Hospitals looking for cash upfront

Staff Writer
Columbus CEO

Before undergoing an MRI, a CT scan or a surgery to clean up that wobbly knee, consumers had better become accustomed to hearing: “How do you intend to pay for that?”

As more Americans move into health insurance plans that require them to foot a larger portion of the bill for their care, hospitals are taking steps to ensure consumers live up to their end of the bargain.

Many health systems and physician groups are adopting new strategies to ensure they’ll collect for providing health services, including asking patients for payment before treatment and hiring contractors to enroll patients in payment plans.

The shift comes as more consumers enroll in so-called high-deductible health plans, which require consumers to pay more out of pocket in exchange for lower monthly premiums. As a result, health care providers must collect a larger portion of patient bills from consumers themselves, rather than their insurance companies.

It’s a delicate balance for hospitals, which have certain legal and ethical obligations to care for people who arrive with critical health conditions regardless of their ability to pay. At the same time, hospitals believe they must become more insistent and methodical about screening patients’ ability to pay, particularly people with scheduled procedures or elective surgeries.

“It’s a dramatic change in collection practices,” said Andy Scianimanico, vice president of revenue cycle for Northwestern Memorial HealthCare, the parent company of Chicago’s largest hospital. “The biggest challenge for us is to move conversations (with prospective patients) as far up in the process as possible. It’s not about strong-arming patients to pay. It’s about getting information into the hands of patients so they can make better-informed decisions.”

In the past decade, enrollment in the most common type of high-deductible health plans has exploded. At the beginning of 2013, an estimated 16.5 million consumers were enrolled in plans with high deductibles, compared with a little more than 1 million in 2005, according to industry data. The majority are enrolled in employer-based coverage.

That number is expected to grow substantially in 2014, as many of the new health insurance plans offered under the Affordable Care Act carry higher deductibles, the set amount that consumers must spend on health care before their insurance benefits kick in.

Further, 85 to 90 percent of large employers are expected to offer workers a high-deductible plan as part of their coverage options in 2014, up from about two-thirds in 2013, said Thomas Hricik, a Pittsburgh-based health care consultant with Buck Consultants.

The Internal Revenue Service defines plans with deductibles greater than $1,250 for an individual and $2,500 for a family as “high-deductible plans,” though many offered by employers and via the new health insurance exchanges carry much higher amounts.

The vast majority of the least-expensive plans offered on the Illinois health insurance exchange, for example, carry deductibles of more than $4,000 for an individual, with some as high as $6,350 for an individual and $41.1 billion 00 for a family.

“The fact is, consumers are taking on a greater burden for their out-of-pocket costs,” said Milton Silva-Craig, president of TransUnion Healthcare, a Chicago-based consulting firm. “Hospitals now have a much greater burden to make sure they’re having a transparent conversation with their patients and ensure there’s an appropriate mechanism for them to collect what they’re owed.”

When Michelle Combs, 50, scheduled a minor outpatient surgery in January 2012, she was asked to pay her portion of roughly $800 before the procedure.

Combs, of West Chester, Ohio, bristled when the hospital told her it would not have gone through with the procedure without prior payment.

Even though her family deductible of $1,500 doesn’t qualify as a high-deductible plan, “There is rarely a time that my family has a spare $800 laying around,” she said. Fortunately, she had enough money saved in a flexible spending account through her employer that she was able to pay the bill upfront.

If it weren’t for that, “I probably would still be waiting to have that procedure done,” Combs said.

Some have warned that people with high-deductible plans may hold off on necessary procedures for fear they cannot afford to meet their out-of-pocket responsibilities. Others say that such plans make for smarter health care consumers, who are more willing to shop for affordable care and are less likely to undergo unnecessary and expensive treatments.


In the past, hospitals could count on insurers to pay 80 to 90 percent of the cost of services, leaving the rest to patients, an important but far less consequential source of revenue. When treating patients with high-deductible plans, however, the insurer’s share drops to as low as 60 percent, with the balance falling to consumers.

The average patient responsibility for medical bills on a selection of major procedures rose to $2,568 in the second quarter of 2013. That’s up 87 percent from $1,375 in the same quarter of 2010, according to TransUnion data, based on information from 200 hospitals for five commonly administered procedures, including major joint replacement and child delivery.

Those figures, too, are poised to rise next year, in large part because a portion of the estimated 7 million consumers who will buy policies on the health insurance exchanges are expected to choose plans with higher deductibles because they come with more affordable monthly premiums, industry analysts say.

The migration of more people onto such policies is changing the paradigm of how hospitals collect payments, forcing them to restructure and refine how they interact with insurance companies and patients.

Hospitals traditionally have had trouble collecting directly from patients, recouping somewhere between 10 and 20 percent of their portion within 120 days of sending the first bill, said Craig Froude, chief executive officer of CarePayment LLC, a Lake Oswego, Ore.-based finance company that provides payment programs that hospitals can offer their patients.

Anemic collection rates, along with growing patient responsibility for medical bills, have contributed to rising levels of bad debt.

