High-deductible health plans prompt some hospitals to cut low-income patients a break

Ascension Health raised eyebrows last spring when its board of directors addressed crushing patient debt caused by high-deductible health insurance plans with a simple but expensive corporate policy.

Henceforth, Ascension would waive the deductibles or unpaid bills for any patient earning below 250% of the federal poverty level at any of its 141 hospitals and other facilities across 24 states.

There were practical reasons for the new approach, said Ascension CEO Anthony Tersigni. The system realized from experience that most of the money would never be collected.

But foremost, Ascension board members felt that the system's stated mission of caring for the poor and most vulnerable demanded that they step up to the hardships created by high-deductible plans, including for the newly insured in the Affordable Care Act exchanges, Tersigni said.

“We believe that everyone deserves quality, personalized healthcare; and our new charity-care policy relieves some of the cost pressures associated with getting the care needed by individuals and their families,” he said.

Not all hospital systems have the means or inclination to replicate Ascension's debt-forgiveness policy. But the issue of the rise of high-deductible plans is forcing itself onto the radar of hospital boards across the country.

For the first time, more than half of all workers (51%) with single coverage faced a deductible of at least $1,000, according to a study released in September by the Kaiser Family Foundation/Health Research & Educational Trust. This year, 29% of workers were in high-deductible plans compared with 20% just two years earlier.

For workers at small firms the news was even worse. Almost two of every three workers at companies employing between three and 199 people had an insurance deductible of at least $1,000. Many of those companies, like their larger rivals, offered some form of health savings account that workers could contribute to on a pretax basis.

Ascension is starting to experience the additional costs of its new charity policy. In its fiscal first quarter ended Sept. 30, Ascension's cost for charity care to people living in poverty rose to $132 million across the 141 hospitals in its system, from $127 million in the year-earlier quarter.

Ascension noted that the 4% increase was “primarily due to more patients qualifying for charity at certain health ministries with implementation of the system's revised financial assistance policy.”

There's a potential cost to hospital boards for ignoring or being unaware of the issue, said David Nash, founding dean of the Jefferson College of Population Health at Thomas Jefferson University in Philadelphia. Bad publicity is just one patient away if someone comes into an emergency room with a high-deductible plan and leaves with thousands of dollars in unexpected and unaffordable bills, he said.

Hospitals boards in inner cities or rural areas have generally been sensitive to this issue for years because of their impoverished patient bases. But hospitals in middle-class areas are starting to see these cases more frequently now that high-deductible plans are becoming the norm. “This only becomes a board agenda item when it hits the newspapers,” Nash said.

There's a paucity of data on how or whether hospitals are changing their charity policies to try to alleviate some of the financial strain hitting members of high-deductible insurance plans, Nash and other experts said. But hospitals are starting to show the strain from bills going unpaid by patients in such plans.

In the past year, the responsibility that insured patients needed to shoulder for outpatient care increased from 23.3% to 26.9%, according to a study released this month by Crowe Revenue Cycle Analytics, a unit of accounting and consulting giant Crowe Horwath. It receives daily transaction data from 660 hospitals.

Hospitals are struggling to collect that increased patient share of the cost, said Brian Sanderson, managing principal of Crowe healthcare services group. Their data show overall managed care net revenue has declined 2.5% for outpatients and 1.4% for inpatients based on unchanged contract rates over the past year. The cause was lower collection rates for “patient responsibility” dollars than for payer responsibility dollars.

“As patient responsibility continues to increase, it's imperative that healthcare organizations establish effective point-of-service collection programs by training and educating front-line staff,” Sanderson said.

Treating those potential losses as charity care has advantages, said Randy Notes, principal in KPMG's healthcare and life sciences advisory practice. As part of the Affordable Care Act, changes to the tax code under Section 501(r) put limitations on billing and collections that not-for-profit hospitals could undertake, especially from individuals eligible for financial assistance, Notes said.

Since 2013, those hospitals have been required to file a Community Health Needs Assessment detailing their charity care and policies every three years. Traditionally, unpaid bills from patients with insurance would have been booked as self-pay and bad debt, not charity care. But with the CHNA requirements and the rise of high-deductible plans, hospitals have an incentive to document those unpaid bills and categorize the amounts as charity care to protect their not-for-profit status, Notes said.

Moreover, hospitals may be able to qualify such charity care for disproportionate share payments that, while being phased out at the federal level, are still important to hospitals getting that assistance for charity care from states, Notes said.

Since 2008, Charlotte, N.C.-based Novant Health has had a uniform charity policy across its 14 hospitals in North Carolina and Virginia. Novant provides free or reduced-cost care to uninsured patients who have a household income up to 300% of the federal poverty level, said Melanie Wilson, vice president of revenue cycle.

Those patients with insurance can also have their bills reduced on a case-by-case basis, Wilson said. Last year, 9% of acute-care patients, or 81,753 total, were treated as charity-care cases and another 9% of self-pay patients received a self-pay discount, she said.

Like Ascension, serving the underprivileged is a central part of Novant's stated mission. “In this case, the return on investment is the right thing to do,” Wilson said.