Unpaid Deductibles Sending Providers to the Hospital

Some observers would argue that the major event impacting healthcare debt in 2007 was legislative, as several states moved to adopt universal health coverage and Capitol Hill considered toughening healthcare debt-collection practices.

But the trend that may have had the broadest reach on healthcare debt buyers and collectors in 2007 was the continued increase in deductibles and co-pays for U.S. workers, according to a healthcare services analyst. This extra burden on workers translated into higher bad-debt expense and write offs for hospitals and private practitioners, Ann Hynes said.

“It was more of the same,” said Hynes, who covers the five major for-profit healthcare industry firms for Leerink Swann & Company in Boston. “Receivables are getting worse because people are uninsured and (health care providers) aren’t getting the money they used to get.”

Five years ago, 48 percent of workers with employer-sponsored health coverage were required to meet a deductible before any benefits were paid by their insurance plan, according to a recent study from the Agency for Health Research Quality (AHRQ). Back then, unpaid deductibles and co-pay accounted for about 10 percent of for-profit hospitals’ bad debt, said Hynes.

In 2005, 64 percent of workers with employer-sponsored plans were required to meet their deductible before insurance coverage kicked in, the AHRQ found. By 2007, 40 percent of for-profit hospitals’ bad debt was due to unpaid deductibles and co-pays, Hynes said.

Given the rapid increases in premiums and deductibles employees have faced over the past five years, human resource consultants expect employers will try to appease workers in 2008 by holding employee health coverage costs steady. That would be a “modest positive” for hospitals, Hynes said. “Maybe we will see some stabilization (in healthcare debt expense) for the first time in five years,” she said.

Leerink Swann & Company is an investment banking firm specializing in healthcare equity research, corporate finance, and asset management services for institutional and high-net-worth clients. Hynes covers Community Health Systems, Health Management Associates, LifePoint Hospitals, Tenet Healthcare, and Universal Health Services.