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Payer Mix

Northeast Ohio Hospital Payer Mix: A Tale of Intrigue and Mystery

Tue, May 2, 2017  -  Comments (0)  -   Posted by Deanna Moore

Behold! A trend chart of Northeast Ohio hospital payer mix! Like moths to a flame, gather all ye closest data nerds and feast your eyes upon this magnificent, stacked bar chart. Ah yes, study it closely for it is a chart with a story to tell. And tell a story, it will.

Payer Mix

Prologue

Once upon a time – well actually, not once upon a time…Lots of times upon a time…wait…let me start again…

Annually, The Center for Health Affairs collects payer mix information from its Northeast Ohio hospital members. Those who are familiar with hospital finance know that this information is critical to understanding the financial picture of a hospital. It’s especially important when big policy changes, like the Affordable Care Act, result in shifts in the mix of payers. Why? Here are the basics:

1. Payers pay different amounts for the same things.

2. Medicare tends to pay less than the cost of care. Medicare in Ohio reimburses hospitals $0.89 for each dollar of treatment they provide

3. Medicaid pays even less, or $0.83 for each dollar of treatment

4. Private (non-governmental) insurers, the big blue band in the middle, tend to reimburse most favorably. 

5. Self-pay patients often pay significantly reduced rates and sometimes do not pay at all. 

6. As a result, the mix of payers can have a big effect on a hospital’s bottom line.

Chapter 1: Payer Mix and Medicaid Expansion

Take a gander at the band on the chart made up of two segments – the Cheerios-box-yellow and the school-bus-yellow. This band represents the portion of revenue Northeast Ohio hospitals make on Medicaid – both fee-for-service (Cheerios-box-yellow) and managed care (school-bus-yellow). In 2014 and 2015 the yellow band is wider than it was in the preceding years because, not surprisingly, the portion of hospital revenue derived from Medicaid grew after Medicaid expansion began in 2014.

Chapter 2: Payer Mix and Self-Pay

Notice, too, the top segment on each bar ‒ the one that’s dark blue. This segment represents patients who pay for their care out of pocket. If you are putting the pieces together, like I bet you are, you have figured out the reason there are fewer patients in the self-pay category in 2014 and 2015 is that a lot of them moved to the Medicaid category after Medicaid expansion.

This is good news for both patients and hospitals. The National Bureau of Economic Research found a personal debt-reduction impact of $600 - $1000 per person among those who gained Medicaid coverage under the Affordable Care Act’s Medicaid expansion. Though all Northeast Ohio hospitals have financial assistance policies and provide care to all without regard to their ability to pay, patients who were traditionally self-pay often have a hard time making ends meet. Adding an unexpected medical expense can pose a significant financial challenge to uninsured individuals, even when favorable terms are offered through a financial assistance program. Medicaid expansion has been tremendously helpful in ensuring these individuals get the care they need while not putting themselves at financial risk to do so.

Chapter 3: Payer Mix and Commercial Insurance

There is a sub-plot to this story that you may not have noticed with all those shifting bands up there. Look closely at the bright blue band in the middle. Do you notice anything? It’s hard to see so don’t feel bad if nothing stands out to you at first. Here – let me make it easier to see:

Payer Mix and Commercial Insurance

The blue band on this second chart is the same segment (but by percentage) as the blue band on the top chart. The orange is all the other stuff combined. Northeast Ohio has seen a big jump in the number of people with commercial (non-governmental) insurance. Again, this payer mix trend occurs after the implementation of the Affordable Care Act, but in this case, is due to the number of people signing up for private insurance through the Insurance Marketplace. It’s also likely that many of the self-pay patients who didn’t qualify for Medicaid moved to this band.

The Payer Mix Plot Twist You Didn’t See Coming!

So, earlier, in the Prologue, I noted that a favorable payer mix is financially advantageous to hospitals and I described which payers tend to pay well and which do not. The policy changes in the ACA have led to a more favorable payer mix in Northeast Ohio and yet…contrary to what you would expect…overall revenue has declined! *GASP* #PlotTwist.

Is there a sequel out there? Maybe.

I’m going to be honest with you here and admit I don’t know what the heck is going on with that. It’s not what I expected. This plot twist is going to require some more digging on my part and I welcome your comments to help me understand it. Should my sleuthing turn up an answer to this mystery, I will happily write the sequel to this story.

Epilogue

The Affordable Care Act has changed the payer-mix landscape for Northeast Ohio hospitals. There are fewer uninsured people, more people with Medicaid and more people with non-governmental private insurance. These feel like steps in the right direction but the future is uncertain. Also, there’s more to the bottom line than payer mix. Perhaps this goes without saying, but healthcare is really complicated. There are hundreds of nuances that impact the bottom line and payer mix is an important one, but it’s just one of them. Stay tuned as I dig into this mystery – and please, if you have clues, send them my way.

THE END

Posted in Hospital Finance

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