One of the most powerful components of the Affordable Care Act (ACA) was the mandate that nonprofit hospitals provide an income-based financial assistance program. But 10 years after the passage of the law, more than half of patients don’t know these programs exist.
This knowledge gap is causing an unnecessary amount of suffering for both patients and hospital revenues—and is one of the reasons medical debt is the leading cause of bankruptcy in the U.S. I saw this suffering firsthand while working as a hospital debt collector for over a decade. I also saw that most patients in collections would have qualified for financial assistance but either didn’t know about it or didn’t complete an application.
This disconnect is a burden for hospitals as well. The fact is that very, very few bills that go to collections ever get paid, especially for lower income patients who qualify for financial assistance. It’s better for the hospital’s bottom line to leverage patient-friendly financial assistance screenings—which can lead to discounted balances the patient can afford, or discovery that a patient is eligible for Medicaid or other potential third-party reimbursements—than to spend time and resources trying to collect balances that patients cannot afford to pay. As an added bonus, effective financial assistance policies help hospitals avoid negative press.
So why does this problem still persist so long after the passage of the ACA? Hospitals have a seemingly ever-mounting list of challenges to deal with and have yet to recover from the strain of the pandemic. Who can blame them for not yet perfecting their financial assistance program when they are in the midst of staffing shortages, overcrowding and other pressing issues?
But as the cost of care soars, hospitals and their patients can’t afford to wait any longer to make these programs work the way they are supposed to.
Do away with 'charity care'
One of the major barriers facing financial assistance is one of simple perception. The most common term for hospital financial assistance programs, “charity care,” is a kind of misnomer that leads to widespread misconceptions of what these programs are and who they are designed for.
A representative survey of 2,000 Americans commissioned by Breez Health shows that patients who actually know about hospital financial assistance tend to think that they aren’t eligible because they’re insured or their income is too high. They’re always wrong on the first account, and often the second as well.
Eligibility varies depending on the state and hospital where the care takes place, but financial assistance often extends to households that earn up to 400% of the federal poverty level. In many areas, this is more than $120,000 a year for a family of four.
But even among those who know they qualify, there is another issue that appeared on the survey: stigma. Many people don’t want to be on the receiving end of “charity,” no matter their financial situation.
In a way, hospital financial assistance is like need-based scholarships to attend college. Imagine if scholarships were called “charity credits” instead. It might change how we view them.
One way to help lower this particular barrier is to just stop using the term “charity care” to describe these programs. “Hospital financial assistance” is a good alternative with fewer negative connotations.
But even if we are able to eliminate the stigma and motivate patients to apply, there is still the issue of the process itself. It is often far more difficult than it should be.
Make the application better—or better yet, screen all patients
The process of applying for financial assistance is different at every hospital. Many still rely on paper forms, and the applications are often needlessly long, weighed down by questions added in anticipation of legislation that never passed.
There are also often a lot of questions that go far beyond the only necessary detail: annual household income. The make and model of your car shouldn’t be on the application, nor your average monthly grocery budget, but these are real examples that I’ve seen on applications.
For financial assistance to work, the application has to be easy to access online, and the patient needs to be able to complete it quickly by providing a document they’re likely to have readily accessible, like a tax return.
In addition to providing a user-friendly application, hospitals need procedures in place to make sure that every patient is systematically notified that financial assistance may be available to them. They shouldn’t have to hear it from a friend or neighbor or on a podcast.
There’s an elegant approach to the awareness issue: Screen every patient for financial assistance eligibility before sending them a bill, or at least before sending them to collections.
New legislation in a number of states, including Colorado, Illinois and Minnesota, has made this a requirement for patients who do not have insurance. Some 30 states have financial assistance legislation on the books or in the works. Adopting this policy before it’s required allows hospitals to make the transition on their own terms—and reap the revenue benefits sooner.
Part of every hospital’s mission is to serve its local community. Financial assistance policies are an important part of that mission. Make 2024 the year you look after your patients’ financial health as well as their physical health. Both your patients and your CFO will thank you.
Nick McLaughlin is CEO of Breez Health, a technology company that streamlines financial assistance policies to better serve patients and hospitals.