New Health Plans Could Cut Hospital Debt

A universal health coverage plan that mandated coverage for all would be good news for the for-profit hospital industry because it would lower the amount of debt they attempt to collect.

That’s the opinion of Fitch Ratings analyst Lauren Coste in the wake of three proposals from U.S. presidential candidates, including Sen. Hillary Rodham Clinton’s proposal released Tuesday.

Clinton’s plan offers coverage choices for the insured and uninsured. But most importantly, it calls for mandatory coverage of all Americans.

Given the difficulty for-profit hospitals have collecting patient debt, some analysts believe any plan that increases the number of people insured would be welcomed by the industry. Coste said about 20 percent of hospitals in the U.S. are categorized as for-profit.

According to Coste, for hospital companies, the average collection on debt for uninsured patients is less than 10 percent. For patients that have insurance, hospitals collect about 50 percent of the co-pays or outstanding debt due after insurance companies pay their portion. As a result, bad debt expense as a percentage of revenue for the for-profit hospitals is about 11 percent, said Coste, director of corporate finance for Fitch Ratings Co.

“Bad debt expense has been escalating and pressuring the industry,” Coste said. “If you have more people with coverage you should see more people able to pay their bills and hospitals should be able to collect more of their revenue,” Coste said.

The American Hospital Association and the Federation of American Hospitals also are supporting increased coverage for the uninsured. The FAH released a plan last February that would cover all Americans. Among the key tenets:

• requiring every American to have health insurance;

• maintaining coverage for people currently insured through employers and public programs;

• ensuring quality coverage is available at an affordable price.

“The Federation of American Hospitals’ health coverage passport proposal is based on a simple proposition,” said spokesperson Richard Coorsh. “It builds upon what works and its fixes what doesn’t.”