Recent data from AHIP and CMS indicates that aggressive historical growth of high deductible health plans will be exacerbated by the Affordable Care Act. Author Nicholas Newsad translates these effects on surgery centers and patients in his books The Medical Bill Survival Guide and Medical Bill Help.
According to the American Health Insurance Plans trade association, approximately 5.7 percent of the 200 million "commercial insurance" patients have a deductible of $1,200 or more.[1] Enrollment in high-deductible health plans has increased over tenfold in the past six years, despite the fact that the threshold for what defines a high deductible plan has increased substantially during the same period. The current threshold for what the IRS considers a HDHP is 20 percent higher than it was in 2005 when the threshold was $1,000.
HDHP Data Source: AHIP. www.ahip.org/content/pressrelease.aspx?docid=33714
ACA Data Source: CMS. www1.cms.gov/NationalHealthExpendData/Downloads/NHEProjections2009to2019.pdf
Under the current trends, the HDHP/HSA threshold will be $1,400 in 2017 and nearly 11 percent of commercial insurance patients will have a deductible at this level or higher. This "organic" trending does not take into account the 15.8 million federally subsidized "individual" commercial insurance policies that will become available in 2014 under the Affordable Care Act. The number of HDHP patients could easily exceed 30 million in the next six years.
Providers of elective medical services like ambulatory surgery centers and diagnostic imaging centers will be directly impacted by this HDHP shift in several respects:
1. Pricing transparency. Insurance carriers (or third parties) will be pressured to make provider pricing comparisons available to high deductible patients. HDHPs have been very effective in curbing medical utilization thus far, but if these trends continue, the increased cost-shifting of medical costs to consumers will create a whole new market for consumer price shopping information.
Most surgery centers have already experienced patient "price shopping" wherein a patient who is not scheduled for a case calls to get a quote or estimate of his or her out-of-pocket costs. These quotes have to essentially go through the "benefit verification" process for each prospective patient's specific procedure and his or her specific insurance coverage and benefits. While the surgery "price shopping" process is very time consuming for patients and ASCs alike, recall that the primary purpose of high deductibles is to engage patients to be more conscious consumers (and it works). It is only a matter of time before patients and their employers demand more pricing transparency from their insurance carriers and make "price shopping" easier.
2. Financial class and payor mix analysis. Most ASC billing systems roll-up patient responsibilities into the "primary payor" when summarizing A/R aging and collections. However, with high deductibles representing the first $1,200 of payments, and additional patient coinsurance also due, it is becoming more common for insured patients to pay the majority of their own account balances. As these trends continue, ASCs may consider running collection reports by "current payor" instead of "primary payor" or creating separate patient responsibility financial classes to carve out the ever increasing proportion of HDHPs.
3. Managed care contracting. Thoughtful consideration should be given to managed care contracting during the next six years. There may come a day in the not-too-distant future when ASCs have to compete with each other on pricing. Consumers may purchase name brand cereal or laundry detergent for a few extra dollars, but it remains to be seen what sort of pricing premiums they are willing to pay "name brand" surgical facilities. Most specialty surgical hospitals and acute care hospitals will be at a significant disadvantage if their markets become saturated with employers electing HDHPs or a high-proportion of government-subsidized "individual" policy holders. Competitively priced ASCs could compete very well in this environment.
ASC management and owners should consider their capitalization of major fixed assets as part of their overall cost and pricing strategies. Paying cash for a new microscope or C-arm may mean a lower distribution this year, but 3-5 years from now, your organization will be in a financially stronger position to compete.
Conclusion
ASCs can expect pricing pressure from both government and commercial revenue sources as employers and insurance carriers continue to shift medical costs to their employees. ASCs should examine how much of their commercial book of business is actually coming from high deductible patients and posture their organizations now for an increasingly competitive pricing environment.
Nicholas Newsad, MHSA, iis the author of "The Medical Bill Survival Guide" and "Medical Bill Help." His books are available from Amazon.com and all major book retailers.
[1] AHIP. http://www.ahip.org/content/pressrelease.aspx?docid=33714