Industry Voices—Beyond benefit design, provider billing policies hit families hardest

What happens when record increases in health insurance premiums and deductibles put too much stress on patients’ pocketbooks? They delay needed care out of fear they’ll be unable to shoulder an unexpected medical expense for themselves or their families.

Now more than ever, patients worry about their ability to cover out-of-pocket healthcare costs, a recent Commonwealth Fund survey shows. The percentage of patients who believe they could afford the care they need is falling, and many say satisfying their financial obligations for care has become more difficult.

But these data only tell part of the story. Our own research shows that while 68% of patients want to discuss financing options that could ease their minds about mounting healthcare expenses, providers are falling short—and families, especially, are feeling the pinch.

Feeling the pinch

According to our survey, 27% of households with children are likely to delay care because they can’t afford to pay for it. Families are also less likely to pay their out-of-pocket costs for care in full—and their chances of having their account sent to collections are twice as high.

It’s not that families and individuals don’t want to cover their out-of-pocket costs. In fact, half of the patients surveyed were willing to select providers based on the availability of financing plans that stretch out their obligation into more manageable monthly payments. The trouble is, providers have been slow to adopt flexible payment plans. They are even slower to discuss financing options with patients or publicize them more broadly.

It’s time for a new approach to patient billing—one that takes into account patients’ desire to fulfill their financial obligations for care, addresses their concerns from the point of service, and demonstrates a willingness to meet them where they are.

The experience of one new mother in Florida illustrates the gains hospitals can make when they take a compassionate approach to patient collections. As she prepared to give birth to her daughter, she found herself facing a financial dilemma. The hospital required her to “reserve” her spot in its labor and delivery unit—for a $1,000 deposit. With no money in reserve and a baby on the way, she feared she wouldn’t be able to deliver her baby at the hospital.

She asked hospital representatives whether the hospital might consider a payment plan instead of a lump-sum payment. To her relief, the hospital allowed her to extend the payment over 12 months—interest-free. It’s an option that relieved the stress of the financial burden of care during what should be a joyous time for her family.

Making a difference through flexible payments

Offsetting the impact of out-of-pocket medical costs for individuals and families doesn’t require an overhaul of a hospital’s patient financial services program. Instead, hospitals can take simple steps to help patients more easily fulfill their financial obligations for care—and reduce their costs to collect as well as bad debt in the process.

Consider offering a variety of options for payment, such as low-interest and no-interest loans that all patients qualify for, without the fear of credit reporting or negative consequences. Setting the program up so that patients have a choice and opt into the program significantly helps the patient experience. Discuss their estimated out-of-pocket expense with patients before or at the point of care, and share information on payment plans widely, both onsite and online. Lastly, a program that is consumer friendly with easy ways to pay their bills and manage their accounts will go a long way to increase patient satisfaction.

Taking a more proactive approach to affordability is not only the right thing to do for patients but also the smart choice in protecting an organization’s long-term financial health.




Hospital bad debt rises in tandem with growing share of patient financial responsibility


The trend even includes Medicare bad debt, which results when hospitals exhaust efforts to collect from beneficiaries and must be paid back.

Hospitals continue to face financial challenges as the landscape shifts, and the challenge posed to hospitals by patient balances after insurance, or PBAI, is growing. That’s according to a new TransUnion Healthcare analysis that showed PBAI rose from 8 percent of the total bill responsibility during the first quarter of 2012 to 12.2 percent during the same quarter in 2017.

Commercially insured patients experienced a PBAI increase of 67 percent from $467 to $781, the analysis showed. The rising trend fueled an 88 percent increase in total hospital revenue attributed to PBAI over the 5-year period.

As patients take on more risk and shoulder more of their own healthcare costs, uncompensated care is also rising. TransUnion cited the American Hospital Association’s 2017 Hospital Fact Sheet, which said uncompensated care increased by $2.6 billion dollars in 2016, the first increase in three years. Rising PBAI has no doubt amplified bad debt for providers, contributing to that rise.

Jonathan Wiik, principal for healthcare strategy at TransUnion, said he expects the figure to have risen in 2017 and again in 2018.

The analysis also indicated that Medicare Bad Debt, which happens when Medicare patients don’t pay their deductibles and coinsurance, rose from $3.14 billion in 2012 to $3.69 billion in 2016, a 17 percent increase. If a hospital feels it has exhausted all efforts to get money from a Medicare beneficiary who has an outstanding copay coinsurance or deductible, and they have documented their efforts to collect, Medicare will actually pay the hospital back though not dollar-for-dollar. Wiik said Medicare pays about 65 cents on the dollar for that payback so the hospital still loses some money, about a third of the bill to be exact.

“A great example of that is a hip surgery patient that has Medicare, has a $1,000 deductible and never paid it,” Wilk said. “The hospital would have gotten $650 back but lost $350.”

The trend indicates that hospitals continue to experience reimbursement pressure that can be tied directly to the increase in how much of their own medical cost patients are now taking on

“That’s a very scary thing. For the average elective surgery the number used to be 10 percent, now it’s 30. Patients are great volume for hospitals but they are horrible payers compared to insurance companies. They cost twice as much to collect from and they take three times as long to pay. That’s an administrative burden for the hospital-cost to collect – it’s significantly higher to collect from a patient than from a insurer,” Wilk said.

To show just how much the payer landscape has shifted for hospitals, patients are now generally ranked as a top tier payer for hospitals, right after Medicare and Medicaid. Then comes PBAI and then commercial, according to Wiik. And with patients in the top of a hospital’s AR ranking, he’s seeing some clinics do deductible holds in which they delay their claim while a related hospital claim processes. They don’t send it in until the patient meets the deductible through the hospital. Once it is met then the clinic will send in their claim and get paid right away because the payer is paying, not the patient.

A big part of the problem is a huge gap in benefits literacy for patients coupled with the driving force of consumerism.

“They don’t understand the magnitude of the costs they they are going to get hit with. A relatively simple elective surgery will blow a $2,500 dollar deductible out of the water almost every time. Patients don’t realize that until it happens so hospitals should be engaging them early and putting patient-facing estimates in front of them. And it’s really not about collecting money from patients anymore it’s about getting them financing,” Wiik said.

That means proactively setting up payment plans to spread debt out over time, which protects not only the patient experience but also the hospital’s revenue. Plus it’s a more pleasant conversation to have. If patients are a higher ranking payer, hospitals should be putting into place more policies to deal with their needs and requirements, treating them like the force they are becoming.

“Imagine if you were going in for knee surgery and your hospital sent you a text that said here’s your payment plan would you like to start that now. I think a lot of patients would appreciate that. It doesn’t happen. But it should. The technology is there. You can buy groceries online now and go pick them up. It’s all billed electronically now.”

It can be hard to do estimates and set up payment plans early because medical costs cost can vary so much, but patients want that kind of experience. They put it on the hospitals to figure out how to get them a bill that is at least close to what they were expecting, and set them up to pay for it.

“They are going to go somewhere where that experience is frictionless. That’s what hospitals have to be aware of,” Wilk said. “The market is highly competitive when it comes to that type of stuff and the ones who are innovating and engaging patients are going to get those millennials and the folks that live paying their bills online.”