Kevin is chief managed care and revenue strategy officer at Unlock Health.
This post is the sixth in a series on the state of managed care by Kevin Thilborger. Check out the first post here.
Just before the recent Wall Street Journal (WSJ) series on healthcare costs, there was an article on May 9 titled “Hospitals are Refusing to Do Surgeries Unless You Pay in Full First.” It reveals such an interesting dichotomy faced by healthcare providers.
First, let’s define the problem. Hospitals face massive bad debt problems, and the dominant percentage is bad debt from commercially insured patients. High deductibles and co-pays, onerous annual out of pocket maxes, and other tools used by insurance companies have shifted financial burden onto patients at a level they can never pay. This all converts into bad debt for hospitals. Deductibles for commercially insured patients are up 111% from 2010 to 2020 — more than double the rate of increase on underlying insurance premiums.
Second, there is enormous pressure to protect patients from out of network bills. The No Surprises Act (NSA) was supposed to achieve that, and maybe it has, but it has also created a massive new burden on providers and increased leverage for payors (which they certainly didn’t need more of). There is a small percentage of providers who might want to be out-of-network (OON), but the vast majority just want to be paid fairly to fulfill their missions and take care of their communities.
So that leads us to third: What do providers do to solve the bad debt problem in light of the NSA and the desire to protect patients by staying in-network?
Some 23% of what patients owe is collected by hospitals before treatment, according to analysis of 2024 first-quarter data from 1,850 hospitals by Kodiak Solutions, a healthcare consulting and software company. For the same period in 2022, the figure was 20%. The Wall Street Journal wrote of the research: “They are seeking advance payment for non-emergencies, they say, because chasing unpaid bills is challenging and costly. Roughly half the debt hospitals wrote off last year was owed by patients with insurance, the Kodiak analysis found.”
Of course, the WSJ position on this issue is highly critical of hospitals. The article reads:
“For years, hospitals and surgery centers waited to perform procedures before sending bills to patients. That often left them chasing after patients for payment, repeatedly sending invoices and enlisting debt collectors. Now, more hospitals and surgery centers are demanding patients pay in advance.
Advance billing helps the facilities avoid hounding patients to settle up. Yet it is distressing patients who must come up with thousands of dollars while struggling with serious conditions.”
So what are hospitals and health systems to do?
If hospitals go OON and “surprise bill” patients, they get criticized.
If hospitals tell people what care costs in advance and charge in advance, they get criticized.
It may seem like hospitals are damned if they do, damned if they don’t.
Advance notice of the patient financial responsibility for care is the right thing to do, notwithstanding the WSJ’s criticism. The most important thing is how these types of policies are communicated, how they are implemented, and how the right (and legal) exceptions are made for specific patient circumstances. It takes a unique skill set to make these things clear and understandable.
Hospitals are not the enemy, nor the problem. They are there to care for people when they need it most.
Unlock Health is here to help providers set managed care strategy and negotiate contracts in the complex world of payor-provider relations. Our full-service managed care consulting group helps providers set their managed care strategy, negotiate contracts, and handle all the contract modeling, analytics, and contract performance. And when negotiations are difficult or contentious, we pioneered the use of strategic marketing communication campaigns to protect providers’ brands and create pressure on payors for fair and reasonable settlements of contract negotiations. Email Kevin Thilborger, our chief managed care and revenue strategy officer, at [email protected].
Like what you’re reading? Read the final post in this series here.