Rising out-of-pocket costs has 'dramatic effects' on hospital's revenue cycle performance

Chicago-based company Crowe, a public accounting, consulting and technology firm, released a report detailing hospital collection rates for self-pay patients. 

Hospitals are likely out of luck when it comes to collecting patient balances over $7,500, referred to as the 'vanishing point' for billing collectability by the report. Its data shows that $7,500 is the drop off point for patients paying out-of-pocket. 

The rise in out-of-pocket medical bills for patients results in lower collection rates and higher bad debt for hospitals. 

The study also revealed that in the past, bad debt was accredited to uninsured patients, but now the majority of bad debt is attributed to patients with insurance. 

"Self-pay after insurance accounts for almost 58% of bad debt," the report states. 

Self-pay after insurance is made up of deductibles and leftover amounts due from a patient after insurance coverage. 

Additionally, the complications of newer insurance programs also feed into the problem, according to Brian Sanderson, a principal for Crowe's healthcare consulting group. 

"[High deductible health plans], health savings accounts, and various Affordable Care Act ‘metal’ plans – for example, bronze, silver, gold and platinum – have created confusion for patients and healthcare providers alike, as most of these newest options create greater out-of-pocket medical expenses for the patient," Mr. Sanderson said in the report. "And the patient is paying less of it for a variety of reasons."

The amount of patients with debts amounting to $7,500 or more have tripled since 2018 and debts more than $14,000 have almost quadrupled. 

"This represents a complete sea change for many hospitals regarding self-pay collections," Mr. Sanderson continued. "It’s one thing to ask patients for the $75 or even $200 copay amounts at the point of service. But it’s a completely different conversation to guide them through paying thousands of dollars. This is why we see collection rates dropping so dramatically."

Patients with insurance who paid out-of-pocket for deductibles or amounts due after insurance have dropped over 20 percent in the past year, standing at only 55 percent down from 76 percent in 2021. 

Staff shortages also play a part in the issue. 

"Hospitals are left in the lurch with these trends," Mr. Sanderson said in the report. “Labor scarcity makes for fewer experienced personnel looking to navigate increasing complexities of insurance coverage, while patient out-of-pocket costs continue to rise dramatically.” 

Sanderson added that hospitals and health systems who maintained high collection rates on large balances through both specific analysis and resource isolation have more successful revenue cycles. 

The report names expected trends, including more direct patient to hospital negotiations for more intricate medical care, payments plans from commercial finance companies and sophisticated hospital models to line up small workforces with patients who can pay their out-of-pocket expenses.

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