Patient Access

Hospitals Plan Responses to Rising Uninsured Rates

December 17, 2018 3:55 pm

Hospital responses to industry trends have included providing estimated out-of-pocket obligations before elective procedures.

Dec. 14—New data showing that the number of uninsured increased in 2017 for the first time since 2010 have left hospitals to find responses to protect their finances.

An analysis released by the Kaiser Family Foundation found the number of uninsured nonelderly adults increased by nearly 700,000, rising to 10.2 percent of that population, in 2017.

The uninsured rate in states that expanded Medicaid under the Affordable Care Act (ACA) was “essentially flat,” although patterns varied by state. In contrast, the uninsured rate increased by 0.6 percentage points in states that did not expand Medicaid. The largest increases in non-expansion states were among non-Hispanic blacks and those living above the federal poverty level.

The KFF authors blamed the uninsured rate on limited Medicaid eligibility for adults in some states, the unaffordability of individual-insurance coverage without financial assistance, and the lack of knowledge by some that they are eligible for coverage assistance under the ACA.

But even those with insurance coverage face increasing financial obstacles.

Among those with employer-sponsored insurance, the average annual deductible for single-person policies reached $1,808 in 2017, according to a December analysis by the Commonwealth Fund.

Average deductibles across single and family plans amounted to 4.8 percent of median income in 2017, an increase from 2.7 percent in 2008. In three states (Florida, Mississippi, and Tennessee), average deductibles comprised more than 6 percent of median income. 

Out-of-pocket spending in 2017 reached 10 percent of total healthcare spending, according to annual data on national health expenditures, as provided by the Office of the Actuary of the Centers for Medicare & Medicaid Services. Such spending, which includes copayments, deductibles, and spending not covered by insurance, increased by 2.6 percent to $365.5 billion in 2017, compared with a 4.4 percent increase in 2016.

Hospital Impact

The financial impact on hospitals of the ever-larger shift of healthcare costs to consumers has been repeatedly highlighted in recent years by debt rating agencies.

A recent TransUnion Healthcare analysis found patient balances after insurance have been steadily increasing—from 8 percent of the total bill responsibility in the first quarter of 2012 to 12.2 percent in the first quarter of 2017.

The concentrated impact of that patient debt was highlighted in the analysis by the finding that 30 percent of self-pay accounts—patients without health insurance or who have a balance after insurance—will generate more than 80 percent of the self-pay revenue collected by hospitals.

That finding underscored the need for hospitals to develop a better understanding of who is coming through their doors to gain better insight into their propensity to pay, their benefit eligibility, or their likelihood of qualifying for charity care, said Dave Wojczynski, president of TransUnion Healthcare.

And from 1 to 5 percent of self-pay accounts that are written off as bad debt actually have billable insurance coverage or are eligible for coverage.

That finding underscored the need for hospitals to have the right tools and practices in place to identify cases that appear to be self-pay but actually involve a liable insurance company, Wojczynski said in an interview.

For instance, a recent KFF analysis estimated that 27 percent of uninsured individuals who could shop on the ACA marketplace, or 4.2 million people nationwide, are eligible to purchase a bronze plan with $0 premiums after subsidies in 2019.

“It’s a pain point in the market and more focus is definitely being provided there,” Wojczynski said, referring to efforts to find existing or potential coverage of hospital patients.

Hospital Responses

In another trend, more hospitals are moving their collection process forward to garner revenue in advance of elective procedures.

“This notion of price transparency and having a better, holistic financial experience for the patient—it is not just words anymore. They are working to improve in that area and procuring solutions and tools to do that,” Wojczynski said.

Such tools can include price estimators, which allow providers to understand a patient’s financial obligation after an insurance claim is submitted and to provide that cost to the patient at the point of service, instead of weeks or months after the care is provided. Some of the most effective tools include data on rates paid for each procedure by local insurers to the specific hospital using the estimator.

Those efforts have managed to reduce bad debt among some of Wojczynski’s hospital clients.

Nationally, other hospitals have reported progress in that area as well. Among 600 hospital financials tracked by Kaufman Hall, bad debt and charity care in October decreased by 0.9 percent as a share of gross revenue year-over-year

Some recent data indicate that hospital leaders have increased their focus on cost cutting over generating more revenue. For instance, cutting costs was the highest priority in 2018 for 63 percent of hospital executives in a recent Premier survey.

But the continuing opportunity to increase revenue was evidenced by other data, including a 2017 Advisory Board study that indicated that the typical 350-bed hospital could garner $22 million by prioritizing revenue cycle improvements over cost cutting.

It remains to be seen how such hospital revenue efforts will interact with the increasing consumerism trend.

“A growing push among individuals and large employers to rein in spending growth is another major threat to the industry’s pricing power,” noted a 2019 outlook by Fitch Ratings. “As employers and consumers continue their revolt against rising costs, we expect to see more state governments respond with policies that could negatively affect the industry’s profits, like rules limiting balance billing and narrow networks.”

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare


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