Blog | Billing and Collections

Analysis: Why it behooves hospitals to re-evaluate medical accounts receivable process

Blog | Billing and Collections

Analysis: Why it behooves hospitals to re-evaluate medical accounts receivable process

  • According to a recent Kaiser Health News article nearly half — 45% — of nonprofit hospital organizations are routinely sending medical bills to patients whose incomes are low enough to qualify for charity care.
  • While hospitals have legitimate points on how the data are analyzed and portrayed, the general public and policymakers largely don’t care.
  • HFMA’s Chad Mulvany says these stories are going to keep coming so it would behoove hospitals to proactively re-evaluate the way they engage their patients to resolve medical accounts receivable.

A recent Kaiser Health News article is reporting, based on its analysis of IRS data from schedule H of form 990 that “nearly half — 45% — of nonprofit hospital organizations are routinely sending medical bills to patients whose incomes are low enough to qualify for charity care . . . Those 1,134 organizations operate 1,651 hospitals.”

“About 56% of American community hospitals have nonprofit status, which frees them of paying most taxes and allows them to float tax-exempt bonds. In return, they provide community benefits,” the KHN article continued. “The IRS leaves it up to each hospital to decide the qualifying criteria based on each community’s individual needs.”

The article then attempts to substantiate the analysis by citing examples based on patients from one hospital. 

Takeaway

There are two buckets of takeaways here.

The first, discussed below in detail, is that there are some real methodological issues with KHN’s analysis. While hospitals have legitimate points on how the data are analyzed and portrayed, the general public and policymakers largely don’t care. For reporters, these stories get clicks and attention in state houses and on the Hill.

Which brings me to my second point. These stories are going to keep coming so it would behoove hospitals and health systems to proactively re-evaluate the way they engage their patients to resolve medical accounts receivable.

HFMA has resources that can both help improve patient financial communications and illustrate best practice workflows for medical accounts resolution. 

Methodological issues with Kaiser Health News analysis

Misusing a data element from the 990: The analysis focuses on the percentage of bad debt “that reasonably is attributable to patients who likely would qualify for financial assistance under the hospital’s financial assistance policy . . . but for whom insufficient information was obtained to determine their eligibility.” The intended purpose of this field on the 990 was to allow hospitals to identify the cost of medical services that would have been provided as charity care had the patient returned and completed the charity care application to the hospital.  So, in my opinion it’s a bit disingenuous to point to this field and call out that number as a failing on the part of healthcare systems.

Percentage of providers cited: The 45% cited by Kaiser Health News includes any hospital reporting that some percentage of its bad debt is attributed to patients who might have been eligible for charity care had the patient provided sufficient information. I don’t know what an acceptable percentage is from KHN’s perspective, but if you arbitrarily draw the line at 16% or more, the percentage of hospitals drops to 25%. 

Total amount of bad debt that should have been eligible for charity care: Instead of counting the number of hospitals that have a percentage of bad debt that could have been charity care had the patient provided sufficient information, I think a more useful number is the total national percentage of bad debt that could have been eligible for financial assistance had the patient returned the application. That number is a more pedestrian 9.7% nationally.

About the Author

Chad Mulvany

is director, healthcare finance policy, strategy and development, HFMA’s Washington, D.C., office.

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