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Armchair Finance

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Straight Talk About Bad Debt

I saw an interesting panel discussion at the Healthcare Financial Management Association’s Annual National Institute this summer that featured some refreshingly straight talk from three individuals who are often operating from three different corners of the healthcare cost debate.

The session focused on consumer-directed healthcare and its effects on health plans and hospitals, as well as how banks might help bridge the gap between the two healthcare sectors. Unquestionably, consumer-directed healthcare is becoming more prevalent. And surprisingly, there was little disagreement in this group about why: employer cost-shifting.

“When we deal with our plan sponsors, they are definitely sharing more costs with their employees. They feel like they have to in order to get their employees more involved,” says David Josephs, senior vice president of consumer-directed healthcare at JPMorgan Chase. But never mind shifting risk to employees, says Bob Barbour, vice president of finance at Montefiore Medical Center in the Bronx, NY. Providers are worried that this risk-shifting strategy will fall largely on their shoulders—no matter how good a job they do in providing quality care—as more patients fail to pay their bills out of underfunded HSA accounts. “I’m concerned about the real-world impact of all this experimentation,” Barbour says. “The single lowest priority we have as a culture is paying medical bills. Why will people who won’t pay us $250 deductibles pay us thousands?”

Good question. Jeff Hankoff, MD, president of CIGNA HealthCare in Glendale, CA, says his company is testing a new card-based system in which CIGNA’s patients present the card upon registration, and once a CPT code is requested, CIGNA’s servers will provide information about the member’s responsibility and what the provider should expect to be paid. He expects to see similar products from other health plans soon. As a doctor who spent 20 years in private practice, he says without hyperbole that shifting risk back to providers will not only kill consumer-directed care, but also the healthcare system as we know it.

Regardless of the success that products like CIGNA’s smart card achieve in reducing bad debt, Barbour is determined not to let risk-shifting eat away his hospital’s bottom line. “We have this potential for a tremendous increase in bad debt,” he worries. But he’s not out of ideas to deal with it; Montefiore is working on number-crunching tools to determine where bad debt originates. And Barbour is determined to hold payers accountable. “We’ve already put our payers on notice that if we can confirm that the bad debt is coming from their patients, we’ll send them a bill.”

Score one for the providers.

—Philip Betbeze