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Insight Driven Health

Healthcare Transparency

Drowning in Bad Debt:


The Looming Patient Payment Crisis
Patient out-of-pocket payments are skyrocketing.
Providers urgently need to implement new collection
strategies if they want to avoid potentially dire
financial consequences.
Thanks to the Affordable Care Act (ACA), the
number of uninsured patients is falling fast.
Congressional Budget Office (CBO) estimates
say that as more people gain coverage under
the ACA the number of uninsured will drop by
more than 25 percent over the next five years,
to about 26 million by 2020.1

Data refers to number of non-elderly uninsured;


Insurance Coverage Provisions of the Affordable Care Act,
Congressional Budget Office, Staff of the Joint Committee
on Taxation, March 2015. https://www.cbo.gov/sites/
default/files/51298-2015-03-ACA.pdf

1

Good news, to be sure, but its only half the


story. Accenture analysis suggests that the
rise in insured patient cost sharing will far
outweigh the benefits of declining numbers
of uninsured.

The cost-sharing crunch


Insured patient cost sharingfinancial
responsibilities in the form of deductibles,
co-insurance and co-payswill rise by
40 percent over the next five years,
Accenture found.

To put that in perspective, a provider


organization with $1 billion in net annual
revenues could experience a 40 percent, or
$27 million, increase in insured patient cost
sharing over the next five years (Figure 1).

Whats driving the surge? Cost sharing for


traditional, employer-sponsored insurance
plans has continued to grow year-over-year.2
Whats more, entrants into the public and
private exchange markets tend to have high-

Figure 1. Insured patient cost sharing is set to soar

A surge in bad debt


Patient payments are both less predictable
and slower than provider payments. In fact, if
payment is not secured before or at the time
of service, the likelihood of collecting balances
drops significantly.4 Even those patients who
pay up eventually do so at a rate that is more
than twice as slow as insurance companies.5

A provider with $1 billion net annual revenues could see a


40 percent increase in patient cost sharing by 2020.

97M
$96

$65
68M
2015

2016

2017

2018

2019

deductible health plans,3 compounding


the growth of patient responsibilities. The
consequencesa reduction in insured revenue
and an increase in patient paymentsshould
be of concern to providers.

2020

Sources: Assumes National Average Payor Mix and National Average Historical Bad Debt Write-Offs (2014).
Accenture analysis, Americas Health Insurance Plans (AHIP), Aon Hewitt, Assistant Secretary for Planning
and Evaluation (ASPE), Centers for Medicare and Medicaid, Congressional Budget Office, Health Affairs,
Instamed, Kaiser Family Foundation, Modern Healthcare, RAND, Truven Health Analytics

Given the complexity of collecting patient


payments, providers will likely also face a
substantial increase in insured bad debt.
Although Accenture analysis found that
uninsured bad debt could decline by as much
as 26 percent, insured bad debt could rise by
39 percenta 20 percent increase in net bad
debt overall. For a provider organization with
$1 billion in net annual revenues, that could
amount to more than 5 percent of net revenue,
or $51 million (Figure 2).

Figure 2. The rise in insured patient cost sharing will boost net bad debt
by 20 percent by 2020
A provider with $1B net annual revenues could see net bad debt of $51M by 2020.

+20
+39%
-26%
%

Total Bad Debt


Net Impact
Insured Bad Debt
Uninsured Bad Debt
Net Revenue Impact

$51M
$42M

$42M
$30M
$12M
2015

$9M
2016

2017

2018

2019

2020

Sources: Accenture analysis, Americas Health Insurance Plans (AHIP), Aon Hewitt, Assistant Secretary for Planning and Evaluation (ASPE), Centers for Medicare and Medicaid,
Congressional Budget Office, Health Affairs, Instamed, Kaiser Family Foundation, Modern Healthcare, RAND, Truven Health Analytics

Kaiser Family Foundation 2015 Employer Health Benefits Survey, September 25, 2015. http://kff.org/health-costs/report/2015-employer-health-benefits-survey/

2

Bob Herman, High-deductible plans dominate next open enrollment, Modern Healthcare, November 13, 2014. http://www.modernhealthcare.com/article/20141113/NEWS/311139966

3

Improving self-pay at all points of service, RelayHealth, September 2010. http://ndha.org/image/cache/ImprovingSelf-PayAtAllPointsofService_RelayHealth__2_.pdf

4
5

Ibid.