U.S. hospitals provided $41.1 billion in uncompensated care in 2011, representing nearly 6 percent of annual hospital expenses, according to American Hospital Association data. That figure, which includes charity care and charges written off as bad debt, has nearly doubled over the last decade.

“It’s such a big deal because it makes (hospital) financial planning and revenue projections difficult,” said Kip Piper, a former state Medicaid official and White House budget officer who advises large health care organizations on health policy, finance and business strategy. “Hospitals are definitely worried more about collecting in an environment where the consumer is at greater financial risk.”


While some hospitals began offering patients low- to no-interest payment plans several years ago, the use of such financing vehicles has risen in recent years, hospitals and industry advisers say.

Loyola University Health System, which has long offered patients short-term, interest-free payment plans, is finalizing plans to partner with a lender, HealthFirst Financial, to accommodate more consumers seeking longer-term payback periods because of higher out-of-pocket costs.

HealthFirst will offer patients payback plans that stretch from three to five years and carry annual interest rates of about 4 percent, according to Loyola.

“That’s kind of a backup for our patients who have high-deductible plans,” said Rich Kudia, Loyola’s vice president of patient financial services. “We want to provide patients with as many options as possible.”

The Maywood, Ill.-based hospital system also is asking more patients to pay before treatment, but noted that it would not postpone or cancel procedures if a patient is unable to do so.

“We know we’ll be dealing with more patients with higher-deductible plans, and it just adds another layer of complexity to an already complex process,” Kudia said. “We have to be very considerate of patients and the situations they’re in. Conversations for collections can be difficult, and that’s why we want to move (payment conversations) up as much as we can so they have less things to worry about when they get home.”

Like Loyola, Northwestern Memorial Hospital in Chicago is leveraging new technology that allows hospital administrators to better estimate a patient’s share of a medical bill, based on their insurance information and projected hospital charges.

The hospital’s aim is to help patients understand their financial responsibility so there are no surprises once the first bill arrives in the mail. The end goal is to better position the hospital to collect as much of the bill as possible.

Instead of providing care and sending a bill — the common practice of the past — hospitals are calling patients in advance to discuss payment options. So if, for example, a patient has a plan with a $5,000 deductible, the hospital would inform him that he would have to pay that amount toward the procedure before insurance would begin picking up the bill.

If the patient is unable to pay that amount upfront, Northwestern may offer a payment plan that could stretch as long as 24 months interest-free. In some recent cases, the hospital has opted to extend the cycle even longer.

“As out-of-pocket responsibilities have increased, patients have asked for longer payment plans,” Scianimanico said. “Just because someone is insured doesn’t mean they don’t need assistance with their out-of-pocket costs.”


New collection practices generally don’t apply in medical emergencies or in cases where prompt treatment is critical. Rather, more hospitals are seeking to collect early from those with scheduled or elective surgeries.

Even in those cases, hospitals walk a fine line: They have an obligation to remain financially stable while treating patients ethically and with respect.

“Hospitals have long struggled for getting reimbursed for care, so it’s not unreasonable for them to address that in some shape or form,” said Ryan F. Holmes, assistant director of health care ethics at the Markkula Center for Applied Ethics at Santa Clara University.

But Mark Hall, a professor of law and public health at Wake Forest University, cautions that hospitals that demand full payment from patients before treatment could face questions because such a burden “can create serious barriers to critical treatment for many patients.”


Nonprofit hospitals, he noted, face an even higher ethical burden because they receive certain tax exemptions in exchange for offering affordable treatment options for low-income patients.

Administrators are better off offering payment plans with terms that patients can reasonably meet.

Even educating patients of their financial responsibility upfront carries some risk, he said, though it generally outweighs surprising them after treatment with a big bill they cannot pay and sending them to collection when they don’t meet their obligation.

“There is an ethical dilemma between being clear upfront versus alarming patients about costs so (high) that they refuse necessary treatment,” Hall said. “In most situations, I think that clarity upfront is the ‘lesser of evils.’ ”

Still, hospital administrators worry that no matter how much upfront education they provide, some consumers who move into high-deductible health plans won’t know what they’re getting into.

“My fear is that we’ll see people buy policies based on what the monthly premium is and not the total cost of the plan. They’re going to be surprised when they show up at a hospital and have to pay $5,000 or $6,000 out of pocket,” said Joe Fifer, president and chief executive of the Healthcare Financial Management Association, a Westchester, Ill.-based organization of health care finance executives.

“This isn’t a very fun experience for patients, so we have to look for any way possible to make it as patient-friendly as we can,” he said. “I think it’s a very significant issue, and one of the challenges right now for hospitals is that they aren’t sure exactly how all of this is going to play out.”


©2013 Chicago Tribune

Visit the Chicago Tribune at

Distributed by MCT Information Services


Topics: t000002827,t000003813,t000184889,t000412858,t000002537,t000023139,t000023148,t000038516,t000032262,t000002863,t000193420,g000065560,g000362661,g000066164,g000216305