Remember the days when a “high” patient deductible was, at most $1,000 per year, out-of-pocket expense? Well those days have been turned upside-down literally . . . $1,000 is now the definition of “low” cost annual patient deductible.
Now patients are enrolling in high-deductible plans that require the patient have annual out-of-pocket costs that are in the $6,000 to $10,000 range per year. According to Ken Kubisty, Senior Vice-President at Advisory Board Consulting and Management, these higher deductibles could constitute 30% patient financial responsibility whereas previously patient responsibility was closer to 10% (Fletcher, 2016).
With employers trying to manage their rising costs to the employee’s health insurance coverage, more and more high deductible plans are either the only plans offered or become the plan of choice for employees when presented with their portion of cost for traditional insurance coverage. The result is that nearly 25% of Americans have a $2,000 deductible in spite of the fact that 66% of Americans have savings of less than $1,000. As a result, many insured people lack the funds to satisfy their high deductibles (Fletcher, 2016).
The “deductible season” used to be considered, at most, one to two months. Patients were essentially meeting their deductible amounts in the month of January and February each calendar year or after the first or second episode of care. This meant a minimal delay in revenue due to the patient being out of the equation early on in the year, and the financial relationship of billing and receiving payment from the insurance carrier quickly resumed. Instead of waiting for the patient taking two to three months to pay their portion (deductible amount), the provider could once again expect payment within four to six weeks from the date the claim is submitted to the respective insurance carrier. However, with these patient’s high deductible plans, it is prolonging this “deductible season” for four, six or sometimes 12 months; depending on the amount of financial responsibility that the patient chose for the plan year.
What does this mean to the medical practice’s revenue cycle? It means that the length of time to collect for services is becoming longer than historical averages. Because the shift of financial responsibility moved more to the patient via higher deductibles, the overall Days Sales Outstanding (DSO) has increased. Additionally, the percentage of a practice’s Account Receivables (A/R) aging greater than 120 days from date of service has also increased.
Once again, the patient is on a different timeline of payment than the insurance carriers. Patients are not opposed to waiting until the last statement (before collections), three to four months after the episode of care, to pay their bills. Furthermore, because of the higher deductibles and more out of pocket expenses for the patient, there are patients that are choosing to enroll in the interest-free monthly payment plans that are typically offered by medical practices.
The comparison of the insurance versus patient payment timeline is quite the differential; whereas a provider can expect payment coming from the typical insurance carrier within four to six weeks from the date of service, payment from the patient is running four to six months from the date of service. Although the allowed amount for the procedure billed to the insurance carrier has not necessarily changed, payer responsibility and timeline are big shifts in the revenue cycle for the modern medical practice.
References:
Fletcher, H. (2016). Why more than half of hospital bills don’t get paid. USA Today News. Retrieved from
http://www.usatoday.com/story/news/nationnow/2016/03/08/unpaid-hospital-bills/81478658/
Toledo, OH