Read the case from the QM 6640 Medical Debt PDF document, and review the data from the QM 6640 Assessment Patient Data Excel file.

QM 6640

ASSESSMENT Medical Debt

INSTRUCTIONS Read the case presented below from Businessweek on

medical debt. Following the case are a series of

questions, which must be answered using the

provided dataset. The two rubrics provided will

provide guidance on how the instructor will assess

your submission. Type your responses to the

questions into a single Word document titled

QM6640_Assessment_LastFirst.docx. Insert tables

and graphs in your report as appropriate. Upload the

completed Word file to the Assessment Submission

Area in Blackboard by the due date.

Carmen Lewis, PhD QM 6640

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Why Hospitals Want Patients to Pay Upfront

By John Tozzi September 25, 2014

Tozzi is a reporter for Bloomberg Businessweek in New York.

URL: http://www.businessweek.com/articles/2014-09-25/why-hospitals-want-patients-to-pay-upfront

Melody Rempe spends much of her day telling people who are about to go into the hospital how much

they’ll have to pay. As a patient financial counselor at Nebraska Methodist Health System, she calls

patients about a week before they go in for procedures with estimates of their bills and what portion

insurance will cover. Although many are grateful, some cry or yell. “Sometimes you’re talking to them

about the biggest thing in their life,” she says. Rempe says most calls end well when she walks patients

through the hospital’s payment-plan options or other financial assistance.

Hospitals have good reason to be concerned about their patients’ finances: Even people with insurance

are increasingly responsible for a big portion of their medical bills. Among Americans who get health

coverage at work, 41 percent have deductibles of at least $1,000 they must meet before insurance starts

paying. That’s up from 10 percent in 2006, according to the Kaiser Family Foundation. Those with

employer coverage are joined by 7 million new enrollees in Obamacare plans, which typically make

patients share a large chunk of costs. The average deductible in the most popular “silver” tier of

coverage is $2,267, according to an analysis by the Robert Wood Johnson Foundation.

Raising deductibles helps employers and insurers limit premium hikes. It also shifts more of the risk

onto individuals. That in turn boosts the chances that doctors and hospitals won’t get paid. If a patient

has a $2,900 deductible, “it’s far more difficult to get that $2,900 from an individual patient than it is

from the Medicare program or from Blue Cross Blue Shield,” says Richard Gundling, vice president of

the Healthcare Financial Management Association, a trade group. A March report on hospitals from

Moody’s (MCO), the credit-rating firm, was blunt: “Today’s high deductibles are tomorrow’s bad debt.”

Hospitals’ total cost of uncompensated care reached $46 billion in 2012, equal to about 6 percent of their

expenses, the American Hospital Association says. Large for-profit chains such as LifePoint Hospitals

(LPNT), which operates more than 60 medical centers in 20 states, have felt the impact of rising

deductibles. LifePoint’s bad debt related to copays and deductibles is running at $25 million per quarter

this year, up from $15 million per quarter in 2013, Leif Murphy, the company’s chief financial officer,

said on an earnings call in July. He blamed the increase in part on the growing prevalence of high-

deductible plans.

As the mechanics of insurance policies become more complicated, Americans are having a harder time

understanding how their plan choices will affect their finances. Only 14 percent of insured adults

correctly understand insurance jargon such as deductibles, coinsurance, copays, and out-of-pocket

maximums, according to a 2013 study published in the Journal of Health Economics.

Many Americans aren’t prepared for a medical emergency. Dr. Marilyn Peitso, a pediatrician in St.

Cloud, Minn., says parents often can’t afford $300 to $400 for antibiotics to treat an ear infection. “For

young working families, this can get to be a real financial burden, and it can make them less likely to

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seek needed care,” she says. About 44 percent of households have less than three months of savings,

according to an analysis by the Corporation for Enterprise Development, an antipoverty group. “Tell me

what 28-year-old is going to be able to provide, especially in this economy, $6,000 of their own

money?” says Jan Grigsby, chief financial officer at Springhill Medical Center in Mobile, Ala.

Like Nebraska Methodist, Springhill reaches out to patients before scheduled procedures with an

estimate of what they’ll owe, Grigsby says. For those who can’t pay immediately, the hospital works

with lenders to arrange no-interest payment plans of as long as two years. Staff members also check

whether patients are eligible for charity care from the hospital or if they qualify for Medicaid.

Many hospitals try to get patients to pay upfront 30 percent to 50 percent of what they’ll owe and some

offer discounts for paying early, says Yaro Voloshin of health-care consultant MedAssets (MDAS). One

reason is that they want to avoid the damage to their

reputations that accompanies aggressive debt

collection practices. “Over the years there’s been

some stigma about collecting from patients,” says

Zac Stillerman, an executive with the Advisory

Board, which sells software and consulting services

to hospitals. “It’s a bit of a third rail.”

Managers at Nebraska Methodist noticed payment

problems getting worse about seven years ago, when

a large employer in the Omaha area introduced a plan

with a $5,000 deductible. “We would bill a procedure

for a patient; the entire amount would be applied to

the deductible,” says Bob Wagner, the hospital’s

director for revenue cycle. “We actually got no

money.”

Now any patient scheduling a procedure expected to

cost more than $500 out of pocket gets a call from

Rempe or another of Nebraska Methodist’s five

financial counselors. The hospital tries to get some

payment in advance, but it doesn’t turn away those

who can’t pay.

Even simply identifying the indigent can help, says Gundling of the Healthcare Financial Management

Association. “For both the patient and the facility,” he says, “trying to collect a debt that can’t be paid

just wastes everybody’s time.”

The bottom line: Some of the 17 million U.S. residents covered by high-deductible health plans are

racking up medical debt.

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With this case, you are provided a sample of patient data for your analyses. The provided link in

Blackboard to the Excel workbook contains data on patients in a particular hospital. The dataset contains

the following variables:

Income: Patient's annual household income

Past Due Amount: Amount of debt or money owed by the patient to the hospital.

Insurance: Type (if any) of medical insurance.

Years since last visit: Number of years since the patient's last appointment.

Year born: The year in which the patient was born

Gender: Patient's gender

Hospitalizations: Lifetime hospitalizations of the patient

Ethnicity: Patient's Race

Marital Status: Patient's Marital Status

Hospitals are concerned about patients’ ability to pay their medical bills. It is suggested that

there is a relationship between type of medical insurance and medical debt. Write a concise report

answering questions 1-6. Using past due amount as the dependent variable and all other variables as

predictors (independent variables), run appropriate statistical analyses in Excel to mine the data. Label

sections of your report to correspond to the questions. Insert tables and graphs from Excel in your report

as appropriate.

1. Summarize the issue(s) and/or problems from the case in your own words. Support your answer(s).

2. Identify strategies for solving the problem. 3. Propose one or more solutions/hypotheses which address the problem(s). 4. Evaluate potential solutions to the problem(s). Analyze own and others’

assumptions.

What inferences can you make from your dataset? Some suggestions are listed below;

however, conduct additional analyses as deemed appropriate.

a. Create a frequency table of insurance types. b. Construct a bar chart, a pie chart, and a Pareto diagram of

insurance types.

c. Which graphical method do you think is best to portray these data? d. Based on this data, what conclusions can you make about the

insurance status of the patients?

5. Choose a solution. 6. Evaluate outcomes by reviewing the results relative to the problem(s) defined.