High-Deductible Health Plans: The Impact on Hospital Receivables
“Today’s high deductibles are tomorrow’s bad debt,” warns Moody’s Analyst Daniel Steingart.
With the insurance provision in the Affordable Care Act comes the risk of bad debt through high-deductibles health plans. Hospitals are welcoming the opportunity to have more insured patients walk through their doors. But, while a less-uninsured patient population can be a positive factor for hospitals, it will be hard to tell what effect the act will actually have on bad debt.
Moody’s is predicting there could be a significant risk in people who are covered by the lowest cost plans who might be unwilling or unable to meet their deductible responsibilities. Hospital care where the deductible accounts for a high share or even all of the negotiated reimbursement could result in bad debt if a patient is unable to pay his or her share.
Also, if the insurers feel they are making little or no profit on plans, they might pressure hospitals into lower reimbursement rates. Insurers will begin pricing policies for 2015 soon and negotiate with hospitals into open enrollment season, which begins in November.
Narrow networks will also affect these rates, if successful. A narrow network is where a group of hospitals, physicians and other healthcare providers negotiate lower reimbursement rates with an insurer in exchange for the insurer using their services exclusively (or close to it.) Theoretically, this should result in higher patient volume, which would make up for the lost reimbursement fees. However, there is risk for the hospitals that do not join in losing patient volume, while those that do join may not see the predicted higher business that would compensate for lower reimbursement.
Hospitals that are not prepared to manage patient payment plans may be at higher risk for bad debt due to these factors. Without a way to offer patients the opportunity to manage their debt in affordable ways, many may decide to avoid paying accounts altogether. By using a vendor-partner with experience with self-pay accounts, a hospital reduces the stress on a patient to pay off a high balance, increasing the likelihood of payment in full.
The offer to a patient to pay their self-pay balance using a payment plan should be made early and often. Hospitals who wait for their early out agency to work the accounts for quick payment miss the window of priority in the patient’s mind.
The Midland Payment Plan was designed for situations like these where patients are left with a high self-pay balance after receiving hospital care – even if they are insured. Making the terms and conditions of the plan “patient-friendly” is paramount for success. Regardless of a patient’s financial or credit situation, as long as he or she agrees to the terms of the contract, he or she may participate in the plan. Plans have low interest rates, and patients may add future balances to their payment plan account if they need additional care. Late payment fees add insult to injury and should never be assessed against a patient.
The plan was modeled after the retail industry on purchases for large-ticket items. How many times, as you peruse the Sunday newspaper ads, do you see “You can own this 72-inch television for as little as $19.95 per month?” By breaking down large account balances into easy-to-manage monthly payments, patients are more likely to pay off the accounts. Instead of one large lump sum of $5,000, a patient will see a more-favorable $150 a month payment.
The typical account with a balance of less than $5,000 takes 15 to 20 months to pay off. Accounts from $5,001 to $20,000 take about 25 to 35 months to pay off. Higher accounts can take about 45 months to pay. Overall, the average time enrolled in a Midland Group payment plan is 36 months.
