Is the ACA responsible for declining physician reimbursement?

I got an interesting question from my friend Josh Evans regarding a recent article I posted on LinkedIn about declining physician reimbursement.  Josh suggested that declining physician reimbursement might be tied to the Affordable Care Act.  It has been an ongoing trend and the ACA has accelerated it.  Here is my reply to Josh below:

Hey Josh, it has been a trend for years.  Prior to ACA, on average, patient responsibility as a percentage of revenue was around 25-30%.  The biggest driver behind that has been rising deductibles which itself is mainly caused by employers trying to lower their insurance contribution expense.

ACA accelerated that even further because virtually all of the plans on the exchanges are high-deductible. (the IRS defines a plan with $1,250 or more as high-deductible)  The most popular exchange plan right now, for example, is a silver plan in CA with a deductible of $2,500.

Here’s the thing – these plans are selling.  And this has emboldend both payers and employers.  As a result we see higher deductibles across the board in both ACA and non-ACA plans.

As it turns out healthcare organizations just aren’t very good at collecting patient balances.  So rising deductibles = lower total reimbursement.

 

Here is a chart from early 2014.  Current estimates are that the percentage of revenue coming from patient is now between 35-40%.

Percent of Revenue from Patients

The percentage of revenue coming from patients is now 30-35%.

CIGNA CEO David Cordani recently stated that he expects approximately 50% of revenues to be coming from patients by 2020.

As mentioned above, this long standing trend is simply playing into the weakest part of this accounts receivable machine for most healthcare organizations.  Given that the average profit margin for healthcare organizations hovers around 12.8%, this trends in particular has reached a threshold that represents a major risk to the livelihood healthcare organizations.

James