Tactics to Reduce Bad Debt

NerdWallet Health reports that 56 million Americans struggle to pay medical bills each year and 1.7 million Americans live in a household where medical debt has driven them into bankruptcy.

Nowadays, medical debt is the highest type of debt in the U.S.—costing people more and putting them more behind than their bank and credit card debt combined. While The Affordable Care Act (ACA) was supposed to lessen medical debt in our country by helping with coverage for millions of Americans, patients are still unable to afford their healthcare expenses. And healthcare facilities are feeling equal financial pressure as higher percentages of their patients end up delinquent or behind on payments.

As the healthcare industry anticipates the impending new administration under President Trump—with the potential repeal and replacement of the ACA—providers are uncertain about and anxious to act on what’s to come. One thing is for certain though: managing cost will continue to be an issue for a long time.

So what’s the cause of this rising “bad debt” and how can healthcare providers work to overcome it?



Insurance companies who offer lower insurance costs up front and higher out-of-pocket charges are actually adding more costs to patients on the back end. Cost-sharing and out-of-network expenses inferred during hospitalization are creating greater financial stress on patients.

Widespread differences in prices different hospitals are charging for the same services and procedures are causing more financial stress in certain regions. NerdWallet identified a case where the charge for an inpatient stay for severe intestinal bleeding was $5,400 in Arkansas and a whopping $291,000 in California!

Human errors in medical billing are unfortunately a common culprit—up to 80% of medical bills can contain errors. Upcoding, unbundling, duplicate billing, mismatched coding and balance billing are all leaving patients with inappropriate costs and providers with unpaid bills.

Patients receiving bills with charges they didn’t expect up front are causing them to be unable to anticipate or manage expenses when the bill finally comes. In fact, NerdWallet shared that 63% of Americans have received a medical bill that was higher than what they expected.

While medical debt in our country continues to increase, healthcare patients and providers don’t know how they can manage the issue. We’ve got a few tactics that can help each party keep bad debt under control.



  1. Ensure your costs of care are appropriate. Understanding you healthcare facility’s costs of care and cost of capital, and ensuring that your capital structure matches a model of care needed, is critical to pulling your facility out of bad debt. Additionally, make sure your practice has a clear and consistent coding systems and that physicians are trained, so patients aren’t getting overcharged. Coding errors and failure to code for the proper amount of time a doctor sees a patient can cause reimbursement rates to drop dramatically.
  2. Clearly communicate patient charges up front. Educate patients about their payment responsibilities early on to minimize surprises and document a point of care collection policy that can be shared with patients. Also be sure to train your personnel on how to strategically communicate with patients about payment before, during and after care.
  3. Minimize wasted real estate and maximize staff efficiency. As healthcare evolves, a lot of care facilities have equipment and inpatient real estate that is no longer utilized or profitable. By monetizing under-utilized assets, you can invest in growing areas of care such as nursing facilities and ambulatory surgery. It’s also a good idea to make sure your nurse practitioners and LPNs are at the top of their license and able to perform a majority of the tasks a physician does, but at a lower cost of care.
  4. Offer financing options, like medical payment plan programs. To help patients afford their medical bills your facility should offers a robust payment plan program. Budco Financial’s Medical Payment Plan (MPP) is a technology-enabled solution that allows healthcare systems, hospitals, clinics and physician groups to offer patients an affordable way to manage and pay out-of-pocket medical expenses. Providers get paid quickly for their service with improved collection of self-pay receivables and bad debt and administrative costs are significantly reduced.

For more financial healthcare resources and advice, follow Budco Financial on LinkedIn and Twitter.

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