Paying up front for health care

Doctors and hospitals increasingly are asking insured patients to pay more of their bills for elective procedures at the time of the service, rather than collecting a small fee up front and waiting until later to get the rest of what’s owed.

A fundamental shift in coverage is prompting the change: the rise of high-deductible insurance plans.

Among covered workers who had high-deductible plans with a savings option in 2013:

15 percent had a deductible of $3,000 or more for single coverage.

38 percent had a deductible of $2,000 to $3,000 for single coverage.

31 percent had a deductible of $5,000 or more for family coverage.

15 percent had a deductible of $4,000 to $5,000 for family coverage.

Source: Kaiser Family Foundation 2013 Employer Benefits Survey

Earlier collection helps avoid payment delays and bad debt, experts say, but also raises concerns for consumers.

“I think the new aggression on the part of providers to collect payments reflects the growing cost of health care and their need to stay financially viable,” said Sara Collins, vice president at the Commonwealth Fund, an independent foundation that supports research on improving the U.S. health care system.

But, she added: “From a consumer standpoint, I think it’s a very ominous development for patients. The trends in employer-based coverage, and most people have that, is towards ever-increasing levels of out-of-pocket exposure.”

Hospitals and physician practices say they are under greater financial pressure to get payment for the services they provide, and can’t easily do what they have historically done: collect a token co-payment upfront, perform the procedure, then sit back and wait for insurers to run the numbers and for patients to pay them.

Insurance is covering less, and if patients don’t pick up the rest, providers are stuck holding the debt.

With unpaid medical debt in the tens of billions of dollars and rising, and with the number of high-deductible plans increasing, the issue is causing stress and potentially affecting care.

“Even people with six-figure salaries can have trouble paying a $5,000 deductible,” said Dr. Douglas Lundy, the co-president for Georgia-based Resurgens Orthopaedics. “People are choosing not to do tests or surgery. The high deductibles are hurting things.”

The growth in high-deductible plans and increasing bad debt are closely related, said Michael Mascolo, north region employee benefits practice leader for Wells Fargo Insurance. Providers used to have very few people in these plans, but that has changed. More employers are offering high-deductible plans, and workers are signing up for them because they offer lower premiums. The high-deductible plans save employers money and can mean lower premiums for employees.

The number of workers with high-deductible plans that included a health savings account option jumped to 20 percent of all covered workers last year, from 5 percent in 2007, according to the Kaiser Family Foundation.

Kaiser said 1 in 3 Americans has had problems paying medical bills in the past year, is paying old bills over time, or has bills that can’t be paid at all.

As a result, Mascolo said, there is “an explosion of bad debt.”

American hospitals provided $41 billion in uncompensated care in 2011, according to the American Hospital Association. That includes “bad debt” for services that hospitals expected to be paid for but were not, and charity care.

“We’re being flooded with patients with little or no ability to pay their portion of the bill,” said Greg Hurst, chief operating officer for Piedmont Healthcare. Approximately 50 percent of its patients are on a high-deductible plan with some form of co-insurance, he said.

As a result, “For elective procedures, we’re going to have to be disciplined about collecting the patient’s financial obligation at time of service,” Hurst said.

At Piedmont, bad debt and charity care combined increased from $207 million in fiscal year 2011 to $324 million in fiscal year 2013. It’s expected to rise to $414 million this year. Bad debt makes up about 75 percent of the increase.

In addition to collecting more up front, hospitals are trying to offset the problem of unpaid debt by being more efficient, Hurst said. The debt squeeze also is leading to more individual negotiations in which the provider tries to work out a payment plan.

Another option for providers is to tap a patient’s health savings account — funds set aside by an employee that can be used to cover medical expenses — if the employee has an HSA. They are becoming popular complements to high-deductible insurance plans.

Providers say they are further addressing the problem by giving patients a better idea before the service of what their cost will be, and by structuring payment plans they can manage.

Emory Healthcare President and CEO John Fox said the health system has financial counselors at the front desk. They talk with patients who carry high deductibles to help determine the amount of their responsibility and how to meet it.

“We try to sort it out right there,” he said.

Emory also works with a bank to offer credit to patients who might not be able to get it elsewhere. Fox said this means added risk for the health system, which carries some risk/guarantee for the debt, but the alternative is worse.

Not every situation works out.

Michael Manning had successful cancer surgery two years ago at one local hospital, but the 29-year-old from Norcross, Ga., chafed when told he had to pay thousands of dollars out of pocket at the time of his service because he hadn’t met his deductible.

He couldn’t work out a payment plan and the bill ended up with collectors, leaving him frustrated.

“I said, ‘Y’all will get paid when you get paid,’?” he recalled.

While providers are willing to work with patients who struggle with their bills, they inevitably must collect.

Said Lundy, “We try to be compassionate to people’s position, but at the end of the day, we have to pay staff.”