Request for money upfront comes at a time when many patients already struggle with medical debt
In its reporting of healthcare trends gathering momentum, a national newspaper caused quite a stir this spring when it published a story documenting how some hospitals now require patients to pay in advance of specified surgeries and procedures. Hospitals are recognizing what clinical laboratories have long known—a larger proportion of Americans do not have the cash to pay a medical bill.
Hospitals and surgery centers are requesting advanced payment for elective procedures such as knee replacements, CT scans, and childbirth procedures, according to an Advisory Board daily briefing.
“In some cases, they may also have a contract with an insurance company. And in that contract are terms that stipulate hospitals need to collect deductibles or co-insurance before a procedure,” Evans added.
According to Bankrate’s 2024 Annual Emergency Savings Report, nearly half of all American’s would be unable to pay cash for an unplanned $1,000 bill. Therefore, one wonders why hospitals would attempt to extract payments from patients in advance of medical visits and clinical laboratory testing. Wouldn’t that just reduce the number of patients electing to undergo needed surgeries and other costly procedures? Nevertheless, it appears that many hospitals struggling financially are doing just that, according to The Wall Street Journal.
Genetic testing laboratories have a similar problem because of high-deductible health plans ($5K/year for individual, $12K/year for family). It means that many patients, even with insurance, struggle to pay a $1,000 to $5,000 bill for a genetic test.
Requesting payment from patients before healthcare visits is not new. However, the practice is on the rise and comes at a time when consumers are already struggling to make ends meet.
“Hospitals collected (in Q1 2024) about 23% of what patients owed them before they set foot in a hospital or doctor’s office. That’s up from about 20% in the same period a year earlier,” said reporter Melanie Evans (above) of The Wall Street Journal, referring to data from 1,850 hospitals analyzed by Kodiak Solutions. Genetic testing laboratories experience similar challenges getting paid due to many people struggling with high deductible health plans. (Photo copyright: LinkedIn.)
Price Transparency Behind Upfront Payments
According to a recent KFF survey of US families, “about half of adults would be unable to pay an unexpected medical bill of $500 in full without going into debt.”
Regardless, asking for payment for nonemergency care has become more common as people increasingly choose health plans with high-deductibles and amid the push for greater price transparency, according to Richard Gundling, Senior Vice President, Content and Professional Practice Guidance at Healthcare Financial Management Association (HFMA), in an interview with Advisory Board.
“It’s very common if not the norm” for hospitals to give patients a cost estimate and ask for advance payment, Gundling stated during the interview.
In fact, healthcare providers and insurers are required to shared charges and estimates as part of newly implemented federal rules. According to the American Hospital Association (AHA) those statutes and rules include:
The Hospital Price Transparency Final Rule (effective January 2021) which requires hospitals to publicly post “standard charges” via machine readable files.
The No Surprises Act which mandates the sharing of “good faith estimates” with uninsured/self-pay patients for most scheduled services and also requires insurers to provide explanation of benefits to enrollees.
According to Consumer Reports, hospitals are finding consumers less reliable payers than insurance companies. “No one would say, ‘Pay up or we won’t treat you.’ But we’re saying that, ‘You have a large out-of-pocket cost, and we want to know how are you going to pay for it,’” explained Jonathan Wiik, Vice President of Health Insights at FinThrive, a revenue cycle management company.
Razor Thin Hospital Margins
For their part, hospitals, health systems, and medical practices wrote off $17.4 billion in bad debt in 2023, Kodiak Solutions, an Indianapolis-based healthcare consulting and software company, reported in a news release.
“With the amounts that health plans require patients to pay continuing to grow, provider organizations need a strategy to avoid intensifying pressure on their already thin margins,” said Colleen Hall, Senior Vice President, Revenue Cycle, Kodiak, in the news release.
“Patient collections have become an increasingly difficult challenge for hospitals due primarily to a shift in payer mix. Because of rising deductibles and increased patient responsibility, the percentage of healthcare provider revenue collected directly from patients increased to more than 30% from less than 10% over 10 years,” the HFMA noted.
Thus, the financial tension being experienced by both patients and providers, and the need for patients to prepay for some treatment, are extreme challenges. The situation may call for clinical laboratory leaders to not only focus on quality testing and efficient workflow, but also affordability and access to services.
Challenges getting paid likely to continue as high deductibles make patients responsible for paying much more of their healthcare bills
Rising out-of-pocket costs for healthcare consumers is translating into increasing amounts of red ink for hospitals and healthcare providers struggling to collect bills from patients with high-deductible health plans (HDHPs). Clinical laboratories and pathology groups are unlikely to be immune from these challenges, as increasing numbers of patients with smaller healthcare debts also are failing to pay their bills in full.
