Patient liability drives about half of hard-to-collect bills

About half of the dollars health systems struggle to collect stem from out-of-pocket expenses, pointing to ongoing patient affordability challenges, according to a new analysis from The Health Management Academy. 

The analysis examined aggregated billing data from the health tech company Cedar, which has processed $13.6 billion in payments for more than 63 million patients nationwide. The data revealed a troubling trend for health systems -- the proportion of hard-to-collect bills tied to patient liability has increased to 49.3% from 37.5% in the first quarter of last year. 

These bills are larger expenses of $200 or more, researchers explained. Healthcare providers have notoriously struggled to collect these patient balances, especially following the explosion of high-deductible health plans that have made healthcare costs harder for consumers to afford. 

This has been heavily concentrated on the "underinsured," or patients who have private healthcare coverage but lack the disposable income to cover hundreds of dollars in medical expenses, especially if they did not expect to owe them. Nearly a quarter of Americans are underinsured, according to a new Commonwealth Fund report. 

Still, patients owe significantly more over time. In fact, the analysis found that out-of-pocket liability increased by $44 million over the last year, far outpacing the $16 million growth in total billings. In other words, about $28 million in costs shifted from payers to patients on about the same volume of care, researchers explained. 

Collecting patient financial responsibility remains more of a problem for larger medical bills, though. The share of out-of-pocket costs was essentially unchanged for bills under $200, according to the analysis. 

Revenue cycle breakdowns 

Healthcare organizations are focused on collecting all revenue owed, especially as margins remain razor-thin amid persistently high labor and supply costs. But prioritizing patient collections is becoming increasingly important, particularly under new health reforms that are expanding the uninsured and underinsured populations. 

Revenue cycles weren't built for such a heavy emphasis on these types of collections, the analysis indicated. Researchers also conducted four use case studies across different types of anonymous health systems. They found common breakdowns within the revenue cycle and the health organizations at large that have contributed to lackluster performance. 

They said healthcare providers tend to have siloed functions, splitting them across teams, reporting lines and technology. This translated into a lack of end-to-end ownership of pre-service outcomes, including upfront collections. 

On the front-end, provider systems also tend to lack early, reliable access to eligibility, payer responsibility and other financial information, the analysis explained. This has kept payment conversations downstream despite tremendous value in moving these talks before care delivery. 

Additionally, the analysis revealed lagging accuracy in patient price estimates due to the complexity of payer contracts. 

Back-end revenue cycle management also faced obstacles with patient collections. Researchers explained that most providers lack sufficient collection approaches to tailor the financial experience to specific patients or populations, leaving money on the table. Their outreach also tends to be too aggressive or too weak. 

Providers may be missing the mark by underusing their technology's capabilities, such as patient risk scoring, they added. 

Furthermore, providers exhibited underinsured policy gaps, making financial assistance and payment plans difficult for this population to access. However, the underinsured population is swelling due to the loss of premium subsidies and rising workplace insurance costs. 

Overcoming patient collection challenges 

The good news is that most patients aren't unwilling to pay their medical bills. Instead, the analysis points to an affordability problem that providers can help to fix, preventing revenue losses and uncompensated care. 

Researchers found that among the health systems they studied, those that performed best with patient collections shared several traits: upfront patient financial conversations, presumptive charity care screening, coverage discovery before collection and segmented post-service outreach. 

"The Health Management Academy's research confirms what we see in our own billing data, that when systems put the right options in front of patients, people use them," Florian Otto, CEO and co-founder of Cedar, said in a press release. "The next step is reaching patients with those options earlier, before a bill ever arrives, so a growing balance never becomes a reason someone delays care." 

Researchers particularly highlighted the health systems' successes with personalizing the patient financial journey. For example, one academic health system helped self-pay patients enroll in marketplace coverage, assisting 350 enrollments in its first year.  

Financial assistance and payment plans built around a patient's propensity to pay or tailored to their individual situation also contributed to greater success for the health systems. 

Ultimately, researchers identified coordination of collection activities as the biggest gap providers need to close to improve collections. The technology largely exists that can help them, the analysis suggested, so it's a matter of working across teams to improve accountability. 

Jacqueline LaPointe is an Executive Editor at Xtelligent Healthcare Media, covering revenue cycle management, healthcare payers, health policy, and health IT since 2016.