Increased coverage significantly shifts hospitals' financial risk

Financial risk for hospitals has shifted significantly as patients assume more costs for services under their insurance plans, according to a new report from Crowe Horwath LLP.

The firm analyzed 444 hospitals' transactions through June of this year. Since October 2013, when health insurance exchanges under the Affordable Care Act (ACA) opened to extend coverage to millions of previously uninsured Americans, providers collect more and their revenue sources have largely transitioned to more dependable payer reimbursements as the number of uninsured self-pay patients falls.  

Accounts receivable from insured self-pay patients rose 13 percent in the last year, according to the analysis. They fell 22 percent for uninsured self-pay patients over the same period, largely due to the previously uninsured enrolling in Medicaid in states that expanded their programs under the healthcare reform law.

Insured self-pay dollars outweighed uninsured self-pay dollars 22 to 1 in the first quarter of 2015, but the fact that average collection amounts for insured self-payers are also up slightly between the first quarter of last year and the first quarter of 2015 is even better news, according to the analysis. That's because low average payments from uninsured self-payers are a bigger drag on providers' bottom lines than uninsured payments.

"While the uninsured self-pay patient population appears to be performing better from an A/R [accounts receivable] perspective, the expanding insured self-pay patient volume and A/R highlights the need for providers to focus on this area of growing financial risk," the report warns.

Providers must develop plans for improving the process for collections from patients with more financial responsibility, the authors write. For example, providers can track self-pay patient collections and use other approaches such as using plan-specific charity care data when negotiating payer contracts and developing policies that provide payment options for patients who cannot pay the entirety of their initial balances.

Other factors, meanwhile, threaten to drive up providers' financial risk, such as the trend toward physician quality reporting and the industry's shift to value-based models, FierceHealthFinance previously reported.

To learn more:
- read the analysis (.pdf)

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