A Broken System
Who Can Fix the Health Care Billing and Collections System?
The underlying principle is simple: for every dollar a hospital spends providing care to patients, it needs at least one dollar of reimbursement to survive. The question of who should provide this compensation is much more complex—a dilemma requiring collaboration and more than a quick fix.

Federal law requires that hospitals set uniform prices for services, but government and private insurers are able to negotiate and pay lower rates. From Medicare and Medicaid, which make up 63.5 percent of Ohio hospitals’ reimbursement, hospitals must accept payment that is often less than what it costs them to provide care.

Care to Ohio’s uninsured population often translates into additional bad debt and lost reimbursement for hospitals, and hospitals also care for Ohioans at or below the federal poverty line free of charge. In 2003, hospitals received federal compensation for only about 24 percent of the $1.3 billion in total uncompensated care they provided.

To remain open, hospitals must fill the gaps left by shortfalls in reimbursement and charity expenses. They adjust their charges to end up with payments that cover the ever-increasing costs of providing services, maintaining facilities and improving capabilities to meet the needs of their communities. And while government and private insurers pay at or below costs, and often far below what the hospital charges, unfortunately those least able to pay sometimes are billed the full amount charged by the hospital.

What can government do?
Minimizing, streamlining and simplifying unnecessary regulations would allow hospitals to focus resources on what matters: patient care. Maintaining funding and eligibility for government insurance programs such as Medicare and Medicaid is crucial to the health of the nearly four million Ohioans who rely on those programs for care. Legislators also must allow hospitals to design financial assistance policies for the working poor and uninsured that fit their individual organizations and communities, without threat of mandated policies.

What can hospitals do?
Most Ohio hospitals have a charity care or discount policy, though the level of discount and qualifications may vary. Hospitals continue to review these policies and ensure four key components are as effective as possible: discounts, communication, financial counseling and compassionate collections. Hospitals tailor discount policies to best meet their communities’ needs within hospital resources. These policies apply uniformly to all patients, but hospitals work with patients individually to help them understand their bills, opportunities for payment plans, free care and discounts and options for help from government programs such as Medicare and Medicaid. And in emergency situations, hospitals provide care first and determine later whether and how the patient can pay.

Hospitals continue to seek out innovative ways to educate patients on billing, discount and collection policies, adding to current methods such as posting literature in multiple languages, including notices in mailed correspondence and talking to patients during their hospital stay. While financial counseling often eliminates the need to employ outside collections agencies, hospitals expect these agencies to extend the same compassion and core values shown by hospital staff while the patient is in their care.

What can employers do?
Due to their age or income level, more than 1.3 million Ohioans do not qualify for government-sponsored insurance and can’t afford to buy private coverage to help offset their health care costs. Fifty six percent work full-time jobs, but their employers do not offer health benefits. Though swelling insurance premiums may cause employers to think twice about offering health care coverage, this insurance is a vital safety net for employees. Employers faced with difficult decisions on health care coverage should explore other options for maintaining some form of insurance for employees—possibly through higher deductible options or partnerships with other businesses.

What can patients do?
Patients worried about their ability to pay should ask about hospital financial assistance policies, payment plan options and potential sources of health care coverage—assisting the hospital in seeking alternate ways to cover the cost of their care. By providing financial records and working with hospitals’ financial advisors, patients can take full advantage of discount opportunities and establish a payment plan that fits their financial situation.

A well-designed health care payment system should balance the needs, responsibilities and limitations of the hospital with the patients it serves. Working together, hospitals, government, employers and patients can design a more fair, efficient and rational health care payment system.

This article is the second in a two-part Healthbeat series on hospital charity care and billing and collection practices. View the October Healthbeat.