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November 1, 2023
David Burda
Economics Outcomes System Dynamics

Bankrupting Patients. Not a Good Business Strategy.

One of the hot healthcare stories last week was the release of the Commonwealth Fund’s first annual Health Care Affordability Survey. The survey results, which I’ll go into in a moment, confirmed what we know already, and that’s rising prices for medical care are forcing consumers into unaffordable medical debt, causing them to forgo needed care in the future while trying to pay off their old medical bills.

But the fact that the highly regarded Commonwealth Fund now says so, too, gives the topic a little more gravitas than it had previously. Like when New York Times or Wall Street Journal reports on a healthcare issue that we in the trenches have been covering for years.

That said, it dawned on me while reading the Commonwealth Fund’s survey results that unaffordable medical debt is a crisis for more than just consumers. It’s also a crisis for providers like hospitals, health systems and physician practices. It’s a self-inflicted crisis for providers because it’s simply bad business.

Hear me out.

Hospitals, health systems and physician practices are businesses like businesses in any other industry. A business sells things. Why does it sell things? To bring in revenue. Why does it want to bring in revenue? To make a profit if it can control its expenses. Why does it want to make a profit? To financially benefit its owners, shareholders and investors, no matter who they are. Businesses are in business to make money. Pretty straightforward and hard to argue with.

That business model only works if customers can afford what the business is selling. If they can’t afford what a business is selling, they won’t buy anything, or they’ll borrow money to buy something they can’t afford. If it’s the latter, the business has to spend money chasing customers down for what they owe.

Hospitals, health systems and physician practices are pricing themselves out of business. Providers are charging so much for medical care that their customers can’t pay their current bills and can’t afford to buy more care even when they need it. Providers also are spending billions of dollars each year chasing customers down for the money they owe. Bankrupting your customers is bad business. It’s that simple.

Let’s look at a few findings from the Commonwealth Fund report that support this simple truth. The report is based on a survey of more than 6,000 working adults aged 19 to 64.

  • 51% said it’s “very” or “somewhat” difficult to afford their healthcare costs.
  • 38% said they’ve delayed or skipped needed care or a prescription drug over the past year because they couldn’t afford it.
  • 57% of those who said they delayed or skipped needed care or a prescription drug said their health condition got worse because of it.
  • 32% said they have medical or dental debt that they’re paying off over time.
  • 39% said having medical or dental debt that they’re paying off forced them to cut back on basic necessities like food, heat or rent.
  • 48% said their outstanding medical or dental debt was $2,000 or more.
  • The leading causes of debt were hospital care, cited by 54% of the respondents, followed by doctor’s office visit (37%) and emergency care (35%).
  • 67% said they were making debt payments directly to providers.

“The relentless growth in the cost of healthcare, driven primarily by prices commercial insurers and employers pay to providers and for pharmaceuticals, is at the root of the nation’s medical debt and affordability crisis in commercial insurance,” the report said.

That’s the Commonwealth Fund speaking, not me. Although I basically said the same thing in this blog post, “The Medical Debt Pyramid Scheme.”

Bankrupting your customers is not a good business strategy.

Thanks for reading.

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About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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