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Hospitals Struggle to Collect Beyond Threshold for Out-Of-Pocket Costs

Analysis  |  By Jay Asser  
   August 19, 2022

Once self-pay balances reach over $7,500, providers are far less likely to collect as more patients have bad debt.

Hospital collections fall off dramatically and result in higher bad debt once out-of-pocket bills reach $7,500, according to a report from Crowe Revenue Cycle Analytics.

The public accounting, consulting, and technology firm examined data of 1,413 hospitals across 47 states through 2021 and found that $7,500 is the "vanishing point" at which hospital collections significantly decline.

That threshold is being hit more and more, the research revealed, as patient statements with balances of more than $7,500 have jumped from 5.2% in 2018 to 17.7% in 2021. Meanwhile, balances greater than $14,000 increased from 4.4% in 2018 to 16.8% in 2021. This has created higher bad debt, write-offs for bills deemed uncollectible after collection efforts have been made.

The report found that for the first time, self-pay-after-insurance accounts were the leading source of bad debt in 2021, responsible for 57.6% of patient bad debt, compared to 11.1% in 2018.

"The complexities of new insurance programs such as HDHPs, health savings accounts, and various Affordable Care Act 'metal' plans – for example, bronze, silver, gold, and platinum – have created confusion for patients and healthcare providers alike, as most of these newest options create greater out-of-pocket medical expenses for the patient. And the patient is paying less of it for a variety of reasons," stated Brian Sanderson, a principal in the healthcare consulting group at Crowe.

Self-pay after insurance collection rates plummeted as well, falling from 76% in 2020 to 55% in 2021, the study noted.

Last year, the self-pay after insurance collection rate for claims between $5,000 and $7,500 was 32%, while the rate for claims between $7,501 and $10,000 was just 17%.

Sanderson points to the labor shortage and rising out-of-pocket costs as putting strain on hospitals.

"Hospitals are left in the lurch with these trends," Sanderson said. "Labor scarcity makes for fewer experienced personnel looking to navigate increasing complexities of insurance coverage, while patient out-of-pocket costs continue to rise dramatically."

The providers that have managed a high collection rate on larger balances have done so through high-performing revenue cycle teams. The report uses the example of some hospitals splitting their self-pay revenue cycle team into three squads, one for low-dollar amounts (less than $1,000), one for medium dollar amounts (typically $1,000 to $5,000), and one for larger-dollar amounts (more than $5,000).

Sanderson concludes that with the way self-pay claims and collections are trending, the healthcare industry will likely veer more into direct patient-to-hospital negotiations for complex care, more consumer financial companies offering payment plans on behalf of patients, and more advanced models for hospitals to align their workforce to patients who are able to pay their out-of-pocket costs.

Jay Asser is the contributing editor for strategy at HealthLeaders. 


Patient statements with balances of more than $7,500 have increased from 5.2% in 2018 to 17.7% in 2021.

Self-pay after insurance accounts were the leading source of bad debt for the first time in 2021, accounting for 57.6% of patients bad debt, compared to 11.1% in 2018.

The trends in self-pay claims and collections suggest hospitals will use more direct patient-to-provider negotiations for complex care.

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