Historically hospitals have not really had to worry about collect directly from patients. On average patient cost-sharing is only about 3% when patients enter the hospital. Health care providers generally focus on insurance reimbursement. Maybe that is changing with the growing prevalence of high deductible plans. Now hospital patients can potentially owe several thousand dollars depending on whether they’ve met their deductibles and their cost-sharing arrangements.
One complaint about Obamacare is that deductibles have skyrocketed since its inception. To get affordable coverage many people have had to settle for deductibles of $3,000, $5,000 even $7,000 per year. Average deductibles have also increased for employer-sponsored health coverage; about doubling over the past decade — a phenomenon that began long before Obamacare. As a result of higher deductibles, many individuals are essentially paying for much of their medical care out of pocket.
A new report by TransUnion estimates that nearly two-thirds (63%) of patients’ outstanding hospital balances are $500 or less. The consumer credit reporting agency recently found:
- In 2016 68% of hospital patients with bills of less than $500 did not pay the full balance in its entirety.
- This is up 53% in 2015 and 49% in 2014
These bills are presumably outpatient services and patients’ share of the bill after insurance has paid.
- In 2016 about 10% of hospital bills were between $500 and $1,000. Of those, 85% were not paid in full.
- Only a small minority of hospital bills were more than $3,000 but 99% were not paid in full.
Only a few years ago, nearly 90% of patients at least made partial payments on hospital bills. In 2016 this had fallen to around three-quarters (77%). As hospital outstanding debts mount, many hospitals are setting up programs to get patients to pay more of their bills in advance. It is too bad hospital don’t set up programs to lower prices to levels their customers are comfortable paying.
Why are people not paying their outstanding hospital bills? It is not uncommon to have your car need $500 worth of repairs. Presumably, the majority of Americans pay for auto repair when their car breaks down. Maybe a hint can be found in the TransUnion report:
“In just about any retail environment in the U.S., people know how much they’ll pay for something before they buy it. Except when it comes to their health. Patients are often not provided with pre-service estimates because of the complexity involved in estimating healthcare costs.”
The report continues,
“According to one recent study, more than 90 percent of patients felt it was important to know their payment responsibility upfront.”
That last quote should be in the running for understatement of the year! I would argue patients are often not provide pre-service estimates because it is not in hospitals’ self-interest to be transparent in their prices.
The report states it a little more delicately than I am, but it basically says most people (92%) have the capacity and are willing to pay bills of less than $500. Just over half (54%) can and would pay bills that exceed $500. You can infer from the report that Americans would be more apt to pay their outstanding hospital bills if they were “engaged” in advance. That’s a fancy way of saying consumers are generally more loyal and willing to pay their bills when they know what to expect are not blindsided by a bill they did not expect. The article suggests giving patients an idea of bills ahead of time is also an opportunity to get a deposit and collect more of their outstanding fees in advance.
I would argue that competing on the basis of price would also help. It’s not just the unexpected bill that annoys consumers. It’s also the sense that the bill is unfair. After patients leaves the hospital they often receive an undecipherable bill in the mail. Digging through the bill they often find charges of $15 for each ibuprofen and $300 for an admissions kit (Kleenex, a plastic water pitcher and a plastic bedpan). The fact that the hospital then discounts the charges to only $5 apiece and $100 respectively, still does not make consumers excited to pay their remaining share.
The report explores a case study where Arizona-based Banner Health boosted collections by 39% through pre-service estimates and increased collections efforts. Something that all hospitals should take to heart is that pre-care cost estimates not only increases collections, it also increases patient satisfaction. Indeed, the report explains,
“Patients and providers can use effective pre-care cost conversations to create a more rewarding healthcare experience for all.”