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6 Strategies for Lowering Bad-Debt Exposure

Jeff Elliott for HealthLeaders Media, September 7, 2010

With insurance deductibles and co-pays on the rise and more uninsured/underinsured patients paying medical costs out of pocket, bad debt continues to plague hospital balance sheets. According to the American Hospital Association's recent "Telling the Hospital Story" report, 87 percent of surveyed organizations reported increased bad debt and charity care as a percent of total gross revenue.

Don't anticipate this trend to ease anytime soon. With healthcare reform introducing anywhere from 20 to 40 million new patients into the healthcare system, hospitals must address self-pay balances as a way of controlling bad debt.

Organizations have instituted many activities to improve cash flow. Among them, collecting a portion of patient balances at the point of service is an increasingly necessary activity. But are hospitals being aggressive enough with their upfront collections efforts, particularly with self-pay patients? Many experts would say "no," given that collection rates are relatively low, ranging from 3 percent 10 percent of a self-pay patient's bill.

At a minimum, healthcare providers should use its front-end process to collect past due balances, says Benjamin Colton, manager with ECG Management Consultants "Instruct your patient access staff on the best ways to address a balance with the patient."

Beyond that, very few things are off the table, including co-pay collections in the emergency department—after the medical screening examination, of course, but prior to in-patient admitting.

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