Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.
The debate over how to reform the nation’s health care system has focused largely on reducing the uninsured population. But even patients who have health coverage are increasingly having a negative impact on provider finances.
While employers have been able to hold down rate hikes by boosting annual deductibles, copayment or coinsurance levels, the higher out-of-pocket costs are forcing providers to write off more revenue as uncollectible (see chart, below).
The popularity of low-cost limited-benefit (mini-med) plans, for example, is leaving patients with huge out-of-pocket expenses, says James Logsdon, vice president of revenue cycle operations and strategic revenue services at Texas Health Resources, a nonprofit multi-hospital health system.
“So, while some insurance is better than no insurance, it also results in very large amounts going to bad debt or charity,” he says. That type of coverage, he explains, gives enrollees a false sense of security by letting them believe they have insurance, “until they realize that their out-of-pocket portion is enormous.” Logsdon says hospital staff tries to identify such patients upfront, but admits it’s a challenge to spot them at the time of service.
But even patients who have more traditional coverage are facing much bigger bills from hospitals and doctor offices. In 2012, the cost of PPO-based health coverage for a family of four topped $20,000 — up 6.9% from the previous year, according to the Milliman Medical Index, which was released May 15. Employers, on average, will contribute $12,144 of the $20,728 total while employees — through payroll deductions and out-of-pocket expenditures — will pay the remaining $8,584, according to the report (HPW 5/21/12, p. 4). And a study released this month by Towers Watson and the National Business Group on Health predicts the medical cost trend will increase an average of 5.6% per employee this year. As costs continue to outpace general inflation, employers will continue to push more of the burden onto employees. Employees this year are expected to contribute 34.4% for health coverage (a combination of premiums and out-of-pocket costs) — up from 33.2% in 2011.
But the financial drain providers are experiencing isn’t coming from just the uninsured and those with high out-of-pocket expenses. Providers also are grappling with reimbursement reductions from Medicaid, says Chris Becraft, president of Collection Service Bureau, Inc., which provides billing and collection services.
Among all hospitals, Medicaid accounts for about 9% of hospital gross revenue, commercial coverage makes up about 36%, and Medicare accounts for more than 40%, according to the Hospital Accounts Receivable Analysis Report, a quarterly benchmarking publication published by Wolters Kluwer Law and Business.
One of the problems, Becraft says, is that consumers expect world-class health care, yet are surprised when they see how much the best care actually costs. “If every time I went in to buy a car, I expected to get a Lambor- ghini, I’d be surprised at my monthly payment” if someone else had previously footed the bill, he says. Paying for health care services, he says, is something that traditionally has been taken care of by health insurers or the government, and has left the consumer largely out of the equation. As a result, providers are experiencing lower utilization, which Becraft predicts could help bring down costs if too many hospital beds and physician waiting rooms sit empty.
Todd Nelson, technical director for senior financial executives at the Healthcare Financial Management Association (HFMA), says member hospitals are seeing higher levels of uncollectible revenue due to increased cost-sharing by employers.
But with more financial responsibility, patients also are becoming more price sensitive, he tells HPW. A growing number of patients, he says, are seeking cost estimates before seeking services. And electronic tools offered by health insurers are helping patients better understand financial obligations, he adds.
“It’s good to see the industry moving to more of a collaborative structure, rather than the us-versus-them mentality” that has traditionally existed between providers and payers.
In the fourth quarter of 2010, hospitals categorized more than 7% of their gross revenue as “uncollectible,” a term used to describe the cost of services written off as either charity or bad debt. The percentage written off was the highest level reported since the recession began in 2008, according to a quarterly survey of hospitals published by the Hospital Accounts Receivable Analysis (HARA) report. Hospitals in the Midwest struggled the most in the fourth quarter, writing off more than 16% of gross revenue as uncollectible.
SOURCE: Hospital Accounts Receivable Analysis report, fourth-quarter 2011, Wolters Kluwer Law & Business.
© 2012 by Atlantic Information Services, Inc. All Rights Reserved.
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