Rising Costs? Adopt Patient Friendly Billing

No matter how long a patient remains in the hospital – whether two days or two weeks – the cost might be high. According to a statistical brief from the Agency for Healthcare Research and Quality, the median cost of a hospital stay is $10,000. In fact, the expense is only going to continue to rise. The “2013 Acute Care Market Report” from the Health Industry Distributors Association found the average cost of a hospital stay has risen 90 percent since 2000. If the rate of growth continues at this speed and patient collections don’t improve, hospitals will be in hot water financially.

Hospitals already have trouble obtaining patient payments, and many are expecting to see the number of patients with high deductibles increase due to the Affordable Care Act. Hospitals are not going to be able to navigate these challenges successfully if they don’t have the proper medical billing plan in place.

The high cost of care
AHRQ researchers analyzed 2011 hospital stay costs data and separated the findings according to patient age, primary payer and major diagnostic category. The “Costs of Hospital Stays in the United States, 2011” report found accumulated hospital expense per stay increased at an annual growth rate of 2.8 percent between 1997 and 2011, and the combined inflation-adjusted costs for hospital stays rose every year by 3.6 percent during the time period. In total, hospital stays cost $387.3 billion in 2011.

People aged 65 to 84 accounted for the majority of hospital stays in 2011 at 27 percent, as well as the bulk of costs at 34 percent. The mean price of staying at a medical center for 65 to 84 year olds was $12,600. However, those 45 to 64 years of age were right behind, accounting for 25 percent of stays and 31 percent of expenses, with an average cost per stay at $12,500.

While Medicare, Medicaid and private insurance took the brunt of the cost, uninsured patients and out-of-pocket costs were high for patients in 2011. The uninsured were expected to pay an average of $8,300 that year, which is lower than the overall mean cost of care. Other payers were billed $10,700.

For many patients, having an unexpected illness or injury can be a big financial issue. According to Forbes, it is estimated that health care reform will end up increasing costs even more for patients. The Centers for Medicare and Medicaid Services expect an average family of four to pay between $650 and $1,000 more each year during the next decade for their medical care. And, don’t forget, health care costs have been rising on their own within the past decade without any help from health care reform.

The majority of patients cannot afford to pay their bills off right away, and are continually confused about the breakdown of their medical expenses. The New York Times reported patients are becoming increasingly dissatisfied with their medical bills.

“When I first saw the charge [for stitches], I said, ‘What could possibly have cost that much?'” Deepika Singh, a patient at a medical center in California and a mother of a toddler, told the Times. “[The hospital] billed for everything, every pill.”

Seeing that certain levels of care amount to a person’s annual salary or monthly paycheck can put a big damper on patient engagement. For example, the Times reported the price tag for an X-ray of heart arteries at California Pacific Medical Center is $32,901. Medication costs can also be staggering. According to the Times article, a single codeine pill through the California health facility costs $20, but a patient only has to pay about 50 cents for the same pill at a drug store.

When patients see specific costs outlined on their bills, they are not going to be loyal to the hospital and will try and compare care prices at other medical centers. Hospitals have high labor costs and need to remain price competitive to be able to boost care quality and complete improvements, yet health systems don’t need to follow traditional bill breakdowns.

Estimate the cost and provide clear bills
To prevent a financial disaster from brewing, hospitals must make it easier for patients to pay their bills on time. Cost estimation is a great start, especially for patients who think their insurers will foot most of the bill. The Times suggests the medical community’s lack of price transparency is going to hurt hospitals’ financial future if hospitals don’t take charge.

For patients, it is often not a high bill that causes dissatisfaction, but the fact that they aren’t told beforehand what the care is going to cost or are presented with a bill they can understand. Hospitals should show patients with how much they will be expected the pay before they even receive care, and then offer them a clear bill to keep their satisfaction levels high.