Dive Brief:
- Bad debt, a proxy for unpaid bills, rose in 2018 for nonprofit hospitals after falling for several years since 2014, when some states decided to expand Medicaid, Moody's Investors Services said in a recent report.
- Rising deductibles are fueling the trend, as patients are on the hook for an increasing share of care costs. The growth of bad debt may at times outpace net patient revenue, the ratings agency said.
- At the same time, deductibles and premiums are increasing faster than wage growth, another ominous signal for hospitals.
Dive Insight:
More Americans have high deductible plans than ever before, according to the Kaiser Family Foundation.
"More than a quarter (28%) of all covered workers, including nearly half (45%) of those at small employers with fewer than 200 employees, are now in plans with a deductible of at least $2,000, almost four times the share who faced such deductibles in 2009," KFF said in a recent report.
But when patients with high deductibles seek care, hospitals typically have to collect from the patient first. And as more Americans struggle to afford treatment, it's harder to collect from patients right away.
"The longer the delay between providing service and collecting payment, the less likely a hospital is to collect payment," Moody's said.
Many patients don't have enough saved to cover the cost of their deductible, according to a survey from accounting firm PwC. At least a third of those with employer-based coverage and HDHPs don't have enough on hand to pay for their deductible, the company reported.
It will be difficult for hospitals to reduce bad debt, according to Moody's, which characterized it as an "uphill battle." Collecting on unpaid bills requires "constant vigilance," the ratings agency said.
In 2014, bad debt clocked in at roughly 5.6% of net patient revenue for nonprofit health systems, and then fell below 4.5% in 2016 and 2017. But in 2018, bad debt climbed again above 4.5%, Moody's said.
