Should CFOs Look Into Medical Debt Relief?

Would debt relief be the biggest industry shift to true value-based care?

Medical debt is no small issue within the American healthcare system. It often becomes a burden for patients and makes them hesitate to seek future care. A KFF analysis found that 41% of US adults have some type of medical debt, and more often than not, it disproportionately impacts lower income families, parents, and black and Hispanic adults.

One health system is looking to change the way we look at medical debt, and it may be an option for other CFOs to consider. Advocate Health, the nation’s third-largest non-profit health system, recently announced it would begin canceling all judgment liens previously placed on homes and real estate as part of its efforts to collect unpaid medical bills. The health system will also forgive the outstanding debts associated with those liens.

“When we expanded our charity care policy, we immediately began assessing all previous outstanding liens and determined that most of those patients would qualify under our new policy,” Brad Clark, chief financial officer of Advocate Health said in the announcement. “As the next step in our roadmap to make care more affordable, we are accelerating this process and removing judgment liens that were placed on homes and property to cover unpaid medical bills.”

Advocate's debt relief plan aligns with a larger movement initiated by Health and Human Services and Governor Roy Cooper in North Carolina to erase medical debt for Medicaid patients in the state. Now all of the state’s 99 eligible hospitals have committed to participate in North Carolina’s medical debt relief incentive program.  According to the plan, hospitals that choose to meet the eligibility conditions for medical debt relief will receive a higher level of Medicaid reimbursement under the Healthcare Access and Stabilization Program (HASP).

All Things Considered

Advocate’s debt relief plan is a smart move for the organization. Lawmakers and policy groups have begun cracking down on medical collection practices, questioning some system’s tax-exempt status in some instances.

But there are other benefits for health systems to consider, if debt relief is financially viable for their specific organization. For example, relieving debt can have a positive impact on patient relationships and patient satisfaction.

This leads to not only stronger patient engagement through fostering goodwill, but also higher patient satisfaction which can enhance the provider's reputation and lead to positive reviews.

Debt relief also indirectly improves access to care. Patients unburdened by debt are more likely to seek necessary medical care, leading to better health outcomes, which can potentially reduce the need for more expensive emergency care.

Eliminating debt collection processes can streamline administrative operations, making them more efficient. Providers can reduce the resources spent on billing and collections, allowing them to get back to patient care.

While it may seem counterintuitive, relieving debt could potentially lead to increased revenue over time. While studies have not pinpointed a direct increase in revenue, many have the highlighted that the impact it has on patients could in turn help stabilize a health system’s revenue over time. Healthier patients are less likely to incur high costs associated with untreated conditions, and satisfied patients may return for elective services or recommend the provider to others.

Lastly, as the industry looks towards a shift to value-based care and emphasizing patient outcomes over volume, relieving debt can lead to better health management and lower readmission rates.