Consumers Paying More for Healthcare Leads to Lower Collection Rates

The amount of bad debt at healthcare providers that is attributable to self-pay after insurance accounts grew sixfold between 2018 and 2021, and represented nearly 60% of all bad debt, according to a report released this month by Crowe Revenue Cycle Analytics. Once out-of-pocket expenses reached $7,500, the report labeled that the “vanishing point” because collection rates dropped off “starkly” at that point.

The growth of high deductible health plans, health savings accounts, and plans under the Affordable Care Act “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. “And the patient is paying less of it for a variety of reasons.”

If $7,500 is the “vanishing point” at which point collectability drops significantly, then maybe there are not that many accounts reaching that point. Unfortunately, that is not the case. The volume of per-claim amounts that exceed $7,500 more than tripled to 18% of all accounts in 2021, from 5.2% in 2018, according to the report.

The collection rate on self-pay after insurance accounts was 55% overall in 2021, down from 76% in 2018. On accounts where the claim amount was between $5,000 and $7,500, the collection self-pay after insurance collection rate was 32%. On claim amounts that were between $7,501 and $10,000, the self-pay after insurance collection rate was 17%.

“Given these trends in self-pay claims and collection, the healthcare industry likely will see more direct patient-to-hospital negotiations for complex medical care, more consumer financial companies offering payment plans on behalf of patients, and more sophisticated models for hospitals to align their already thin workforce to patients who have the means to pay their out-of-pocket expenses,” the report concluded.