Patients often can’t afford to pay off what their insurance leaves behind

Research from accounting services firm Crowe found that self-pay-after-insurance patients (the deductible amount and/ or the residual amount due from the patient after insurance payment) represented nearly 60% of patient bad debt in 2021, a five-fold increase in just three years.

Since the introduction of high deductible health plans, this metric has been increasing, and 2021 was the first year self pay-after-insurance accounts were the leading source of bad debt for hospitals.

“The complexities of new insurance programs such as HDHPs, health savings accounts, and various Affordable Care Act ‘metal’ plans – for example, bronze, silver, gold, and platinum – have created confusion for patients and healthcare providers alike, as most of these newest options create greater out-of-pocket medical expenses for the patient,” said Brian Sanderson, a principal in the healthcare consulting group at Crowe, in a statement. “And the patient is paying less of it for a variety of reasons.”

According to the study, the proportion of total patient statements with balances of more than $7,500 has more than tripled since 2018, up to 17.7%. Balances greater than $14,000 nearly quadrupled from 4.4% in 2018 to 16.8% in 2021. This increase creates new challenges for providers to collect higher balances that are more difficult for patients to pay either prior to services or during the typical 120-day collection window after the insurance balance has been resolved.

“This represents a complete sea change for many hospitals regarding self-pay collections,” Sanderson said. “It’s one thing to ask patients for the $75 or even $200 copay amounts at the point of service. But it’s a completely different conversation to guide them through paying thousands of dollars. This is why we see collection rates dropping so dramatically.”

According to Crowe, the percentage of patients with health insurance who paid their out-of-pocket bill dropped more than 20 percentage points last year to about 55% from 76%. The break point at which most patients with insurance pay their out-of-pocket bills is $7,500. After a bill crosses that threshold, the percentage of patients who pay it off drops significantly.

“Labor scarcity makes for fewer experienced personnel looking to navigate increasing complexities of insurance coverage, while patient out-of-pocket costs continue to rise dramatically,” Sanderson said, adding that the highest-performing revenue cycle operations at hospitals and health systems have been able to maintain their higher collection rates on larger balances through a combination of targeted analytics and resource segmentation. For example, some successful hospitals and health systems have separated their self-pay revenue cycle teams into three squads: one for low-dollar accounts (typically less than $1,000), one for medium-dollar accounts (typically $1,000 to $5,000), and one for large-dollar accounts (typically more than $5,000). Such data-driven specialization leads to better collection results.