Out-of-pocket costs biggest factor in defaulting on hospital bills

WILLMAR -- High out-of-pocket costs are the biggest predictor for who's most likely to default on their hospital bill, a study at Rice Memorial Hospital has found.

WILLMAR -- High out-of-pocket costs are the biggest predictor for who's most likely to default on their hospital bill, a study at Rice Memorial Hospital has found.

Hospital officials hope to use the study's findings to do a better job of identifying these at-risk patients sooner and working with them to either develop a payment plan or steer them toward financial assistance.

"We have a lot of this in place already. We've been doing this. The onus, I think, is on the hospital and provider to communicate better," said Amy Kelleher, communications coordinator for the city-owned hospital.

Kelleher conducted the study last year as a thesis project for a master's degree in health care administration.

In hospital and public policy circles, uncompensated care is increasingly gaining attention.


Although the rate of uncompensated care -- which includes both bad debt and outright charity care -- is lower in Minnesota than the national average, it's growing. A report released last month by the Minnesota Department of Health found that uncompensated care at Minnesota hospitals rose 26 percent between 2004 and 2005.

Spurred by a 2005 settlement with the Minnesota attorney general's office, hospitals also are attempting to become more transparent and accountable in how they collect on overdue accounts from patients.

Kelleher analyzed 966 claims for hospital services received from June through September 2004.

The goal of the study was to identify factors most strongly associated with the likelihood of defaulting on a hospital bill.

Kelleher said it wasn't a surprise that lack of health insurance was one of the factors. More eye-opening was the discovery that out-of-pocket expenses were the biggest factor, regardless of the patient's insurance status, she said.

Even for someone who's insured, a large hospital bill plus a large deductible means patients have to pay a substantial portion of the bill themselves -- and this situation is likely to become more common, hospital officials said.

Lorry Massa, CEO of Rice Hospital, said the hospital gave $461,000 worth of charity care last year. Although it represents a small slice of the care that's written off each year to discounts or bad debt, it's a 31 percent increase from 2005, when $349,000 in charity care was provided, he said.

"I think we're going to see more charity care," Massa said. "As more businesses move to high-deductible plans and health savings accounts, it puts the onus on individuals to pay more of their own costs. And we don't plan for health care like we do for other purchases."


The study found three patient groups that were most likely to not pay the bill: emergency department patients, patients receiving same-day surgery, and women admitted for labor and delivery.

Age and gender weren't as important, although the study found that younger people -- especially younger men -- were somewhat more likely than older patients to default on their hospital bill.

Nonpayment also was more likely among frequent users of hospital services.

Whether patients lived in Kandiyohi County or traveled to Rice from farther away didn't seem to be a significant factor, Kelleher said.

All identifying information was stripped away from the claims before they were analyzed. The study didn't look at income or employment status, which aren't queried when patients are admitted to the hospital.

Kelleher's study recommends beefing up Rice Hospital's efforts at patient financial counseling.

For instance, the hospital could provide patients with more help in applying for programs such as MinnesotaCare or Medical Assistance, the state's subsidized programs to provide health care to low-income residents.

"A lot of people who are eligible are either unwilling or unable to fill out very daunting paperwork," Kelleher said.


It's important to let patients know there are resources available and that the hospital is willing to help work out a solution, Massa said. "We will work with patients and try to figure out a payment plan that works for all of us. ... It's about communication and trying to get to potential patients early."

Another recommendation is to do more outreach work with target populations, such as pregnant women who are uninsured or underinsured, and get them referred to programs or payment plans to help pay their labor and delivery bill.

"We know who they are. If they're receiving prenatal care, they're already in the system," Kelleher said. "It provides us with a place to start."

She also recommends the adoption of an official policy to define charity care and identify who should receive it.

"It is a board policy issue. I think it's something more hospitals are looking at," she said. "It's a complex issue and it's not always clear. Every hospital has to be more up front."

Massa said hospitals have "done a better job of saying up front, 'This is charity care.' I think we've gotten better. I think we're making progress."

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