LifePoint Hospitals and the payer structure at US hospitals
LifePoint Hospitals: A critical investment profile (Part 7 of 10)
Payer structure
Other services are generally paid for by the end consumer. The healthcare industry, represented by the Health Care Select Sector SPDR Fund (XLV), is an exception to this rule. It receives payments from various parties including government programs, commercial insurers, and a small portion from patients themselves to cover the costs of its services.
The above graph shows that in 2013, the percentage of uninsured, or self-pay, revenues was highest at LifePoint Hospitals (LPNT). This was followed by Community Health Systems (CYH), which, like LifePoint, is an acute-care hospital operator in non-urban communities.
Despite being an urban hospital operator, Universal Health Services (UHS) also earns substantial revenues from self-paying patients. This is mainly on account of its unique business mix that consists of acute-care services and behavioral health services. The level of insurance among behavioral health patients is still quite low but is expected to increase after 2015.
HCA Holdings (HCA) has the lowest percentage of self-pay revenues. It benefits from its strategy of focusing on select urban markets and providing an optimal service mix.
Medicare
Medicare payments to LifePoint Hospitals can be separated into five categories:
acute-care inpatient stays
outpatient hospital services
Medicare-dependent hospital programs for rural hospitals with less than 100 beds
Medicare bad-debt reimbursement
physician services
Compared to its competitors, rural hospital operators such as LifePoint Hospitals generally face more Medicare bad debt. It’s more difficult to collect co-pays and deductibles, the part of the payment owed by the patient under Medicare.
Medicaid
Hospital operators that focus on rural areas such as LifePoint Hospitals and Community Health Systems depend more on Medicaid revenues. It’s in these areas where a greater proportion of low-income people are treated.
Commercial insurers
Compared with its rivals, LifePoint Hospitals has the lowest share of commercial insurers in its revenue stream. This is mainly on account of the company operating in remote areas inhabited by low-income groups.
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