Effective payment strategies


To address the evolving financial environment,
providers need to prioritize the following:
Focus on complex liabilities
Traditionally, providers have pursued upfront collections strategies that favor simple
liabilities such as co-pays, which are relatively
easy to identify without specialized tools and
processes. However, complex liabilities such as
deductibles and coinsurance now make up a
much larger portion of a providers net revenue
and are the key driver of the impact illustrated
above. Effective collection of all liability types
requires robust pre-service financial clearance
strategies, an enhanced operational structure,
skilled resources, and enabling technology.

Expand financial counseling capabilities


As insured cost sharing increases, so will the
numbers of underinsured: those patients who
have insurance but also experience affordability
challenges. Providers will need effective
programs of financial education and assistance.
And rather than relying on patients to selfidentify post-billing, when they are less likely
to engage, they will also need to embrace a
proactive screening and outreach approach.

up-front price transparency, more self-service


options, and an omni-channel customer service
experience supported and managed by strong
contact-center strategies.

Employ customer relationship management


Providers have lagged in their ability to meet
consumer demands that tie to customer
satisfaction and ultimately to financial
performance. But the rise of consumerism
in healthcare will drive the need for change:

Plainly, providers need to adjust their payment


and collections strategiesand fast. The
potential benefits of taking a more transparent
approach are just too significant to ignore. The
time to start building new capabilities is now.

Accenture analysis reveals that providers


equipped with such enhanced capabilities
could boost their total net revenues by more
than 0.5 percent, or $5 million for every $1
billion in net revenue (Figure 3).

Figure
3.3.
Proactive
patient
payment
strategies
focused
onon
pre-service
processing
Figure
Proactive
patient
payment
strategies
focused
pre-service
processing
can
significantly
decrease
bad
debt
can
significantly
decrease
bad
debt
Estimated
value
proposition
Estimated
value
proposition

~0.5
~0.5%%

of of
Total
NetNet
Revenue
Total
Revenue
(Annual
Recurring
Run
Rate)
(Annual Recurring
Run
Rate)
or or

$$55M
M

Operating
Model
Operating
Model
Pre-service
Contact
Center;
Pre-service Contact
Center;
skilled
resources
in financial
skilled
resources
in financial
clearance
andand
counseling
clearance
counseling

Key
KeySolution
Solution
Components
Components

forfor
every
every

$$11BB

in in
NetNet
Revenue
Revenue

Real-time
Insurance
Verification
Real-time
Insurance
Verification
& Liability
Estimation
& Liability
Estimation
Eligibility,
covered
benefits,
Eligibility,
covered
benefits,
copay,
deductible,
coinsurance
copay,
deductible,
coinsurance

Predictive
Analytics
Predictive
Analytics
for for
account
segmentation,
account segmentation,
propensity
to pay,
andand
refined
propensity
to pay,
refined
adjudication
approaches
adjudication
approaches

$$
Upfront
Payment
Upfront
Payment
Pre-service
notification
/ collection
Pre-service notification
/ collection
or capture
of authorized
payment
or capture
of authorized
payment
for for
deferred
charging
deferred
charging

Expanded
Self-Service
Options
Expanded
Self-Service
Options
enabling
lower
cost
to
collect,
enabling lower cost to collect,
easeease
of access
for for
patients
of access
patients
Sources:
Accenture
analysis,
Americas
Health
Insurance
PlansPlans
(AHIP),
Aon Aon
Hewitt,
Assistant
Secretary
for Planning
and and
Evaluation
(ASPE),
Centers
for Medicare
and and
Medicaid,
Sources:
Accenture
analysis,
Americas
Health
Insurance
(AHIP),
Hewitt,
Assistant
Secretary
for Planning
Evaluation
(ASPE),
Centers
for Medicare
Medicaid,
Congressional
Budget
Office,
Health
Affairs,
Instamed,
Kaiser
Family
Foundation,
Modern
Healthcare,
RAND,
Truven
Health
Analytics
Congressional
Budget
Office,
Health
Affairs,
Instamed,
Kaiser
Family
Foundation,
Modern
Healthcare,
RAND,
Truven
Health
Analytics

For more information:

Methodology

Sarah Sinha

Accenture analyzed insurance coverage status


and change in coverage using publicly available
data from the following sources: Congressional
Budget Office (CBO), Health Affairs and RAND
Corporation. To model the trends and actuarial
value in cost sharing, Accenture referenced
data from Assistant Secretary for Planning
and Evaluation (ASPE), Aon Hewitt, Americas
Health Insurance Plans, Centers for Medicaid
and Medicare Services, Instamed and the
Kaiser Family Foundation. To benchmark health
system financials, Accenture referred to national
average profiling and benchmarking from
Truven Health Analytics and Modern Healthcare.
Examples cited were based on a health system
with a national average payer mix and bad debt
experience in net annual revenues.

sarah.l.sinha@accenture.com

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@AccentureHealth

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