Stopping the rise in hospital bad debt

U.S. hospitals provided $41.1 billion in uncompensated care in 2011, according to data from the American Hospital Association, representing 5.9 percent of annual hospital expenses and $1.8 billion more than in 2010. Since 2006, uncompensated care has increased by approximately 8 percent annually.

According to the Hospital Accounts Receivable Analysis, the Southeast region of the U.S. had the highest percentage of total uncollectable accounts at 6.70 percent.

“Most hospitals do a solid job of managing patient receivables and associated bad debt expense, but even well performing organizations are quick to say there is always room for improvement,” said John Hutchens, managing director at Huron Healthcare.

“Improved revenue cycle performance through process improvement to reduce bad debts and denials can account for 2-4 percent of additional net patient revenue, which is a small percentage that amounts to big dollars for a typical hospital,” said Hutchens.

[See also: Bad patient debt continues to mount.]

Clint Sallee, president of Fidelity Creditor Services, a debt collection company for physician practices, ambulatory and surgery centers, recommends a three-step process for avoiding bad debt.

“First is to know the case, and that doesn’t mean from a medical standpoint, it means more from a demographic standpoint: their social security, know their date of birth, driver’s license number,” said Sallee. “Second, know the patient. Get the proper information and feel confident that the person that you are providing service to is the person that you’re ultimately going to need to collect from, should that situation arise.

“The third step is to know when to escalate the matter. If someone hasn’t paid you and it’s three months old, you sent them statements, don’t just accept the fact that you now have bad debt.”

One of the challenges of handling bad debt is many doctors are often ill-equipped to collect on overdue accounts.

“Collection is not administrative,” said Sallee. “Collection is very personal—it doesn’t feel right to a lot of people. It’s not a natural human skill to want to confront somebody to discuss finances.”

[See also: Uncompensated care an ominous trend .]

What’s more, Sallee said, doctors are gun-shy about assigning accounts to collections because it might jeopardize their relationship with patients.

“I’m always an advocate of collecting debt, but not in a manner that jeopardizes your patient good will,” said Sallee. “That would be counterintuitive, but that all comes down to who you work with, your service provider, to make sure you can accomplish that.”