Over 40% of Hospitals Seeing Bad Debt, Uncompensated Care Increase

A new survey of hospital executives and finance leaders has found that bad debt, uncompensated care, and self-pay patients have all gone up since the start of the pandemic, adding to other revenue and clinical challenges.

The survey conducted by consulting firm Kaufman Hall in August 2020 showed that more than 40 percent of respondents have seen increases in bad debt and uncompensated care (48 percent), the percentage of uninsured or self-pay patients (44 percent), and the percentage of Medicaid patients (41 percent).

Meanwhile, about 38 percent of hospital leaders also reported a lower percentage of privately insured patients who typically bring in higher revenue than public insured patients.

The shift in hospital payer mix is only adding to the mounting revenue and clinical challenges hospitals have been facing since the start of the year. For example, one-third of respondents said operating margin declines have been in excess of 100 percent in the second quarter of 2020 compared to the same period the previous year.

More than one in five hospital executives also reported expense increases of more than 50 percent, with the greatest percentage increase in expenses being for personal protective equipment (52 percent of respondents) and nursing staff labor (34 percent of respondents).

Additionally, clinical volume recovery continues to be somewhat of a challenge in areas where patients can delay care, such as orthopedics and pediatrics.

These challenges were brought on by the COVID-19 pandemic but are likely to persist well beyond the public health emergency. Most hospital executives in the survey agreed that COVID-19 would last through at least the summer of 2021 and are planning on reduced volumes going forward.

And without an effective vaccine or treatment for the virus, nearly three-quarters of hospital leaders are either moderately (52 percent) or extremely (22 percent) concerned about the financial viability of their organizations.

“The challenges brought on by the COVID-19 pandemic have affected nearly every aspect of hospital financial and clinical operations,” said Lance Robinson, a managing director at Kaufman Hall. “Organizations have responded to the challenge by adjusting their operations and strengthening important community relationships.”

Telehealth adoption is one of those positive impacts the pandemic has had on clinical operations. In the survey, more than half of executives said they have seen the number of telehealth visits increase by more than 100 percent since the start of the pandemic.

Continuing telehealth use after the pandemic will hinge on payment parity between in-person and telehealth visits, access to high-speed internet, and sufficient consumer demand, executives suggested. However, 30 percent reported that they do not face any of the common barriers to telehealth adoption and some indicated in interviews that they are now finding the right balance of in-person and virtual care.

Other positive impacts of the pandemic cited in interviews with hospital executives included an enhanced sense of “systemness,” a newfound nimbleness in adapting to rapid change, a realized return on investment in analytics, and a new look at different payment models, including capitated or global payment structures.

But fostering community relationships will be especially important as hospitals navigate payer mix changes that favor uninsured and self-pay patients.

The uninsured population is on course to increase by 10 percent through the end of 2020 as working-age adults continue to face job and coverage disruptions because of the pandemic, Washington, DC-based think tank Urban Institute recently projected.

Relationships with schools, local and state governments, and community organizations can help to keep communities healthy by addressing social determinants of health, which has been linked to decreased emergency department utilization.

“Hospitals and health systems face multiple challenges in the coming months and years,” Kaufman Hall stated in the report. “Their ability to leverage the positive impacts of the pandemic as they work to mitigate its negative impacts will have a significant effect on their long-term health and the health of the communities they serve.”