial crisis, in which only the most prestigious hospitals were able to significantly adjust pricing in response to historic investment losses.
Finally, economic uncertainty and the threat of recession will create continued disruptions in patient volumes, particularly with elective procedures. Although health care has historically been referred to as “recession-proof,” the growing prevalence of high-deductible health plans (HDHPs) and more aggressive cost-sharing mechanisms have left patients more exposed to health care costs and more likely to weigh these costs against other household expenditures when budgets get tight. While this consumerist response is not new—research on previous recessions has identified direct correlations between economic strength and surgical volumes—the degree of cost exposure for patients is historically high. Since 2008, enrollment in HDHPs has increased nearly four-fold, now representing 28 percent of all employer-sponsored enrollments. There’s evidence that this exposure is already impacting patient decisions. Recently, one in five adults reported delaying or forgoing treatment in response to general inflation.
Taken together, these factors suggest that the current financial pressures are unlikely to resolve in the short term. As losses mount and cash reserves dwindle, hospitals will ultimately need to cut costs to stem the bleeding—which presents both challenges and opportunities.
Direct And Indirect Consequences For Cost, Quality, And Access To Care
Inevitably, as rising costs become baked into commercial pricing, patients will face dramatic premium hikes. As discussed above, this process is likely to occur slowly over the next few years. In the meantime, the current challenges and the manner in which hospitals respond will have lasting implications on quality and access to care, particularly among the most vulnerable populations.
Likely Effects On Patient Experience And Quality Of Care
Insufficient staffing has already created substantial bottlenecks in outpatient and acute-care facilities, resulting in increased wait times, delayed procedures, and, in extreme cases, hospitals diverting patients altogether. During the Omicron surge, 52 of 62 hospitals in Los Angeles, California, were reportedly diverting patients due to insufficient beds and staffing.
The challenges with nursing labor will have direct consequences for clinical quality. Persistent nursing shortages will force hospitals to increase patient loads and expand overtime hours, measures that have been repeatedly linked to longer hospital stays, more clinical errors, and worse patient outcomes. Additionally, the wave of experienced nurses exiting the workforce will accelerate an already growing divide between average nursing experience and the complexity of care they are asked to provide. This trend, referred to as the “Experience-Complexity Gap,” will only worsen in the coming years as a significant portion of the nursing workforce reaches retirement age. In addition to the clinical quality implications, the exodus of experienced nurses—many of whom serve in crucial nurse educator and mentorship roles—also has feedback effects on the training and supply of new nurses.
Staffing impacts on quality of care are not limited to clinical staff. During the initial months of the pandemic, hospitals laid off or furloughed hundreds of thousands of nonclinical staff, a common target for short-term payroll reductions. While these staff do not directly impact patient care (or billed charges), they can have a significant impact on patient experience and satisfaction. Additionally, downsizing support staff can negatively impact physician productivity and time spent with patients, which can have downstream effects on cost and quality of care.
Disproportionate Impacts On Underserved Communities
Reduced access to care will be felt most acutely in rural regions. A recent report found that more than 30 percent of rural hospitals were at risk of closure within the next six years, placing the affected communities—statistically older, sicker, and poorer than average—at higher risk for adverse health outcomes. When rural hospitals close, local residents are forced to travel more than 20 miles further to access inpatient or emergency care. For patients with life-threatening conditions, this increased travel has been linked to a 5–10 percent increase in risk of mortality.
Rural closures also have downstream effects that further deteriorate patient use and access to care. Rural hospitals often employ the majority of local physicians, many of whom leave the community when these facilities close. Access to complex specialty care and diagnostic testing is also diminished, as many of these services are provided by vendors or provider groups within hospital facilities. Thus, when rural hospitals close, the surrounding communities lose access to the entire care continuum. As a result, individuals within these communities are more likely to forgo treatment, testing, or routine preventive services, further exacerbating existing health disparities.
In areas not affected by hospital closures, access will be more selectively impacted. After the 2008 financial crisis, the most common cost-shifting response from hospitals was to reduce unprofitable service offerings. Historically, these measures have disproportionately impacted minority and low-income patients, as they tend to include services with high Medicaid populations (for example, psychiatric and addiction care) and crucial services such as obstetrics and trauma care, which are already underprovided in these communities. Since 2020, dozens of hospitals, both urban and rural, have closed or suspended maternity care. Similar to closure of rural hospitals, these closures have downstream effects on local access to physicians or other health services.
Potential For Productive Cost Reduction And The Need For A Measured Policy Response
Despite the doom-and-gloom scenario presented above, the focus on hospital costs is not entirely negative. Cost-cutting measures will inevitably yield efficiencies in a notoriously inefficient industry. Additionally, not all facility closures negatively impact care. While rural facility closures can have dire consequences in health emergencies, studies have found that outcomes for non-urgent conditions remained similar or actually improved.
Historically, attempts to rein in health care spending have focused on the demand side (that is, use) or on negotiated prices. These measures ignore the impact of hospital costs, which have historically outpaced inflation and contributed directly to rising prices. Thus, the current situation presents a brief window of opportunity in which hospital incentives are aligned with the broader policy goals of lowering costs. Capitalizing on this opportunity will require a careful balancing act from policy makers.
In response to the current challenges, the American Hospital Association has already appealed to Congress to extend federal aid programs created in the CARES Act. While this would help to mitigate losses in the short term, it would also undermine any positive gains in cost efficiency. Instead of a broad-spectrum bailout, policy makers should consider a more targeted approach that supports crucial community and rural services without continuing to fund broader health system inefficiencies.
The establishment of Rural Emergency Hospitals beginning in 2023 represents one such approach to eliminating excess costs while preventing negative patient consequences. This rule provides financial incentives for struggling critical access and rural hospitals to convert to standalone emergency departments instead of outright closing. If effective, this policy would ensure that affected communities maintain crucial access to emergency care while reducing overall costs attributed to low-volume, financially unviable services.
Policies can also help promote efficiencies by improving coverage for digital and telehealth services—long touted as potential solutions to rural health care deserts—or easing regulations to encourage more effective use of mid-level providers.
The financial challenges facing hospitals are substantial and likely to persist in the coming years. As a result, health systems will be forced to take drastic measures to reduce costs and stabilize profit margins. The existing challenges and the manner in which hospitals respond will have long-term implications for cost, quality, and access to care, especially within historically underserved communities. As with any crisis, though, they also present an opportunity to address industrywide inefficiencies. By relying on targeted, evidence-based policies, policy makers can mitigate the negative consequences and allow for a more efficient and effective system to emerge.
Almost 40% of Americans are willing to split their ticket and vote for a candidate from the opposing party who made a top priority of lowering health costs, according to a Gallup/West Health poll published Thursday.
Why it matters: Though candidates haven’t been talking much about medical costs in the run-up to the midterms, the issue remains enough of a priority that it could erode straight party-line voting.
By the numbers: 87% of Americans polled said a candidate’s plan to reduce the cost of health care services was very or somewhat important in casting a vote.
The issue cut across partisan lines, with 96% of Democrats and 77% of Republican respondents saying a candidate with a health care costs plan was an important factor.
86% also said a plan to lower prescription drug prices is very or somewhat important. That’s especially true for seniors.
Of note: Democratic voters were more likely than Republicans to say they would cross party lines because health costs are a top priority. Four in 10 Democrats said they were likely to do so compared to about 1 in 5 Republicans.