Recently, many senior hospital and health system executives who are otherwise leading their health systems brilliantly through a rapidly changing healthcare reimbursement system have been tripped up, and in some cases, let go, for a decidedly old-school reason: debtor harassment.
I say old-school because while the flap over Accretive Health's debt collection tactics might seem like news, only the names and places have changed in eight years. The problem is the same.
Haven't they learned from their predecessors? One of the first big stories I did for HealthLeaders magazine, back in 2004, involved overly aggressive self-pay debt collection and the huge problems it caused for hospitals and health systems, from regime change to loss of nonprofit status.
I wrote it nearly eight years ago—so long ago that even the Internet has forgotten about it. So perhaps I should cut leaders some slack. I would, except for the fact that this type of mistake is so easily avoidable.
Many hospitals and health systems are struggling to meet their missions with lower revenue and they're prepping for even steeper cuts. The logical conclusion many senior leaders seem to be coming to is that they need to make every effort, up to and including suing their patients, to recover unpaid balances.
These balances, in many cases, are as much as twice as high as what would have been paid on behalf of this group of "self-pay" patients if they had been properly enrolled in Medicare, Medicaid or a commercial insurance plan. The challenges that cause these aggressive, and sometimes illegal, collection tactics are numerous, but the most aggravating thing about them is that there's just not much revenue at stake, on a relative basis.
So hospitals end up not getting little or nothing in revenue, as they already were, but they're actually getting less than nothing as word gets out about these aggressive tactics. Especially for nonprofits, it's a dangerous game.
It appears many CEOs have forgotten the lessons of eight years ago. They should have learned that their leadership position can easily be undermined when these strong-arm tactics come to light. So why does this continue to happen? I'm not naïve. They see a shrinking margin and no apparent way to resolve it.
A few weeks ago, I got a press release and a follow-up call about a small hospital in Texas, 107-bed Cleveland Regional Medical Center, that boasted of the fact that the hospital's new owner had lowered its price for medical services by 15% effective immediately. Bravo, I thought, you changed prices for services that almost nobody pays full price for, and for those who do, they're already paying lots more than their counterparts with insurance. So I initially declined the opportunity to speak with the hospital's CEO, Patrick Ayers, about the program. But in an effort to determine whether there was anything but puffery surrounding the so-called price cut, I changed my mind.
So we talked. And while the price decrease remains of little interest, the company behind the hospital is intriguing.
First off, Ayers admitted to some PR puffery regarding the press release. "Nothing we're doing is revolutionary," he says. "This is the first step we're taking, but it obviously won't greatly affect anyone with Medicare, Medicaid, or private insurance."
It also won't greatly affect self-pay patients either. But it will help some, Ayers argues.
It has always bothered Ayers that in the hospital industry, "they refer to people who are private pay with a sneer."
"From a business standpoint, it's a weird thing to accept," he says. "About 10% of our patients are self-pay, so do we accept that 10% of our patients won't pay us? Ford Motor Company wouldn't accept that. So it's a strange business practice. I'm not naïve; it's borne out of necessity with the current payment system."
From a 30,000- foot view, he says, it's easy to forget that these are actually people who are coming not out of choice but because their lives depend on it.
A little context is in order here. Cleveland Regional is the only hospital owned by New Directions Health Systems, LLC, a Louisville, KY-based for-profit company backed by private investors. It seeks to own hospitals in small towns across America. In fact, it bought Cleveland Regional, which lost $11 million last year, last October from Community Health Systems, another for-profit hospital company that owns rural hospitals nationwide.
Ayers spent the last 15 years of his career traveling around the country as a consultant, looking for rural hospitals for others to buy. "I believe that if given a chance, most people will pay for the healthcare they get," he says.
The jury's still out on that question, but he believes the price cut introduced at Cleveland Regional is a start.
"There's not tons we can do, even though that's not right," says Ayers. "It's crazy that nobody pays full price except the people least likely to pay," he continues. "We don't get money. They file bankruptcy. Our discount is not a huge discount, but it's not nothing."
He says the price decrease, which was instituted Jan. 1, made a difference, but admittedly not a huge one, and it "almost ends up being more cosmetic than anything."
But it does show movement in the right direction in making healthcare more affordable. And Cleveland Regional is starting to go further.
In an effort to make a bigger difference, Ayers says, "now we've instituted a program where any private pay patient who expresses a desire to pay, but their bill is insurmountable, we discount all the way to the Medicare charge and work out a payment plan."
While Cleveland Regional's approach is far from revolutionary, at least it's evolutionary, which is more than I can say for many of the big nonprofit health systems that have recently gotten into hot water over their collection practices, when they should have known better in the first place.
The difference with Cleveland Regional's leadership is that they're not just ignoring the problem of high prices charged to people without insurance. However small, they're attempting to do something about it by making healthcare a little bit more affordable to those patients, and they're doing the work themselves—not farming collections out to a separate company, and dealing with the fallout when things go wrong.
It's preferable to getting nothing from this patient class, and loads better than getting less than nothing.
Philip Betbeze is the senior leadership editor at HealthLeaders.