Unpaid Patient Healthcare Bills Mount: The Seen and the Unseen

“NASHVILLE — Hospitals and medical practices share a growing problem with those they treat: Patients aren’t paying their bills.

Working people are on the hook for an increasingly large portion of the cost of their care, as insurance policies pay for less. It’s a trend that is not reversing — and it’s causing financial distress for families and CEOs alike.”

“In health care, the billing process is called revenue cycle management. It’s a complex system of diagnostic codes, services, insurance benefit analysis, billing departments and software.

Hospitals and providers, historically, received 90% of the reimbursement from insurers, according to The Advisory Board. The patient portion was more of an afterthought.”

“For every patient dollar being billed, hospitals have historically failed to collect 65 cents.”

"The hospital operator is not alone, and the problem is not simple.

Billing practices are not designed to collect small, incremental payments from hundreds or thousands of patients. They are designed to bill a handful of large entities — insurance companies — not individuals who walk in the door.”

“Streamlining billing into a single itemized list is essential to helping turn patients into bill-paying customers.

One might not go back to a restaurant that gave you a bill for the appetizer then a bill for the bread then individual bills for the entrée and drink.

But that’s how health care is presently billed. An open heart surgery could bring individual bills from the cardiologist, the surgeon, the lab, the anesthesiologist, a consulting doctor who helped read charts and more.” - Why more than half of hospital bills don’t get paid, usatoday.com, 03/09/2016

　

The Seen and Unseen

The above excerpts, from the above mentioned report, do manage to explain the “seen”, but what about the “unseen”? How so?

The above statements are based on the assumption that insurance historically paid the vast majority of bills, which it did not. As recent as 1960 patients paid 90% of the bills and third party payers 10%. Stated alternatively, as recently as 1960 the percentages paid by third parties and the patients were exactly opposite of today i.e. today third party providers pay 90% and patients pay 10%, whereas 1960 third party providers paid 10% and patient 90%.

Somehow patients managed to pay 90% of bills as recent as 1960 and those bills were somehow manageable to be paid from a household budget. Conversely, somehow patients in 2016 can’t manage to pay 10% of bills and those bills are not manageable to be paid from a household budget.

With the 10% patient responsibility existing in 2016, the report mentions: “Hospitals and providers, historically, received 90% of the reimbursement from insurers, according to The Advisory Board. The patient portion was more of an afterthought”, “hospitals have historically failed to collect 65 cents” and “Billing practices are not designed to collect small, incremental payments from hundreds or thousands of patients. They are designed to bill a handful of large entities — insurance companies — not individuals who walk in the door.” Suppose one could look at the above statements many ways. One way is to state: The customer is not the customer, rather the customer is the third party payer.

Moreover, if the third party payer is indeed the indirect or direct consumer from the point of view of the healthcare provider as the report indeed suggests, then as such, it confirms the oft mention non-price signal discussion in healthcare. That is, the statement confirms the regularly discussed scenario that healthcare in conjunction with health insurance is akin to buying “grocery insurance” and paying a monthly premium. As the scenario goes, one arrives at the grocery store to shop where no prices are posted (price is not a signal). When checking out with the cashier one never knows the single item price nor total price as the bill goes to the “grocery insurance company”. One merely laments their monthly grocery insurance premium along with complaints and moans about their ever escalating monthly “grocery insurance” premium.

One can also make a grand argument that the unpaid patient bills are directly related to the process of non-price purchases. If price is not a signal at the point of exchange and only a signal after exchange, are the unpaid patient bills merely an adjustment to mutual exchange, after the fact, in that the patient doesn’t pay the bill to adjust for mutual exchange? Stated alternatively, had price been a signal many exchanges would have never occurred as the patient would have been unwilling to pay such price at the point of exchange (transaction rejected as a non-mutual exchange). As an extension to the argument: Are the unpaid patient bills merely part of the process, a process of non-price signal, a process self-produced by healthcare providers, and hence not a surprise but rather a known-known of such a process?

A final point one might consider involves the following observations from the article: “Streamlining billing into a single itemized list is essential to helping turn patients into bill-paying customers“, “One might not go back to a restaurant that gave you a bill for the appetizer then a bill for the bread then individual bills for the entrée and drink“, and “But that’s how health care is presently billed. An open heart surgery could bring individual bills from the cardiologist, the surgeon, the lab, the anesthesiologist, a consulting doctor who helped read charts and more.”. Why all the bills?

What about the “why” concerning the several and many bills received by patients? The “why” is related to the non-competitive nature of much healthcare (CON [Certificate Of Need] legislation and other related legislation protecting the incumbent healthcare provider) and the consequential failure to reach scale in healthcare.

The several and many bills are not going to change as it is part of a conscious process. Nay, nay there is absolutely no reason to wring one’s hands over the flood of bills received by the patient as it is by design, not by error. Many and varied healthcare providers, in a self-produced and politically [legislation] protected non-scale environment, send many bills by design. Nope, no Wal-Mart or Southwest Airlines of healthcare in this supply, just a gazillion little shops sending non-price signal bills….and expecting to be paid.

Yep, one might think twice about the supply-side of healthcare.