up-front payments

MN bill blocks hospitals from using debt info pre-care

Wed, 07 May 2008 06:59:56 -0400

Arguing that such a practice is coming, even if it isn't widely observed yet, Minnesota legislators have approved a bill forbidding hospitals from using information about a patient's medical debt history to decide whether or not to treat that patient. The bill forbids providers from sharing or obtaining medical debt information until after care is delivered. Hospitals are entitled to determine patient income and assets, but only for the purpose of qualifying the patient for charity programs or state and federal reimbursement.

Right now, a small number of providers have begun financially qualifying patients who need elective procedures. That could conceivably disqualify a substantial minority of patients seeking care, as one in five Americans have medical debt, according to research by the Commonwealth Fund.

To learn more about the bill:
- read this piece from the Minneapolis Star-Tribune
- read the bill text

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Providers could face big squeeze in '09

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

Next year isn't likely to be pretty for providers. As a story in this week's newsletter notes, insurance companies have been watching profits fall, so they're likely to raise premiums in 2009. Then, the dominoes begin to fall: In an effort to save, employers will raise deductibles and co-pays, employees will carry bigger financial burdens and voilà--bad debt will rise. Worse, with health plans struggling to regain their profit levels, providers are likely to face tougher pressure to maintain, or even cut their rates. Then, of course, there's the crisis currently roiling the financial markets, which limits providers' ability to get loans, issue bonds and finance deals.

Add in the likelihood that health system reforms could be in play next year--when the U.S. swears in a new president--and you're looking at a scary 2009. If things don't play out just right, providers could face a serious squeeze, with patients who can't pay on one side and insurers who won't on the other.

Hospitals are particularly vulnerable here. With far too many operating on razor-thin margins (or losing money), next year could turn out to be a bloodbath, with the U.S. seeing an explosion of hospital bankruptcies and closures. Small wonder many are battening down and beginning to demand up-front cash payments for services where they can, though that, too has its down side. (This practice may slash bad debt, but it's not exactly warm and fuzzy, and besides, in a tough competitive market consumers may just go elsewhere.)

All that being said, providers aren't powerless. This is the year to begin partnering aggressively--one reason why physician-hospital JVs seem to be coming back into vogue--and to consider mergers and acquisitions that beef up your bargaining muscle quickly. After all, if I were a health plan negotiator, I'd try a "divide-and-conquer" strategy to get the best deals.

Now, it's your turn, readers. What strategies do you think providers (especially hospitals) need to pursue to survive the next year or two? Do you think their salvation lies in better managed care contracting? Building volume? Partnering? Attracting venture capital? Investing in new vehicles (say, medical real estate or biomedical start-ups)? I'd love to hear your thoughts. - Anne

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

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