Before undergoing an MRI, a CT scan or a surgery to clean up that wobbly knee, consumers had better become accustomed to hearing: “How do you intend to pay for that?”
As more Americans move into health insurance plans that require them to foot a larger portion of the bill for their care, hospitals are taking steps to ensure consumers live up to their end of the bargain.
Many health systems and physician groups are adopting new strategies to ensure they'll collect for providing health services, including asking patients for payment before treatment and hiring contractors to enroll patients in payment plans.
The shift comes as more consumers enroll in high-deductible health plans, which require consumers to pay more out of pocket in exchange for lower monthly premiums. As a result, health care providers must collect a larger portion of patient bills from consumers themselves, rather than from insurance companies.
It’s a delicate balance for hospitals, which have legal and ethical obligations to care for people who arrive with critical health conditions regardless of their ability to pay. At the same time, hospitals believe they must become more insistent and methodical about screening patients’ ability to pay, particularly people with scheduled procedures or elective surgeries.
“It’s a dramatic change in collection practices,” said Andy Scianimanico, vice president of revenue cycle for Northwestern Memorial HealthCare, the parent company of Chicago’s largest hospital. “The biggest challenge for us is to move conversations (with prospective patients) as far up in the process as possible. It’s not about strong-arming patients to pay. It’s about getting information into the hands of patients so they can make better-informed decisions.”
In the past decade, enrollment in the most common type of high-deductible health plans has exploded. At the beginning of 2013, an estimated 16.5 million consumers were enrolled in plans with high deductibles, compared with a little more than 1 million in 2005, according to industry data. The majority are enrolled in employer-based coverage.
Trend will continue
That number is expected to grow substantially in 2014, as many of the new health insurance plans offered under the Affordable Care Act carry higher deductibles, the set amount that consumers must spend on health care before their insurance benefits kick in.
Further, 85 to 90 percent of large employers are expected to offer workers a high-deductible plan as part of their coverage options in 2014, up from about two-thirds in 2013, said Thomas Hricik, a Pittsburgh-based health care consultant with Buck Consultants.
The Internal Revenue Service defines plans with deductibles greater than $1,250 for an individual and $2,500 for a family as “high-deductible plans,” though many offered by employers and via the new health insurance exchanges carry much higher amounts.
When Michelle Combs, 50, scheduled a minor outpatient surgery in January 2012, she was asked to pay her portion of roughly $800 before the procedure.
Combs, of West Chester, Ohio, bristled when the hospital told her it would not have gone through with the procedure without prior payment.
Even though her family deductible of $1,500 doesn’t qualify as a high-deductible plan, “There is rarely a time that my family has a spare $800 laying around,” she said. Fortunately, she had enough money saved in a flexible spending account through her employer that she was able to pay the bill upfront.
If it weren’t for that, “I probably would still be waiting to have that procedure done,” Combs said.
Some have warned that people with high-deductible plans may hold off on necessary procedures for fear they cannot afford to meet their out-of-pocket responsibilities. Others say that such plans make for smarter health care consumers, who are more willing to shop for affordable care and are less likely to undergo unnecessary and expensive treatments.
New collection policies
In the past, hospitals could count on insurers to pay 80 to 90 percent of the cost of services, leaving the rest to patients, an important but far less consequential source of revenue. When treating patients with high-deductible plans, however, the insurer’s share drops to as low as 60 percent, with the balance falling to consumers.
The average patient responsibility for medical bills on a selection of major procedures rose to $2,568 in the second quarter of 2013. That’s up 87 percent from $1,375 in the same quarter of 2010, according to TransUnion data, based on information from 200 hospitals for five commonly administered procedures, including major joint replacement and child delivery.
Those figures, too, are poised to rise next year, in large part because a portion of the estimated 7 million consumers who will buy policies on the health insurance exchanges are expected to choose plans with higher deductibles because they come with more affordable monthly premiums, industry analysts say.
The migration of more people onto such policies is changing the paradigm of how hospitals collect payments, forcing them to restructure and refine how they interact with insurance companies and patients.
Hospitals traditionally have had trouble collecting directly from patients, recouping somewhere between 10 and 20 percent of their portion within 120 days of sending the first bill, said Craig Froude, chief executive officer of CarePayment LLC, a Lake Oswego, Ore.-based finance company that provides payment programs that hospitals can offer their patients.
Anemic collection rates, along with growing patient responsibility for medical bills, have contributed to rising levels of bad debt.
U.S. hospitals provided $41.1 billion in uncompensated care in 2011, representing nearly 6 percent of annual hospital expenses, according to American Hospital Association data. That figure, which includes charity care and charges written off as bad debt, has nearly doubled over the last decade.
“It’s such a big deal because it makes (hospital) financial planning and revenue projections difficult,” said Kip Piper, a former state Medicaid official and White House budget officer who advises large health care organizations on health policy, finance and business strategy. “Hospitals are definitely worried more about collecting in an environment where the consumer is at greater financial risk.”