Westmoreland County’s Excela Health rethinks patient debts
Hospitals and patients encounter a common problem: rising medical debt.
There is a solution that could help both. Hospitals are using companies that allow patients to extend payments for as long as two years. These companies avoid rules that restrict hospital repayment plans to four months.
The longer payment plans come into play as patients struggle with bigger bills for hospital care because companies are shifting more of the financial burden for health insurance to employees through plans with higher deductibles and co-payments.
Hospitals could end up swallowing the costs if patients can’t afford the higher out-of-pocket expenses, adding to the financial pressure of mounting bad debt and lower payments from the government and private insurers.
Excela Health, a nonprofit operator of three hospitals in Westmoreland County, is among the first to offer the extended repayment service in Western Pennsylvania. It is working with Portland, Ore.-based CarePayment, a financial services company that focuses on the health care industry.
Medical-debt companies have been criticized for aggressive collection tactics, but the service offered by CarePayment is different.
“Complaints were mounting due to the negative connotation of using a collection agency to handle these amounts,” said Joyce Noel, Excela’s director of revenue cycle. “We knew we needed to find a better way to assist our patients in handling these financial responsibilities in a patient-friendly manner.”
CarePayment says it takes a different approach. “We don’t report to the credit bureaus,” CEO Craig Hodges said. “We don’t make offensive collection calls.” And he said the company doesn’t charge hospital patients interest under the payment plans, which are optional.
An estimated one in five American adults will struggle to pay medical bills this year, according to a study released by NerdWallet.com, a personal finance website. The study looked at government and private data for its estimates.
Inability to pay for costly medical procedures was expected to lead 1.7 million households to declare bankruptcy this year, NerdWallet said.
Bad debt and other uncompensated care at hospitals are rising. The Hospital Council of Western Pennsylvania, a Warrendale trade association, said hospitals in the region provided $1.08 billion in uncompensated care in the fiscal year ended June 30, or 7 percent more than the previous year.
“A large and growing portion of that is for patients that have insurance … but they don’t have the wherewithal to fund that,” said Denis Lukes, the council’s chief financial officer.
“Some of them carry really high deductibles,” he said. “So you may have insurance, but coverage may not kick in for quite some time.”
Excela reported bad debt of $26.4 million for its fiscal year ended June 30, down from $31.1 million the previous year.
Hodges said the growing prevalence of higher deductibles is driving growth of his business.
High-deductible plans accounted for 20 percent of workplace health coverage this year, up from 4 percent in 2006, according to the Kaiser Family Foundation, a California nonprofit research organization. The average annual deductible was $1,135 this year, up from $826 in 2009, the foundation said.
About 130 hospitals and large doctor practices nationwide contracted with CarePayment at the beginning of this year. As of this month, 480 facilities were using the service, and Hodges predicted the company’s revenue will more than double next year.
CarePayment pays the hospital the amount the patient owes minus a fee. Hodges declined to disclose the fee. If the patient doesn’t pay, the account is turned back over to the hospital, which refunds CarePayment the unpaid amount. The hospital then can choose to hire a collection agency to recover the unpaid balance.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or [email protected].