Know Your Data to Tackle Uncompensated Care

By Cory Herendeen and Daniel Wallace
| 11/3/2015
The move by millions of Americans from uninsured to insured status and the expansion of Medicaid in 30 states plus Washington, D.C., since the passage of the Patient Protection and Affordable Care Act have significantly altered the sources of losses due to uncompensated care (bad debt and charity) for healthcare organizations.


80407780-250x167In general, financial risk is shifting from uninsured self-pay patients to insured self-pay patients, many of whom have enrolled in high-deductible health plans (HDHPs).

Historically, almost all uncompensated care has come from the uninsured self-pay population. According to the most recent benchmarking study from Crowe, while this population continues to account for the majority of uncompensated care in states that have not expanded Medicaid (71.7 percent), copays and deductibles from patients with insurance coverage are now the source for the majority of uncompensated care dollars in Medicaid expansion states (56.8 percent). The study also shows a precipitous decline in uninsured self-pay uncompensated care from the first quarter of 2014 through the first quarter of 2015 in Medicaid expansion states; this trend has continued into the second quarter of 2015. By contrast, states that have not expanded Medicaid services have seen a much smaller drop in uncompensated care from the uninsured self-pay population.

Understand Your Patient Populations

In light of the changing healthcare environment, providers need to re-examine their strategies and tactics for addressing uncompensated care with an eye on their organization’s unique circumstances. Doing so involves analyzing their data to understand the makeup of their patient populations and the sources and demographics of uncompensated care at their facilities. What proportion of uncompensated care is coming from uninsured self-pay versus insured patients (copays and deductibles)? Are uncompensated care dollars primarily originating in emergency departments, from outpatient surgeries, or from inpatient care?

A close look at the data is crucial to identify the opportunities for reducing losses and to determine where to allocate efforts and resources. The results of a polling question at a recent Crowe webinar suggest that providers still have some work to do in this regard. When asked, “In which patient type has your organization seen the largest shift in uncompensated care?” 39 percent of respondents reported that they were unsure.

Organizations that do not have a handle on their data are flying blind and will not be able to zero in on their risks or determine how or where to focus their efforts and alter their strategies. For example, if visits to the emergency room make up the chief source of uncompensated care at an institution, financial counselors can be deployed to initiate contact, perhaps at a checkout desk, before patients leave the facility. Specific efforts will vary depending on the sources of uncompensated care dollars.

Find Your Peer Group

In order to accurately assess performance, organizations should benchmark their key performance indicators (KPIs) against an appropriate peer group of hospitals and health systems to obtain an apples-to-apples comparison. For example, organizations in Medicaid expansion states should benchmark uncompensated care KPIs against providers in their state and other Medicaid expansion states. The same holds true for the self-pay payer mix. An organization with a self-pay payer mix of 10 percent would not gain meaningful business intelligence by benchmarking uncompensated care KPIs against an organization that has a self-pay payer mix of 1 percent.

Increasing Financial Risk From HDHPs

Based on a Crowe analysis of data from 650 facilities, only 16 percent of providers have created unique HDHP codes, and less than half of those organizations that have created unique plan codes have material volumes in these codes, indicating a lack of effective training of registration staff. As payers shift more financial responsibility to patients with HDHPs, it is critical for providers to be able to quantify the impact of this shift on their organization, down to the insurance plan code level.

Crowe currently is performing root cause analyses for a number of hospitals through the account-level linking of 835 electronic payer remittance patient responsibility data with patient accounting system payment data. This allows the comparison of patient responsibility amounts and collection rates across payers and service locations and enables providers to evaluate policies and compare payer performance. For example, understanding the average patient responsibility amount for an emergency visit can help in evaluating the amount requested for patient deposits. Having data points on the variability of patient responsibility amounts among managed care payers and the resulting collection and uncompensated care rates for services, particularly outpatient surgeries, can be powerful during contract negotiations with payers.


It is important for providers to evaluate how their uncompensated care sources are changing in order to effectively adjust financial counseling efforts as well as financial assistance, prompt pay, and self-pay discount policies. With the dramatic rise in HDHPs across the industry in both Medicaid expansion and nonexpansion states, providers should analyze all available data, including 835 electronic payer remittance, and benchmark KPIs against similar organizations to evaluate performance and identify strategies to improve financial results.





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