Straight Talk About Bad Debt

Philip Betbeze, Senior Editor, Finance , October 15, 2007

I saw an interesting panel discussion at the Healthcare Financial Management Association's Annual National Institute this summer that featured some refreshingly straight talk from three individuals who are often operating on opposite sides of the healthcare cost debate.

This particular session focused on consumer-directed healthcare and its effects on health plans and hospitals, as well as how banks might help bridge the gap between two sectors of healthcare that are highly suspicious of each other's motives. Unquestionably, consumer-directed healthcare is becoming more prevalent. And surprisingly, there was little disagreement in this group about why: employer cost-shifting.

"When we deal with our plan sponsors, they are definitely sharing more costs with their employees. They feel like they have to in order to get their employees more involved," says David Josephs, senior vice president of consumer-directed healthcare at JPMorgan Chase. But never mind shifting risk to employees, says Bob Barbour, vice president of finance at Montefiore Medical Center in the Bronx, NY. Providers are worried that this risk-shifting strategy will fall largely on their shoulders--no matter how good a job they do in providing quality care--as more patients fail to pay their bills out of underfunded HSA accounts. Barbour speaks from a financial high ground when he worries about the impact of high deductibles that often come with consumer-directed plans. "I'm concerned about the real-world impact of all this experimentation. The single lowest priority we have as a culture is paying medical bills. Why will people who won't pay us $250 deductibles pay us thousands?"

Good question. I don't know if anyone has a definitive answer yet, but there is some hope, because at least three of the top leaders in their subsector of healthcare realize what will kill it more quickly than anything, and that's shifting risk back onto the providers. Jeff Hankoff, MD, who is president of CIGNA HealthCare in Glendale, CA, says his company is testing a new card-based system for its members that is being rolled out in limited markets right now. CIGNA's patients present the card upon registration, and once a CPT code is requested, CIGNA's servers will immediately provide information to the provider about what the member's responsibility is and what the provider should expect to be paid at point of service. He expects to see similar products from other health plans--and soon. As a doctor who spent 20 years in private practice, he says without hyperbole that shifting risk back onto providers will not only kill consumer-directed care, but the healthcare system as we know it.

Regardless of the level of success that products like CIGNA's smart card achieve in helping reduce bad debt, Barbour is determined not to let risk-shifting eat away his hospital's bottom line. "We have this potential for a tremendous increase in bad debt," he worries. But he's not out of strategies to deal with it; Montefiore is working on powerful number-crunching tools to determine where bad debt originates. And Barbour is determined to hold payers' feet to the fire. "We've already put our payers on notice that if we can confirm that the bad debt is coming from their patients, we'll send them a bill."

Score one for the providers.

Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at

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