Hospitals increasingly requiring upfront payment for services to reduce bad debt

The Wall Street Journal on Monday examined how some hospitals are "adopting a policy to improve their finances: making medical care contingent on upfront payments."

According to the American Hospital Association, uncompensated care nationwide increased by 44% to $31.2 billion in 2006 from $21.6 billion in 2000. The "bad debt is driven by a large number of Americans who are uninsured or who don't have enough insurance to cover medical costs if catastrophe strikes," the Journal reports. Federal law mandates that hospitals provide emergency care, but the law does not cover conditions that are not immediately life-threatening, such as cancer. Even among people with adequate coverage, "deductibles and copayments are growing so big that insured patients also have trouble paying hospitals," according to the Journal.

Richard Umbdenstock, president of AHA, said that leaving bad debt unchecked could leave hospitals in financial ruin and hinder their ability to provide care. He said that hospitals prefer to talk about payment up front because "[a]fter, when it's an ugly surprise or becomes contentious, it doesn't work for anybody."

The Journal reports, "While the practice has received little notice, some patient advocates and health care experts find it harder to justify at nonprofit hospitals, given their benevolent mission and improving financial fortunes." Otis Brawley, chief medical officer at the American Cancer Society, said, "My greatest concern is that there are substantial numbers of people who need cancer care" and do not receive it, "usually for financial reasons."

The Journal profiled Lisa Kelly, who was diagnosed with leukemia in late 2006 and was asked to pay $105,000 up front for treatment at M.D. Anderson Cancer Center, which would not accept her limited-benefits insurance (Martinez, Wall Street Journal, 4/28).