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Q: We've had some discussions recently about medical savings accounts and how their proliferation might impact hospitals' ability to collect from patients. What’s the realistic effect on collections?

Patient Financial Services Weekly Advisor, July 2, 2004

A: Medical savings accounts-tax-deferred accounts that allow patients to save money for medical expenses-create an environment in which collecting payments from patients becomes far more than just collecting a copay. By shifting risk and financial responsibility to the patient, payers have also shifted the very environment in which collections occur.

In the current model, providers can depend on (fairly) consistent payment from private and government insurers based on a contractual or regulatory relationship. In a consumer-driven model, a larger portion of hospital collections must come directly from the patient.

Collection of self-pay balances has traditionally been a challenge, not only from a financial perspective (ability to pay, willingness to pay, patients' prioritization of their hospital bills compared to other financial responsibilities) but also from a public relations standpoint.

Hospitals have been very careful in how they deal with patients on the subject of collections. Although providers do not want patients seeking care elsewhere, they will be unable to provide free services to owners of MSAs. It will be interesting to see if payers will be willing to drop poor-paying MSA owners from their membership roles.

Ultimately, if MSAs or any other model of consumer-directed healthcare become prevalent, the relationship between the provider and patient must evolve into one of customer and vendor. As providers, we must be prepared for the same kind of consumer scrutiny of our invoices as any other business. Our frontline communications with our patients must be educational and to the point. Patients must understand their financial responsibility to healthcare providers and live up to that responsibility.

There are those who argue that because MSA money is dedicated to healthcare costs, providers will have little difficultly in obtaining payment. This would be true under previous medical savings schemes, in which a "use it or lose it" approach gave owners an incentive to spend.

However, with the ability to roll over (tax free) MSA monies from year to year, the consumer has an incentive to save money in the short term in order to pay for more expensive (and often uninsured) care in the long term. Providers need to overcome that incentive to hedge for tomorrow and collect payment for services today.

This question was answered by PFS Advisor editorial advisory board member Joseph Zebrowitz, MD, executive vice president and senior medical director at Executive Health Resources, Drexel Hill, PA.

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