Industry Perspectives: Uncompensated Care — on the Rise Again

The American Hospital Association recently released the latest uncompensated care numbers, and the outlook isn’t promising. After remaining flat at $38.4 billion in 2016 and 2017, the uncompensated care rate jumped to $41.3 billion in 2018.1 This uptick, the second in three years, points to the importance of capturing every last dollar. As uninsured, underinsured, affordability and payer denials continue, this certainly is a pain point the industry needs to address to ensure earned revenue gets paid from all sources.

With this rise, comes questions:

• What’s causing the increase?
• What can the industry do to bring this number down?
• Can we expect improvements?

Before we get to solutions, let’s look at what’s driving the hike in uncompensated care. Some of the biggest contributors are related to:

Uninsured rate on the rise
The rate of those without insurance is on the same upward trend — it jumped to 13.7% in 2018 from 12.2% in 2017. That’s almost on par with the rate in 2014 (13.4).2 This rise can be attributed to a variety of factors, including higher insurance premiums, lack of access to coverage, such as an employer-sponsored plan and reduced enrollment periods for ACA exchanges and plans.

Shift in payment
Patients are paying more for care than ever before. This shift presents payment challenges to both patient and provider. Over the past 10 years, provider revenue from patients has increased from less than 10% to more than 30%. Per a recent TransUnion Healthcare analysis, in 2018, 59% of patients had an average out-of-pocket expense between $501 and $1,000, up dramatically from 39% in 2017. As patient responsibility grows, it’s no wonder it’s harder to collect on earned revenue.

Pharmaceutical and medical costs climbing
Costs aren’t just increasing for the patient’s portion of the bill. Drug prices and overall costs of medical treatment are also rising. In 2017, total spending on prescription drugs was $333 billion, up by more than 41% over a 10-year period ($236 billion in 2007).3 Healthcare costs are expected to grow by an average of 5.5% annually over next decade — from $3.5 trillion in 2017 to $6 trillion by 2027.4

Fluctuations in population⁵
The aging population is growing. This contributes to more costly and higher utilization of care. From the late 1960’s to date, life expectancy has increased almost 10 years (from 70 years old in 1986 to almost 79 in 2016.) Additionally, the aging population is expected to more than double the home care market (from $100 billion in 2016 to an estimated $225 billion by 2024). In the next two decades, it’s predicted the older generation will outnumber children — a first in U.S. history.

For more information on uncompensated care and how you can better manage it, download our insight guide or quick guide on specific solutions.

¹https://www.aha.org/fact-sheets/2020-01-06-fact-sheet-uncompensated-hospital-care-cost
²https://news.gallup.com/poll/246134/uninsured-rate-rises-four-year-high.aspx
³https://www.npr.org/sections/health-shots/2019/01/07/682986630/prescription-drug-costs-driven-by-manufacturer-price-hikes-not-innovation
⁴https://www.pgpf.org/blog/2019/05/healthcare-costs-for-americans-projected-to-grow-at-an-alarmingly-high-rate
⁵https://www.businessinsider.com/aging-population-healthcare