The Accountable Care Act: Ballooning Bad Debt for Providers

DeniedThe ACA has enrolled approximately 8 million people through the healthcare exchanges sponsored by the government.

The initial logic is that this would have a positive effect on bad debt for the average physician. As more people get insurance, the more they will visit the doctor and the billings to self-pay patients will go down. But if one looks at recent trends - including the types of plans actually purchased on the exchanges, the opposite could be true!

Today, most bad debt is incurred by self-pay or uninsured patients. In the future, a greater percentage is likely to come from people with insurance - for balance after insurance (BAI). More than 81% of consumers purchasing plans on the exchanges opted for a silver plan (62%) or a bronze plan (19%) which pay for 70% and 60% respectively of the covered costs of services.

In 2013, patients were responsible for 24% of the medical bills for practices. That is up from 20% in 2009 and up from 6-10% a decade ago. A study last year by credit rating agency, TransUnion, showed that the average deductible a consumer pays increased by more than 154 percent, from $405 to $1,032 and the average copay a consumer pays increased from $65 to $117. This represents a significant shift in financial responsibility away from insurance companies to consumers. And it is one that consumers are still getting used to. One study showed that more than 60% of bankruptcy findings are related to medical bills.

This shift will require that practices change from a “wholesale” RCM model (which puts comparatively little emphasis on collecting from individuals) to a retail model that focuses on effective patient collections. In this new retail environment, practices are going to need new tools and skills to effectively manage this new dynamic with their patients. Estimating the true financial responsibility for a patient - including co-pays, deductibles, co-insurance, etc. - and having that discussion BEFORE services are rendered, providing timely, accurate and easy-to-understand financial statements, making it easy for patients to access information and pay their bill and, finally, being realistic about the potential need for a payment plan will all be critical to collecting that 25% of your revenue without breaking your patient's bank.

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