Should debt collection be a primary funding source for healthcare providers?

For most companies having past-due amounts is not a pleasant or power position to be in. In the case of hospitals, the high bills have left both providers and patients in a delicate situation, unable to pay their debts.

Without other options, hospitals are changing their primary function as healthcare providers, and they are taking up a second role, as financial institutions. This change is dictated by the need to fight the tendency which shows that 60% of hospitals could become unprofitable this year.

The past-due debt has risen to over $75 billion, which shows just how delicate is the situation. This change is caused by the rising costs of medical services, policy and lifestyle changes. Another concerning factor is the increasing number of chronical disease. These cases are responsible for 85% of the expenses. The most prevalent of all is diabetes, heart affections, and mental illnesses.

Bad debt

Not only do hospitals have obligations, but they have the wrong kind of it. That translates not only to struggle with the uninsured but waiting long terms to get the money from the insured part of the population. These patients are reluctant to make out-of-pocket payments since they have the feeling they have already paid for those services once.

In these conditions, healthcare services only bring minimal profit and are putting additional pressure on the hospital’s financial departments. These mountains of debt make it complicated to think about investments and upgrades. The patients feel a decline in the quality of the services and a steep rise of the invoices, an unfortunate and unwanted situation. This state of fact has made hospitals to take a more proactive approach, which can almost be classified as aggressive, but necessary.

Debt collection

First, hospitals have delegated internally the task of talking to clients and setting up new payment terms for overdue accounts. If there is no satisfactory resolution, the bills are sent to collectors to deal with them.

This practice is actually detrimental to both the hospital and the patient. Usually, the hospital only collects a fraction of the initial debt after fees are applied. Also, the patient is affected since the medical bills sent to collectors appear on their credit scores for up to seven years. There are a few recent changes that decrease the importance of the medical collections for the FICO 9 score, the new model that needs to be adopted.  You can find more about the process at https://aaacreditguide.com/medical-bills/.

One of the most ingenious ideas in the business belongs to Tenet Healthcare who has sold its least profitable hospitals but keeps them as clients for the debt collection subsidiary.

Final thoughts

On the background of rising medical costs and inefficiencies of the insurance system, the healthcare providers are forced to act mercilessly. Unfortunately, the patient’s interest is secondary to the hospital’s financial concerns. Although there is a slight legal help directed toward those with bills already in collections. Yet, no real steps are focusing on improving the mechanisms of the insurance system which could make a real difference.

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