Even with ACA, some hospitals face the bad debt blues

'When someone has a really high deductible, effectively they're still uninsured'

Some hospitals are reporting an uptick in bad debt as patients with high-deductible plans struggle to pay their bills, John Lauerman writes for Bloomberg Business.

Many expected that the Affordable Care Act would decrease the number of delinquent accounts. But even as the uninsured rate has fallen to 9.1 percent—6.6 percentage points lower than in 2009—some providers are seeing an increase in bad debt.

Some attribute the surge in bad debt to the rise of higher-cost and high-deductible insurance plans, which can make it difficult even for insured patients to pay their medical expenses. In the first nine months of 2015, about 36 percent of insured U.S. residents had plans that could require significant out-of-pocket payments, up from 25 percent in 2010, according to CDC data.

"When someone has a really high deductible, effectively they're still uninsured," says John Henderson, CEO of Texas-based Childress Regional Medical Center. "Most people in Childress don't have $5,000 lying around to pay their bills."

"It feels like a sucker punch," Henderson adds.

Four tips to beating bad debt

Rural hospitals have been hit particularly hard by bad debt, which may be fueling some mergers as systems struggle to collect on delinquent accounts, Lauerman reports.

"We have 39 hospitals that have negative margins and the majority of them are rural," says Joe Schindler, VP of finance at the Minnesota Hospital Association. "They have less of a financial cushion to absorb the losses of bad debt."

Research from The Advisory Board Company has shown patients aren't likely to pay medical bills greater than 5 percent of their household income. Last year, the average deductible in a high-deductible individual plan was $2,099, which exceeds 5 percent of income for many low- and mid-income households.

Even so, HHS reports that total out-of-pocket medical spending is at 10.9 percent, the lowest on record (Lauerman, Bloomberg Business, 2/23).

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