Learn How Much Uncompensated Care Can Cost Your Hospital

The healthcare landscape in the United States has seen significant changes over the years, but one thing has remained consistent: the increasingly high cost of uncompensated care. 

According to the American Hospital Association (AHA), hospitals across the United States accumulated nearly $745 billion in uncompensated care costs between 2000 and 2022. These costs expand among small practices, standalone hospitals and health systems alike.

‍Uncompensated care has costs that go far beyond financial. Understanding why uncompensated care occurs is key to knowing how to mitigate it. 

Why Does Uncompensated Care Occur in Hospitals

Uncompensated care arises when hospitals provide services with the expectation of reimbursement but do not receive payment. This issue can occur when patients are unable or unwilling to pay. 

Several challenges contribute to the growth of uncompensated care, including:

• Churn in patient eligibility
• Medicaid redetermination
• Insurance denials
• Lack of appropriate tools for eligibility verification
• Insurance coverage gaps

The dynamic nature of these factors makes it increasingly difficult for hospitals to manage patient eligibility effectively, resulting in higher uncompensated care costs.

The Burden of Uncompensated Care on Hospitals

The financial burden of uncompensated care has wide-reaching implications for hospitals. The lost revenue translates to fewer resources, leading to financial constraints and cutbacks on essential services. Studies show a direct correlation between a hospital's financial health and patient outcomes, highlighting the significant impact of uncompensated care on the overall quality of healthcare provided.

The Financial Impact of Uncompensated Care 

According to a survey conducted by Definitive Healthcare, covering 3,855 U.S. hospitals from 2015 to 2018, large hospitals with over 250 beds experienced a surge in their uncompensated and unreimbursed costs, reaching $39.7 million in 2018 compared to $33.2 million in 2015, with an average annual growth rate of 6.2%.

In contrast, smaller hospitals faced an even more challenging situation. Those with fewer than 25 beds saw their average costs escalate to $2.3 million in 2018, up from $1.8 million in 2015, growing at an average annual rate of 8.5%.

Hospitals with more than 250 beds had proportionally higher uncompensated care costs. For example, John Peter Smith Hospital in Fort Worth, Texas, racked up $309 million, and Yale New Haven Hospital in Connecticut counted $411 million. Imagine the resources and patient care a hospital could provide with $411 million extra in the budget!

Evidence of financial strain also holds up at the state level, not just the federal level. In the same year Definitive conducted its study, The Healthy Michigan Plan surveyed 85 hospitals within the state, with each reporting an average of $4.6 million in uncompensated care costs. From 2017 to 2018, uncompensated care costs increased from 2.0% to 2.5% in the context of total hospital expenses. 

Uncompensated Care’s Toll & Patients, Staff, & Healthcare Quality

The burden of uncompensated care extends beyond financial implications, affecting patients, hospital staff and overall healthcare quality. Unsettled patient accounts require additional work for staff, leading to increased stress and reduced productivity. Stressed-out teams tend to have a high turnover rate, racking up further costs in employee onboarding and training.

Higher uncompensated care costs also correlate with lower patient experience scores, indicating a negative impact on the quality of care provided. Looming medical bills can affect patient health and negatively impact care outcomes by casting a shadow over time that should be spent focused on healing.

Reduce Uncompensated Care with Office Ally’s Healthcare Solutions 

Hospitals should mitigate uncompensated care whenever possible. Providers of all types and sizes can recover revenue in 2024 with a better understanding of uncompensated care. Ask yourself: Are you satisfied with your recoveries in the self-pay/uncompensated care area? Are you confident you are getting the most out of your existing workflow or vendor? 

With continued vendor consolidation and the loss of collective knowledge, your Insurance Discovery process and technology must continue to evolve. New points of failure surface regularly, causing revenue loss for your organization. Not all services are created equal and products that historically were high-performing are underperforming today.

Hospitals are encouraged to assess their current recovery strategies and consider innovative revenue recovery solutions in the self-pay/uncompensated care area. Office Ally’s Healthcare Solutions offers a comprehensive approach to address these challenges.

Insurance Discovery & Revenue Recovery Solutions

Inaccurate patient insurance coverage is the number one reason claims are denied or rejected. To combat this, Office Ally provides software tools to improve in-house revenue recovery without resource constraints. Insurance Discovery is an automated process that involves conducting an exhaustive check of government and commercial payors, identifying Medicare, Medicaid and commercial claims eligibility for patients financially triaged as self-pay.

With proprietary algorithms and extensive experience, Office Ally helps identify valid and billable insurance coverage that may have been written off as self-pay, charity, or bad debt. We currently process half a billion eligibility transactions yearly and have one of the largest eligibility verification footprints in the United States. We consistently find revenue opportunities, even when placed behind other vendors. 

To prove Insurance Discovery can make a major difference in your organization’s revenue recovery services, we offer a free assessment using standard file extracts. This risk-free assessment requires no technical resources from your organization. Charges are only incurred if Office Ally recovers revenue that yields higher returns for your organization. 

Case Study for Uncompensated Care Costs in Hospitals

Background:

‍A large health system on the East Coast brought in OA to perform a secondary audit of their current vendor’s performance. The system, comprised of 14 locations, believed the current vendor was under performing.

Challenges:

• The hospital’s patient population shifted, and it started treating more self-pay accounts due to expansion.
• The existing vendor’s algorithms only verified eligible individuals. In contrast, OA’s product also verifies eligible claims/visits based on DOS.
• Due to this difference, billing the current vendor’s discoveries demanded more time and resources from the hospital.

The health system selected Office Ally due to our deep and thorough understanding of HIPAA and CMS regulations, which are best for maintaining compliance. Our proprietary algorithms, speed, efficiency and accuracy were also considered, in addition to our customizable user experience, reporting and file transfer operations.

Results:

The hospital used Office Ally’s Insurance Discovery to conduct a comprehensive review of over 87,000 or 100% of the facility’s self-pay accounts going back one year. 21.2% of those accounts already worked by another vendor had “ACTIVE” coverage on the date of service and were left on the table as a loss to the provider. The return for the facility was significant and swift. 

• 87,000 self-pay accounts reviewed
• 21.2% of claims over one year were found billable with active coverage on the date of service
• 10-30% average in newly identified eligible claims historically
• $3.14 Million in payments recouped by Office Ally

A report with eligible claims data was provided to the hospital to bill upon execution of the agreement and the assessment was completed within ten days of receiving the target data file.

The rising tide of uncompensated care poses a significant challenge to hospitals, impacting both their financial health and the quality of care provided. Understanding the root causes and financial implications is critical. Implementing effective solutions, such as Office Ally’s Healthcare Solutions, is crucial for hospitals seeking to recover revenue and optimize their revenue recovery strategies.

Whether you’re actively looking for a new insurance discovery tool or are simply curious to see if there’s any revenue out there that you could recover, our free Insurance Discovery assessment is for you. Contact Office Ally to take the next step.