Some executives contend health plans that combine high deductibles and savings accounts in exchange for lower premiumsan attractive option for small employers, and a product not on the market during the last recessionhave accelerated losses. In negotiations with insurers, such high-deductible plans have prompted some hospitals to push for higher reimbursement for all privately insured patients, they say.
Were not a financial institution and not in the business of financing the provision of care, said Neil Bertrand, chief financial officer for Longmont (Colo.) United Hospital, which saw charity care spike 65% to $22 million and bad debts increase 8% to $12.4 million in 2007 after major area employers began introducing high-deductible health plans two years ago.
For the first nine months of 2008, both measures of unpaid bills have surpassed estimates thanks to the sour economy, rising unemployment and greater out-of-pocket costs for insured patients, Bertrand said. Actual bad debtsor losses on patients who fail to pay debts and do not qualify for financial assistancewas projected to reach $10.3 million through September, but in fact totaled $11.7 million.
The 168-bed hospital has plenty of company. Unpaid medical bills ate away 2008 profits at Ascension Health, the largest U.S. private not-for-profit hospital operator. The St. Louis-based health system, which owns 77 hospitals, saw income from operations fall $66 million as its bad debt increased by $167 million, or 23%, financial records show. Catholic Healthcare West, a 38-hospital system based in San Francisco, closed its books in June with an 18% increase, or $98 million, in bad debt compared with 3% the prior year. Neither system responded to requests for comment.
Losses from insured patients suggest healthcare is vulnerable to the battery of economic pressures squeezing other industries. One major trade group for healthcare finance executives polled 1,000 members during a late-October webcast on the economic downturn and found 80% expected significant increases in unpaid medical bills in the coming year. Three-quarters said they had already seen an ebb in profitable surgery patients.
Rising individual medical expenses arent the only cause of household medical debt, said Carol Pryor, senior policy analyst for the Access Project, a Boston-based healthcare access advocacy group. Poorly understood policies can leave patients with far less coverage and substantially larger bills than expected. Patients may inadvertently end up outside of health plans approved networkswhere out-of-pocket costs are lowerwhen in-network hospitals contract with out-of-network doctors for services such as anesthesiology or emergency care, she said.
But patients growing share of healthcare spending is a significant contributor to the unpaid bills dragging down household and hospital finances, Pryor said.
Patients with chronic conditions, who make frequent visits to healthcare providers, are particularly vulnerable, Pryor said. Underinsurance both puts people in financial jeopardy and is also a serious barrier for people to get care, she said.
Underinsured patients reported costs prevented them from filling prescriptions or seeking tests or follow-up care recommended by their doctors, the Commonwealth Fund reported. Such patients did not visit needed specialists or seek treatment for a medical condition because of cost, the survey found.
Pryor cited two reasons why relief is unlikely anytime soon. Health plans and employers will continue to shift financial risk onto the consumer because they are the least able to avoid it.
Meanwhile, good health and good luck may have kept many underinsured from illness or injuryand the related expenses. They may think theyre doing OK because they havent got sick yet, Pryor said. But everybodys at risk, and sooner or later, everybody gets sick.
In St. Cloud, Minn., CentraCare Health System began tracking its unpaid bills from insured patients in July so future budgets include an accurate estimate of projected losses, said Kathy Parsons, the systems director of managed care. As health plans with high deductibles gained a foothold across the dozen counties where CentraCare operates, bad debt increased, management told credit analysts with Fitch Ratings in November 2007. For the fiscal year ended June 30, 2007, the systems bad debts climbed roughly 16% to $12.1 million, but remained less than 2% of the systems patient revenue.
As high-deductible plans spread with annual benefit changes in January, Parsons said more patients began to call with questions about the cost of care.
The system operates two critical-access hospitals and 489-bed St. Cloud Hospital and has not started asking patients for deposits or payment upfront, Parsons said, though it may do so in the future. Such a change would have a pretty big community impact, and the community will have opinions on that, she said. You have to be very careful in small communities.
High-deductible health planswhich combine savings accounts with a requirement that patients pay hundreds or thousands of dollars toward their care upfronthave gained popularity with employers and enrollees since their introduction earlier in the decade. The average family deductible in such plans was roughly $3,560 in 2008, compared with managed-care or point-of-service plans, where average deductibles were between $1,053 and $1,860.
In 2008, 8% of insured workers were enrolled in such plans, compared with 5% in 2007 and 4% in 2006, the first year for which figures were available, according to the Kaiser Family Foundation and Health Research & Education Trust survey of employer-sponsored benefits.
Kathleen Campbell, who oversees high-deductible health plan product development for Aetna, said employers favor such plans because they include incentives to reduce healthcares waste and improve transparency. With more financial risk, enrollees also have greater motivation to better manage their care and seek preventive screenings, she said. Plans may include financial bonuses deposited into savings accounts that go toward medical expenses, she said.
Campbell argued the lower premiums for high-deductible plans give employers, particularly small businesses, an alternative to dropping insurance altogether during the downturn.
Kate Prout, an Aetna spokeswoman, said in an e-mail that unpaid bills have plagued healthcare providers, but said the insurer launched an education campaign to encourage patients to save for care and offers automatic deductions from health-specific accounts and debit cards, and checkbooks for consumer-directed plans to improve payment rates.
We know affordability is the No. 1 issue in healthcare today, said Debbie Welle-Powell, vice president of payer strategies and legislative affairs for Exempla Healthcare, which owns two hospitals and operates a third. Poorly informed patients end up with sticker shock when visiting the hospital and lack the resources to pay their bills.
Roger Deshaies, senior vice president and chief financial officer of Fletcher Allen Health Care, Burlington, Vt., said the 437-bed hospital has entered into negotiations with expected rate increases that have caught insurers off-guard. Behind the push for bigger gains are narrow margins on high-deductible plans, he said.
It is a hot-button, Deshaies said. Were trying to be as transparent as we can in the logic. But it is becoming an issue.