A new survey reveals that the current recession has negatively impacted the balance sheets of healthcare organizations more than the 2001 recession, with the rise in patient bad debt doing much of the damage.
The Chicago-based credit agency TransUnion surveyed 46 healthcare organizations in all 50 states. Almost 75 percent said the current recession had done more damage than the 2001 downturn.
According to the survey, 96 percent of respondents said their healthcare organization is experiencing a rise in the uninsured/underinsured patient population. More than 41 percent of healthcare administrators said this increase is the most important issue facing their organization.
“Our survey reinforced the fact that hospitals and other healthcare-related offices are in search of ways to manage their rising debt caused by the increasing uninsured population, changing healthcare plans and the realities of greater out-of-pocket payment liabilities for patients,” said Milton Silva-Craig, executive vice president of TransUnion’s healthcare business unit.
Other issues ranked as most important include an inefficient collection process at the front-end and back-end of the revenue cycle (17 percent), a multitude of financial assistance programs and rules (15 percent), higher co-pays and deductibles (13 percent) and more regulatory scrutiny (13 percent).
According to Silva-Craig, the weighted average of a consumer becoming 90 or more days delinquent on any credit obligation is at an all-time high in the United States. TransUnion’s Credit Risk Index, a statistic developed to measure the changes in consumer credit risk, has elevated more than twice as much in the current recession as compared to 2001.
“What this means for healthcare organizations is that it is more important than ever to develop strategies to effectively manage the collection of receivables from self-pay patients,” said Silva-Craig.
The Credit Risk Index increased from 118.38 at the end of 2007 (the beginning of the latest recession) to 129.67 at the conclusion of 2009 (the latest data available) – a 9.54 percent increase.
“It is important to understand that consumers are more than 18 percent riskier today than they were at the beginning of the 2001 recession, a condition that is filtering down into many different industries, including healthcare,” said Chet Wiermanski, global chief scientist at TransUnion.
The survey also revealed that 83 percent of healthcare organizations have seen self-pay patient populations increase in the last 12 months.
“The distressed economy and years of rising premium costs have undoubtedly contributed to the growing uninsured population,” said Robert LeWinter, vice president of regional claims recovery at the North Shore Long Island Jewish Health System in New York. “Fiscal policies now are a balancing act between cash maximization and bad debt reduction.”
Approximately two-thirds (65 percent) of survey respondents indicated their healthcare organization has a bad debt percentage of between 1 percent and 5 percent. About 23 percent indicated they have bad debt percentages between 5.1 percent and 10 percent.
Decreasing bad debt was found to be the No. 1 objective by survey respondents. Nearly 35 percent of respondents rate this as their most important objective, followed by increasing collections at the time of service and post discharge (26 percent) and improving operational efficiencies (20 percent).