Pre-payment...The New Best Practice – Part 2

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Winter 2014

This is Part 2 of a 3-part series examining the implementation of Patient Pre-payment Practices, the Paradigm Shift in A/R Management, Collection Challenges and Effective Solutions

Collection Challenges

• According to a new report from health consultancy Deloitte out-of-pocket healthcare expenses for consumers reached $672 billion by 2012, and is expected to increase substantially.

• Mark Edwards, owner of Credit Bureau Systems, Paducah, KY, which does billing and debt collection for 20 Kentucky hospitals, sees how much bad debt hospitals are accumulating. Edwards predicts that, “one day soon reimbursements will drop and more people will be on Obamacare. That will mean even more people will be asked to pay larger out-of-pocket costs. We haven't seen the worst of this yet."

• Many hospitals, particularly those in urban and suburban settings, also are experiencing steep increases in uncompensated care. Three contributing factors:

• Bad debt
• Charity care
• Medicare & Medicaid pay less than cost


Over $413 billion in uncompensated care was provided by hospitals of all types since 2000. (AHA report)

• In 2012, bad debt & charity care reached an all-time high: $45.9 billion…6.1% of the hospitals’ total operating expenses.

• The bad debt figure may rise to $200 billion by 2019 if current trends continue. (Analysis of 2011 Medicare and Medicaid statistics.)

• Government reimbursements to hospitals were $56 billion less than the hospital’s costs (in 2012)

- Medicare only reimbursed 86 cents for every dollar spent on patient care.
- Medicaid only reimbursed 89 cents for every dollar hospitals spent on patient care.

A 300% increase in uncompensated care is projected over the next five years. (Deloitte report)

“Hospitals must ensure that the self-pay portion of a medical bill does not become the no-pay portion.”
- Ron Knaus, CFO, Spectrum Health Systems, Grand Rapids, MI


• Expenses growing more rapidly than Revenue
• Revenue growth & Cash flow Margins at an all-time low (3.9%)
• Extremely tight Operating Margins
• Sharply decreasing non-operating income (investments and endowments)
• Substantial decline of Inpatient and Outpatient Volume
• Obsolete Facilities and Equipment
due to limited access to capital

• 25.1% of all Non-Profit Hospitals
Operate at a Loss; (a 65%increase
over the past five years)

“What is the mission of a community hospital?
Why do you exist?...It's a matter of survival.” 1
Michael D. Williams, FACHE, Pres./CEO, Community. Hospital Co. Dallas, TX

Look for the third and final installment in this series - Effective Solutions

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or call Donald Tapella at (816) 229-4887, ext.111