The prevalence of high-deductible health plans and a growing gap between self-pay and insured patients are continuing to influence healthcare providers’ collections on their accounts, according to a new report, “Revenue Recognition and High-Deductible Plans: The Greater the Patient Portion, the Lower the Collections,” prepared by Crowe Horwath, LLP.
“In what appears to be an ongoing evolution of self-pay customers, the collections gap between uninsured accounts (‘true self-pay’) and the patient responsibility portion on insured accounts (‘self-pay after insurance’ or SPAI) is widening,” according to the report. Crowe Horwath analyzed a sample of 172 hospitals in its benchmarking database to determine the number of hospitals separating patients into payer groups, including “true self-pay” and “self-pay after insurance.” It found that 74 percent of those hospitals, each with more than 125 beds, separate patients into the two payer groups.
Collections from patients with “very” high-deductible health plans are becoming similar to those of traditional uninsured patients in some cases, according to the findings in the report. “The Crowe benchmarking data reveals that true self-pay patients generally pay approximately 6.06 percent on the dollar, while self-pay after insurance patients pay approximately 15.51 percent overall,” according to the report. Overall, more consumers have enrolled in high-deductible health plans over the last two years and healthcare providers are struggling to secure the amounts owed by patients.
“The percentage of collections on patients with account balances greater than $5,000 is four times lower than collections on low-deductible plan patients,” according to the report. “Hospitals have traditionally separated insured patients and uninsured patients into different portfolios when conducting financial analysis,” said Brian Sanderson, managing principal of Crowe healthcare services group. “However, recent findings indicate that very high-deductible plan customers may pay at a rate more similar to that of uninsured patients.”
Crowe Horwath also analyzed self-pay after insurance accounts based on inpatient or outpatient services. Key findings on inpatient self-pay after insurance include:
Patient account balances less than $1,200 have a payment rate of 40.1 percent.
The payment rate drops significantly—to 17.6 percent—near the inpatient Medicare deductible amount of $1,201 through $1,450, where Medicare bad debt may have implications on collections, according to Sanderson.
The payment rate for higher deductible health plans with balances of $1,451 through $5,000 is 25.5 percent.
The payment rate drops to 10.2 percent for balances of $5,001 through $7,500, 4.1 percent for $7,501 through $10,000, and 0.9 percent for accounts with a self-pay balance at more than $10,000.
Findings on outpatient self-pay after insurance payments also vary significantly across different segments, according to the report:
The average self-pay payment is 18.2 percent across all outpatient accounts receivable (AR).
A significant increase exists in the percent of self-pay after insurance outpatient AR residing in the $10,001 through $500,000 segment—from 14.6 percent of AR in 2015 to 29 percent of AR in 2016.
The outpatient payment rate is 23.7 percent on AR between $1 and $5,000.
The outpatient payment rate is 4.7 percent on AR between $5,001 and $7,500.
“While average patient balances for high-deductible plans increase, payment collections vary based on the size of the balance,” the report concludes. “As healthcare providers analyze the ‘realization’ (i.e., the percentage of net revenue versus gross revenue) of their managed care contracts, they also should understand risks associated with high-deductible plans and should recalibrate their AR valuation and potential impacts on revenue recognition to account for these new market factors.
Parsing accounts based on patient balance will prove a particularly insightful analysis for any finance team and likely will create a more reliable collectability factor based on historical experience.”