A spike in the amount of unpaid patient bills over the past year could have a serious impact on the bottom line of UK HealthCare if the upturn becomes a trend, according to hospital officials.
Over seven months ending Jan. 1, UK HealthCare amassed $45 million in bad debt, a 49 percent increase over the same period last year and $13 million more than anticipated. Officials had expected about a 15 percent increase, or about $4 million.
The percentage of UK HealthCare's total billing that went unpaid was 12.9, up from an average of 12.4 percent over the past three years and more than double the national average of 6 percent in 2009.
"The fact that has happened basically has eroded all of the positive things that we have done to be more cost efficient," said Sergio Melgar, senior vice president for health affairs and chief financial officer. "If the trend holds up we have to begin to look at ways to mitigate this or it will start impacting other decisions that we make."
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"It's too soon to say how it is going to settle out," he said.
It's not that more patients are unable to pay, it's that those who can't pay are having larger average bills, Melgar said.
UK HealthCare, which includes University of Kentucky Chandler Hospital, UK Good Samaritan Hospital, Kentucky Children's Hospital, Kentucky Clinic, and all of UK's clinics, has made much lately of its push to attract patients with complicated medical issues from across the state and region.
Melgar said he doesn't think the spike in bad debt is related to UK's push to attract the most complicated — and potentially expensive — patients.
While $13 million may seem like a big number, he said, it is a small portion of the overall hospital budget of $1.1 billion. When you are working with such large numbers, an increase of one percentage point can make a multi-million-dollar difference, he said.
Melgar said it's really too soon to tell if this is a trend or a fluke. The increase could be a result of a random number of high-dollar patients defaulting on some portion of their debt at the same time, he said.
Bad debt is increasing across the country but at a much smaller rate, said Caroline Steinberg, vice president of trends analysis at the American Hospital Association.
Bad debt at U.S. hospitals jumped 8 percent to $39 billion between 2008 and 2009, the most recent period for which data is available. In that same time period, the average percentage of billing that went unpaid rose 0.2 percentage points to 6 percent.
Much of the problem can be tied to the lingering impacts of the recession as more people have lost jobs, she said.
And, as at UK, hospitals across the country are seeing more patients who have insurance but still can't pay their bills.
Melgar said some hospitals are dealing with rising bad debts by turning patients away. Even some non-profit hospitals are going that route, putting their tax-exempt status into question.
UK would not consider that option, he said.
"UK doesn't have an option nor does it have that as a consideration," he said.
Steinberg said she's unaware of any public hospital systematically turning away patients. There are, however, a growing number of physician-owned hospitals that are designed without an emergency room to avoid having to take uninsured emergency patients, as federal law requires.
Hospitals are cutting administrative costs, delaying capital investments, even cutting services such as psychiatric care and substance abuse treatment, she said.
Melgar said UK's overall bad debt is higher than the national average because it serves a high percentage of poor, uninsured patients and is a trauma center where the sickest of the sick are provided care.
Bad debt will continue to be a challenge for the next few years, he said.
"With health care reform it's very difficult to project how people will be covered," he said.
Ultimately, Steinberg said, bad debt could impact everyone. The costs of bad debt eventually get covered by increasing payments from private insurance.
"At the end of the day," she said, "the hospital has to make payroll and at least break even."