Skip to main content

Analysis

Hospital Bad Debt Rising as Patients Shoulder Bigger Share of Medical Bills

By Jack O'Brien  
   June 26, 2018

Hospitals find themselves working to recoup as much of the outstanding costs as they can, according to a new TransUnion Healthcare analysis.

Patient balances after insurance (PBAI) have continued to rise, increasing the amount of uncompensated care, the combination of bad debt and charity, according to a study released Tuesday by TransUnion Healthcare.

The analysis found PBAI rose from 8% of total bill responsibility in Q1 2012 to 12.2% in Q1 2017, while patients with commercial insurance saw a PBAI increase of 67%, from $467 to $781.

Consequently, total hospital revenue attributed to PBAI rose 88% during the same five-year period. However, uncompensated care has continued to grow alongside the medical costs facing patients.

After no growth in three years, uncompensated care increased by $2.6 billion in 2016, according to the American Hospital Association's 2017 Hospital Fact Sheet. TransUnion's study correlates this rise in uncompensated care to PBAI increasing bad debt exposure to providers.

Jonathan Wiik, principal for healthcare strategy at TransUnion Healthcare, said the analysis should serve as a wake-up call for CFOs, who should recognize the need to engage patients early to recoup costs through collections.

"It is becoming clear that patient balances after insurance is a major factor in increases in uncompensated care at the macro level," Wiik said in a statement.

"Higher out-of-pocket-costs from cost sharing has made patients responsible for an increasing percentage of the bill. Most patients simply cannot afford that and hospitals need to make sure they're actively engaging their patients to ensure they have funding mechanisms for the care needed," Wiik added. "Tools like propensity to pay, charity scoring, and others can help differentiate a patient's willingness or ability to pay."

John Yount, vice president of healthcare for TransUnion, said unpaid medical debts pose challenges for providers and that rising uncompensated care reflects the "importance of implementing new solutions to prevent revenue leakage, which ultimately provides a better patient financial experience."

Below are some notes on the TransUnion study, including comments from both Wiik and Yount at the annual Healthcare Financial Management Association meeting in Las Vegas.

  • Medicare bad debt, which is the result of Medicare patients not paying their deductibles and co-insurance, rose from $3.14 billion in 2012 to $3.69 billion in 2016, a 17% increase, according to data from the Healthcare Cost Reporting Information System (HCRIS).
     
  • TransUnion analysts state that this trend indicates hospitals continue to experience reimbursement pressure that can be "tied directly to the increase in patient responsibility."
     
  • Wiik said he does not expect the rates to decline, as he projects PBAI to continue to rise by single percentage point for the foreseeable future and reach the 20% rate by mid-2019.
     
  • Since patients with commercial insurance take on more responsibility for costs, Wiik said that providers are nearing a point where they "have no choice" other than pursuing recoveries and implementing solution tools.
     
  • Wiik and Yount suggested the focus should shift to engaging patients at the point of service rather than pursuing collection actions on the backend, which is a difficult approach for most hospitals and health systems.
     
  • However, systems should be prepared to have collection tools and services ready for those who cannot pay in order to stem the rising costs. 

Providers need to act; otherwise, bad debts and uncompensated care will continue to rise, Wiik and Young said. But, Wiik added, taking action could also benefit patients, allowing them to receive coverage and reduce their outstanding balances.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


Get the latest on healthcare leadership in your inbox.