Rising out-of-pocket cost of having a baby can impact hospital revenue and reputation

• New moms in 2015 spent an average of $4,500 out of pocket (OOP) to give birth, nearly double what new moms spent in 2007, according to a CBS News article.
• The growth rate in OOP is three times the rate of inflation, and the $4,500 cost is more than what the average full-time worker in the U.S. makes per month, according to the CBS report.
• According to the Kaiser Family Foundation, in 2013, most U.S. households did not have the liquid savings to cover the average cost of a delivery.
• Hospitals can turn to HFMA for resources, such as its Patient Financial Communications Best Practices to help them ensure a good financial experience for patients.

CBS News is reporting that in 2015 new moms spent an average of $4,500 out of pocket (OOP) to give birth. This is an increase of almost 50% from 2007 when an average new mom paid just over $3,000. The growth rate in OOP costs is three times the rate of inflation. It’s also more than what the average full-time worker in the U.S. makes per month. What drove the increase in OOP was not the cost of care, but an increase in cost sharing. The typical deductible during that period increased from $1,500 to $2,500 while co-insurance increased by $300.

Takeaway

So what should be a time of joy could turn into a time of financial stress for a family that’s probably already had its stress increase as a result of sleep deprivation and a new routine. In 2013, roughly the same time frame for this University of Michigan data, most households, according to the Kaiser Family Foundation, didn’t have the liquid savings to cover the average cost of a delivery.  Some 65% of households had incomes of less than 400% of the Federal Poverty Level. While economic fortunes have improved for many since then, my guess is household liquid savings rates aren’t that much better today.

Labor and delivery is a high-volume service line so there’s no doubt the increase in related bad debt negatively impacts hospital finances. And for many families who aren’t aware of their responsibility before they get the bill, it has a negative impact on their experience of care.

While this isn’t necessarily a problem that hospitals’ created (benefit design is on the employer, and where there are insurance product options — PPO vs. HDHP — it’s also an employee choice), it clearly has a negative impact on both a hospital’s financial performance and its perception in the community. So it behooves hospitals to proactively solve this problem as best they can even though they can’t get at the root cause of the issue of cost sharing for a common service that has rapidly outpaced employee earnings.

Resources to help hospitals get in front of payment and negative perception issues

HFMA brought together a cross-industry stakeholder group to create its Patient Financial Communications Best Practices (PFC) to help hospitals ensure a good financial experience for patients.

Given that many expecting mothers choose the hospital where they’re going to deliver, there should be plenty of opportunities to engage them in a discussion about the related cost sharing. Beyond helping expecting families budget for this life-changing event, these discussions can identify in advance whether or not they are eligible for financial assistance, and if not, help set up a payment plan which can reduce the financial stress that families feel. Beyond their application to a specific service, the PFC Best Practices are a foundational element in HFMA’s recently released self-assessment and resource, titled the Consumerism Maturity Model, which was developed to guide hospitals and health systems in efforts to improve their patients’ financial experience.