"The job isn't pretty, but someone's got to do it."
That's the position taken by a growing number of US hospitals, who are increasingly calling patients to let them know how much their stay will cost—or even demanding 30% to 50% of what they'll owe up front. Experts say that hospitals are taking this tack because they want to avoid aggressive debt collection practices that often take place after the fact.
The question is, is this a good strategic move for hospitals? One the one hand, they may collect more of what they are owed. On the other hand, making sure patients know what they're expected to pay could cost the hospital more, as the patient may simply postpone elective procedures indefinitely. And aggressive tactics, such as demanding a big chunk of money up front, may simply push patients into the arms of other hospitals.
A tough collections task
With the number of uninsured Americans as high as ever—roughly 41 million, according to the CDC— hospitals are having a hard enough time collecting on bills. While the hospitals offer what financial support they can, there are many gaps they cannot cover, leaving consumers with bills they cannot afford to pay.
When you add the number of consumers whose insurance is handicapped by high deductibles, the burden grows even more heavy. Among Americans who get insurance in the workplace, 41% must cover deductibles of at least $1,000 before their insurer begins coverage. Meanwhile, the 7 million enrollees in Obamacare plans aren't much help either; the average deductible for the most popular "silver" coverage tier is $2,267, a Robert Wood Johnson Foundation study concluded.
All told, it's a gigantic problem, with hospitals' total cost of uncompensated care reaching $46 billion as of 2012, which is equal to about 6% of their expenses. And there's no reason, at present, to think that uncompensated care costs are going to fall anytime soon.
Other solutions
If hospitals are reluctant to try and collect ahead of time, or even to inform patients of expected bills before they become due, what other options do they have?
For one thing, merely identifying the indigent can help, said Richard Gundling, vice president of the Healthcare Financial Management Association. "For both the patient and the facility, trying to collect a debt that can't be paid just wastes everybody's time," he told BloombergBusinessweek.
But even if hospitals sharpen their pencils and try to collect only from those who are solvent, they're still likely to encounter many consumers who can't afford the deductibles their policy includes. And they've got to work around this somehow. For the foreseeable future, hospitals are going to face a grave threat to their existence if they don't find a way to bring in more cash from debtors. And if shaking them down ahead of time is what it takes, they'll have little choice but to do it.