68% of Consumers Did Not Pay Patient Financial Responsibility

June 27, 2017 - About 68 percent of patients with medical bills of $500 or less did not fully pay their patient financial responsibility to hospitals in 2016, according to a recent TransUnion Health study.

The proportion of individuals failing to pay off full medical bill balances increased from 53 percent in 2015 and 49 percent in 2014.

“There are many reasons why more patients are struggling to make their healthcare payments in full, the most prominent of which are higher deductibles and the increase in patient responsibility from 10% percent to 30 percent over the last few years,” stated Jonathan Wiik, TransUnion Principal for Healthcare Revenue Cycle Management. “This shift in healthcare payments has been taking place for well over a decade, but we are seeing more pronounced changes in how hospital bills are paid during just the last few years.”

Other key findings regarding patient financial responsibility in the analysis included:

• 63 percent of hospital medical bills were $500 or less between 2014 and 2016 and 68 percent of these bills were not paid in full by 2016

• 14 percent of hospital medical bills between 2014 and 2016 were $3,000 or more and hospitals did not receive full patient financial responsibility for 99 percent of the bills in 2016

• 10 percent of hospital medical bills were between $500 and $1,000 from 2014 to 2016 and patients did not pay the full balance on 86 percent of them in 2016

The TransUnion Health analysis confirmed that as patient out-of-pocket costs increase, hospital patient financial responsibility collection rates drop. A recent Crowe Horwath study also revealed that patient collection rates for accounts with balances exceeding $5,000 were four times lower than patient collection rates for accounts with low-deductible health plans.

For patient balances between $1,451 and $5,000, hospitals reported a 25.5 percent collection rate. In contrast, hospitals saw collection rates drop to just 10.2 percent for patient balances between $5,001 and $7,500.

Consequently, patients are more likely to partially pay hospitals for their financial responsibility. The TransUnion Health analysis showed that the proportion of individuals making partial payments toward their hospital medical bills rose from about 89 percent in 2015 to 77 percent in 2016.

Hospitals may see these patient collection trends continue, researchers stated. They projected the percentage of individuals neglecting to fully pay their patient financial responsibility to grow to 95 percent by 2020.

Researchers pointed to the popularity of high-deductible health plans as the primary driver of increased hospital patient collection challenges. In 2015, almost one-quarter of all workers belonged to a high-deductible health plan with a savings options versus just 8 percent in 2009, a 2016 Health Affairs blogpost stated.

The number of employees enrolled in high-deductible health plans is likely to increase, the blogpost continued. More than four of ten employers are considering offering only high-deductible health plans over the next three years.

Provider organizations continue to feel the pressure from increased patient financial responsibility under high-deductible health plans. About 72 percent of providers in a recent InstaMed survey cited patient financial responsibility and collection as their top healthcare revenue cycle management concerns in 2016.

The greatest challenge impacting healthcare revenue cycle management was the growth of patient financial responsibility with 29 percent of respondents, followed by cash flow issues with 21 percent, longer days in accounts receivable with 14 percent, and rise in bad medical debt due to insufficient patient collections with 8 percent.

With unpaid patient financial responsibility reducing hospital revenue, TransUnion Health researchers reported that hospitals wrote off about $35.7 billion as bad medical debt or charity care in 2015. Although overall uncompensated care costs declined in 2015, they added.

“Higher deductibles and the increase in patient responsibility are causing a decrease in patient payments to providers for patient care services rendered,” stated John Yount, TransUnion Vice President for Healthcare Products. “While uncompensated care has declined, it appears to be primarily due to the increased number of individuals with Medicaid and commercial insurance coverage.”