Hospital finance leaders expect deteriorating payer mix, HFMA survey finds

• Hospitals expect their payer balance to shift more toward Medicaid and individually insured patients, according to a survey.
• One-third of hospitals said they are unprepared for price transparency requirements that start in January.
• One-fifth are examining a shift to variable costs, such as by outsourcing revenue cycle staff.

About 70% of hospital and health system finance leaders expect their shares of self-pay and Medicaid patients to increase and commercially insured patients to decrease over the coming 12 months, according to a new survey.

A Guidehouse Center for Health Insights analysis of an HFMA survey of more than 150 hospital and health system CFOs and revenue cycle executives examined a range of expectations about the next 12 months.

Findings included:

• 26%-27% expect their payer mix to stay the same for self-pay (individually insured), Medicaid and commercial health plans
• 6% expect self-pay to decrease as a share of payer mix
• 3% expect Medicaid to decrease as a share of payer mix
• 48% plan to continue remote working arrangements that were established for the pandemic
• 12% plan to return to pre-pandemic work arrangements

The financial effects on hospitals from the payer shift will stem from both Medicaid’s lower payment rates and the high out-of-pocket costs of individual-market plans, Tim Kinney, a partner at Guidehouse, said in an interview.

A recent Commonwealth Fund survey deemed 42% of adults with individual coverage underinsured, including those who purchased coverage in the Affordable Care Act marketplaces, where deductibles are as high as $8,150 in Silver-level plans.

“If they’re already struggling financially and [are] put into that market, a $2,500, a $5,000 or a $10,000 deductible most likely means they end up wholly or at least some portion in bad debt,” Kinney said about those with individual insurance.

Hospitals will need to make up the lost margin somewhere, which could mean pressing commercial insurers for more rate increases or shedding less profitable services, Kinney said.

Are hospitals ready for rate-posting requirements?

A looming requirement for hospitals to post online their individually negotiated health plan rates starting Jan. 1, 2021, may prove challenging. Survey findings about hospital preparedness included:

• 8.5% aren’t prepared at all
• 24.8% are somewhat unprepared
• 54.7% are somewhat prepared
• 12% are very prepared

“There was a lot of hope from large health systems and academic medical centers that Congress would push that back,” Kinney said. “From being involved in the conversations, I think it’s coming Jan. 1 and it’s here to stay.”

The release of the data will provide new insights for health plans and put pressure on hospital pricing, Kinney said.

Guidehouse is urging hospitals to be selective regarding the 230 “shoppable services” for which they opt to post prices under the requirement, while strategically protecting their position in their market.

Concern about the rate-posting requirement was seen in the leading obstacles to compliance, as identified in the survey:

• 38.3% cited concerns about risks of disclosure, including by health plans
•  26.1% cited lack of data infrastructure, and time constraints
• 24.3% cited lack of understanding of compliance requirements
• 7% said no obstacles are anticipated
• 4.3% cited other obstacles

RCM strategy changes under consideration

The pandemic has shuffled many hospitals’ strategies. And some revenue cycle management (RCM) responses have been well publicized, while others are emerging.

RCM strategy responses, according to the survey, have included:

• 92.4% are increasing their use of telehealth
• 87% are transitioning more RCM staff to remote
• 50.4% are increasing their focus on revenue integrity
• 22.1% are increasingly moving from fixed to variable costs
• 7.6% are implementing other responses

“The shift to home was probably already in motion, but for a lot of healthcare back-end and revenue cycle [operations], it was a big lift,” Kinney said. “They had to make sure they had the technology set up.”

A lower-profile trend identified by respondents was the shift to a variable cost structure. The pandemic-era revenue collapse led many hospitals to furlough or lay off back-office staff. That opened many leaders’ minds to the need for cost structures that are more flexible, Kinney said.

“You’ll see outsourcing or partnerships pick up more, so that they can scale up and down with the volume, or heaven forbid we have another dip due to the pandemic,” Kinney said. “That’s one that really surprised me [to see] kind of bubbling up.”