Are Higher Medical Bills Driving More Bad Debt?

In spite of its position on the world stage, the United States lags behind the rest of the developed world as the only country without a system of universal healthcare in place, though it does hold first place for the highest healthcare spending per capita. A recent report by Crowe Revenue Cycle Analytics (Crowe RCA) has revealed that high healthcare bills are causing a significant uptick in uncollected revenue and ultimately bad debt.

The new report, “Hospital Collection Rates for Self-Pay Patient Accounts,” leverages data collected via the Crowe RCA solution, which captures patient transactions for more than 1,600 hospitals and 100,000 physicians across the U.S. for the purposes of performing accounts revenue valuation, net revenue analysis, and automating hindsight. The report utilized data collected from 1,413 hospitals across 47 states in calendar year 2021.

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The results paint a picture of patients preferring to shoulder the financial and social consequences of non-payment once the balance due reaches an amount out of reach for the majority of working Americans—some 56% of whom cannot afford to cover an unexpected $1,000 expense. A bill that exceeds $7,500, according to Crowe’s report, is where collection rates drop off significantly.

“In the past, insured patients may have had a $75 to $200 copay and many were able to pay the total amount at the point of service,” said Brian Sanderson, a Principal in the Crowe healthcare consulting group. “These days, medical bills could be thousands of dollars, even after the insurance balance has been resolved, which is more than a lot of patients can afford, and hospitals are struggling to collect this revenue.”

Health systems are feeling the squeeze too, as total patient statements with balances of greater than $7,500 have more than tripled in the past three years, from 5.2% in 2019 to 17.7% in 2021. The report additionally found that the percentage of patients with health insurance who paid their out-of-pocket bill dropped from 76% in 2020 to 54.8% in 2021, with patient statements with balances greater than $14,000 nearly quadrupling from 4.4% in 2019 to 16.8% in 2021.

The dramatic increase in bad debt is reducing the already slim operating margins of health systems, and combined with the ongoing shortage of medical personnel is due to squeeze their financials even further. If providers wish to survive, they must find solutions that both reduce patient costs and improve revenue cycle operations to maintain higher collections rates.