NCPA - National Center for Policy Analysis

Payment Delays Generating Hospital Cash-Flow Problems

May 11, 1999

Hospitals are aggressively trying to collect mountains of overdue bills, which have left them in a financial bind. Several factors are involved in their cash-flow predicament.

  • Although it is illegal in 21 states for insurers to delay payment to hospitals by more than 30 to 60 days, managed- care companies are routinely withholding money for three to four months -- often by claiming they have lost track of bills, even those forwarded electronically.
  • Changes enacted in 1997 to the Medicare program have reduced the hospitals' share of growth in program payments by billions of dollars.
  • Patients are not in any hurry to pay their hospital bills, believing that insurance should have covered them, experts report.
  • Across the board, payments for patients plummeted 20 percent last year at the nation's most efficiently managed hospitals, according to preliminary figures from HCIA Inc.

Hospitals are employing new strategies to better their position. Some are hiring drivers to take uninsured low-income patients to Medicaid offices to sign up for benefits. Others are combing through Medicare documents seeking overlooked payments. And still others are prodding managed-care companies to pay more promptly and are experimenting with ways to collect from patients more efficiently.

Patients are sometimes urged to charge their bills on major credit cards, but many balk at signing an open-ended commitment on a bill that many not be totaled until weeks after they return home from treatment.

If all else fails, hospitals turn to collection agencies and sometimes sell receivables at discounts to financial firms that are more willing to pursue debtors.

Source: Milt Freudenheim, "Insurers and Uninsured Put Hospitals in Squeeze," New York Times, May 9, 1999.


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