Trend: Hospitals requiring upfront cash payments before treatment

Wed, 30 Apr 2008 06:59:56 -0400

Of late, a growing number of hospitals have been insisting on cash payments before they offer high-ticket services to non-emergency patients if they're not sure they'll get paid. While such practices may not generate the best PR, it's a matter of survival, hospitals say. Even though the current slate of health reform schemes insure all citizens, it seems unlikely to address the problem of collecting payments for costly procedures. For example, Massachusetts plans include many high-deductible options, which still leaves hospitals deep in the red if patients don't pay their share.

Hospitals are being sapped by care for growing numbers of uninsured patients, and say that unless they get tough on patients with some means, some of them simply won't survive. For example, both HCA and LifePoint hospitals saw profits drop substantially during the first quarter of this year, largely due to jumps in bad debt expense--including lower collections on patient accounts. Uncompensated care has been flattening hospitals nationwide, with the burden climbing 44 percent in 2006, to $31.2 billion, from $21.6 billion in 2000. Such debt is helping to push hospital margins well below the the 3 to 5 percent considered appropriate, and sometimes destroys them entirely.

That being said, collecting cash aggressively can rebound when not-for-profits are involved. For example, this week the Wall Street Journal brought some unflattering attention to the M.D. Anderson Cancer Center, which in late 2006 asked a leukemia patient for $105,000 up front because it wasn't satisfied with her insurance coverage. And with federal legislators like Sen. Chuck Grassley questioning not-for-profit hospitals' right to their tax exemptions, coming across as too money-driven has its perils.

To learn more about this trend:
- read this Kaiser Daily Health Policy Report item

Related Articles:
HMA adopts tougher collections strategy
In 2007, bad debt rising for hospitals
Bad debt savages HCA, LifePoint profits
HCA sees debt rising until patients get insured

Bad debt savages HCA, LifePoint profits

Wed, 13 Feb 2008 06:59:57 -0500

Two hospital chains checked in with quarterlies over the last week, and they're singing the same song: they've both had their profits socked by bad debt.

HCA, for one, reported that its bad debt expenses for the fourth quarter of 2007 was 13.2 percent of revenue, about 21 percent more than the 10.9 percent level it reported for the fourth quarter of 2006. Meanwhile, bad debt expenses for all of 2007 were 11.7 percent of revenue, up from 10.4 percent in 2006. Taken as a whole, bad-debt was fueled not only by uninsured patients, but also lower collections on patient accounts and annual increases in HCA's gross prices. Meanwhile, profits for 2007 decreased by 15.9 percent, to $874 million from $1.04 billion in 2006, despite a revenue increase of 5.4 percent to $26.86 billion and inflow of $661 million for the sale of three hospitals.

LifePoint Hospitals, meanwhile, saw profits drop 30 percent for fiscal '07, undermined not only by volume losses of 15 percent but also a rise in bad debt to 16 percent. For the year, things looked worse. Despite a revenue increase of 9.7 percent, to $2.63 billion, profits fell 30.2 percent to $102 million in 2007, compared with profits of $146.2 million for fiscal '06.

To find out more about the chains' bad debt crisis:
- read this Modern Healthcare piece and this other piece (reg. req. for both)

Related Articles:
HCA income up, but bad debt still significant. Report
HCA profits fall, smacked down by debt payment. Report
LifePoint shareholder calls for changes. Report
HCA sees bad debt rising until patients get insured. Report