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February 24, 2016 at 07:33 AM
(Bloomberg) — A type of pain that hospitals thought they had relieved has come back with a vengeance: It’s called bad debt.
Hospitals have long struggled to collect bills when patients aren’t covered by insurance — creating delinquent accounts. The Patient Protection and Affordable Care Act (PPACA) was supposed to relieve some of that strain by helping pay for coverage for millions of Americans and expanding Medicaid in some states to cover the poor.
See also: 5 hot battles over the PPACA-free zone
Yet while millions of people have gained coverage since Obamacare became law in 2010, there’s also been an increase in insurance that comes with high-deductibles and cost-sharing. Under those plans, the first few thousand dollars of annual medical expenses come out of patients’ wallets. That’s money that hospitals like Childress Regional Medical Center in the Texas Panhandle region are unlikely to collect.
“It feels like a sucker punch,” said John Henderson, te nonprofit hospital’s chief executive. “When someone has a really high-deductible, effectively they’re still uninsured, and most people in Childress don’t have $5,000 lying around to pay their bills.”
See also: Why Bernie Sanders wants to know your health insurance deductible
The rate of uninsurance in the U.S. has fallen to 9.1 percent from 15.7 percent in 2009. Yet in the first nine months of 2015, about 36 percent of the U.S. insured were covered by high-deductible or consumer-directed health plans that can require considerable out-of-pocket payments, compared with about 25 percent in 2010, according to a U.S. Centers for Disease Control and Prevention (CDC) survey.
For-profit hospitals
Hospitals are feeling the pressure from those patients. Community Health Systems Inc. (NYSE:CYH) operates 195 hospitals in 29 states and is the U.S.’s second-biggest for-profit U.S. hospital chain. This month, it revised its fourth-quarter 2015 provision for bad debt up by $169 million — and said that 40 percent, or about $68 million of that amount, was from patients being unable to pay deductibles and co-payments. Patient bankruptcies also contributed, the company said. A Community Health spokeswoman didn’t respond to requests for comment.
“I’m surprised it’s not bigger,” Sheryl Skolnick, an analyst with Mizuho Securities USA who rates the stock underperform, said of Community’s bad-debt figure. “They need to fill the beds and collect the cash.”
HCA Holdings Inc. (NYSE:HCA), the biggest U.S. hospital company, also reported increasing rates of bad debt in the second and third quarters of 2015, although the chain attributed the trend to dropped insurance coverage, rather than unpaid bills from insured patients. Another major chain, Tenet Healthcare Corp. (NYSE:THC), reported fourth-quarter results Monday. Stocks of all three companies have struggled in the last year.
While higher out-of-pocket charges can lower what insurance costs up front, it means more costs for patients on the back end. Under individual Obamacare mid-level “silver” plans, the annual deductible was $2,556, and under less expensive, low-level “bronze” plans it was $5,328 in 2015, according to the Kaiser Family Foundation.
Outside of PPACA, deductibles are becoming more common, as well. Last year, 81 percent of coverage people got through work came with a deductible, up from 70 percent in 2010, according to Kaiser. The average deductible in a high-deductible, individual plan gained through work was $2,099 last year.