That’s according to a recent TransUnion Healthcare analysis of patient data from across the country. It revealed that 99% of hospital bills of $3,000 or more were not paid in full by the end 2016. For bills under $500, more than two-thirds of patients (68%) didn’t pay the full balance by year’s end (an increase from 53% in 2015 and 49% in 2014). The study also revealed that the percentage of patients that have made partial payments toward their hospital bills has fallen dramatically from nearly 90% in 2015 to 77% in 2016.
Increased Patient Responsibility Causing Decrease in Patient Payments
“The shift in healthcare payments has been taking place for well over a decade, but we are seeing more pronounced changes in how hospital bills are paid during just the last few years,” Jonathan Wilk, Principal for Healthcare Revenue Cycle Management at TransUnion (NYSE:TRU), said in a statement.
Millions of Americans are in high-deductible health plans. And, as the graphic above illustrates, that number has been increasing since the ACA was signed into law in 2010. (Graphic copyright: Reuters.)
While the Affordable Care Act (ACA) has increased the number of Americans receiving medical coverage through Medicaid or commercial insurance, TransUnion noted in its statement that hospitals still wrote off roughly $35.7 billion in bad debt in 2015. By 2020, TransUnion predicts that figure will continue to rise, with an estimated 95% of patients unable to pay their healthcare bills in full by the start of the next decade.
“Higher deductibles and the increase in patient responsibility are causing a decrease in patient payments to providers for patient care services rendered. While uncompensated care has declined, it appears to be primarily due to the increased number of individuals with Medicaid and commercial insurance coverage,” John Yount, Vice President for Healthcare Products at TransUnion, said in the TransUnion statement.
Collecting Patients’ Out-of-Pocket Costs Upfront
According to Reuters, hospitals in states that did not expand Medicaid under Obamacare have witnessed a more than 14% increase in unpaid bills as the number of people using health plans with high out-of-pocket costs increased. For hospitals in those states, HDHPs are impacting their bottom lines.
“It feels like a sucker punch,” declared Chief Executive Officer John Henderson of Childress Regional Medical Center, Texas Panhandle Region, in a Bloomberg Business article. “When someone has a really high deductible, effectively they’re still uninsured, and most people in Childress don’t have $5,000 lying around to pay their bills.”
A recent report from payment network InstaMed found that 72% of healthcare providers reported an increase in patient financial responsibility in 2016, a trend that coincides with a rise in the average deductible for a single worker to $1,478, more than double the $735 total in 2010.
In response to the increase in patient responsibility, hospitals and other providers are turning to new tactics for collecting money directly from patients, including estimating patients’ out-of-pocket payments and collecting those amounts upfront.
“Hospitals have gotten much more aggressive in trying to collect at time of service, because their ability to collect on self-pay amounts decreases significantly when the patient leaves the building,” Arquilla noted. “You can’t say, ‘Give me your credit card’ to someone in the emergency room bleeding from a gunshot wound, but you can to someone going in for an elective procedure.”
Revenue loss due to unpaid medical bills among states that complied with Medicaid Expansion under the ACA has increase so dramatically, some hospitals are now offering patients prepayment discounts and no-interest loans to ensure payments. Clinical laboratories and anatomic pathology groups should develop strategies to respond to the increase collections from patients at the time of service. (Graphic copyright: Reuters.)
Richard Gundling, a Senior Vice President at the Healthcare Financial Management Association (HFMA), told Kaiser Health News that an estimated 75% of healthcare and hospital systems now ask for payment at the time services are provided. To soften the blow, some healthcare systems are providing patients with a range of payment options, from prepayment discounts to no-interest loans.
Novant Health, headquartered in North Carolina, is among those healthcare systems offering patients new payment strategies. Offering no interest loans to patients has enabled Novant to lower its patient default rate from 32% to 12%.
“To remain financially stable, we had to do something,” April York, Senior Director of Patient Finance at Novant Health, told Reuters. “Patients needed longer to pay. They needed a variety of options.”
Providers Must Adapt to New Patient Procedures
“Doctors need to understand the landscape has changed. A doctor’s primary concern use
While clinical laboratories and anatomic pathology groups traditionally have not collected money directly from patients, Herrick says healthcare providers must accept that the rules of the game have changed. “Patients are more cost-conscious now. That means patients will question their physicians about costs for procedures,” he adds.
