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Dan Murdoch

July 31, 2023
Revenue Intelligence
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5 Effective Tactics To Reduce Hospital Bad Debt

5 Effective Tactics To Reduce Hospital Bad Debt

American healthcare faces a severe debt problem, with medical debt impacting more than half of all adults, roughly 100 million, as per the Kaiser Family Foundation. By 2018, hospital bad debt had already reached $56.5 billion, and with a global pandemic and high-deductible insurance plans coming into play, this number has only risen. Hospitals are now experiencing multiple months of negative operating margins. Such mounting bad debt calls for actionable strategies. Here are five effective tactics to reduce hospital bad debt:

1. Maximizing Medicare Bad Debt Reimbursement

A. Thorough Recovery Efforts

  • Recover What You Can: Medicare offers a generous compensation structure where they cover 65% of bad debt related to unpaid balances on billed services. This proves to be a significant relief for hospitals and healthcare facilities. However, it's crucial to understand that obtaining this reimbursement is not straightforward. Hospitals need to meticulously document evidence that showcases the patient's genuine inability to settle their bills.

B. Leverage Technological Solutions and Expertise

  • Utilize Software & Third-Party Services: The landscape of medical billing and reimbursement is intricate. Given the substantial potential recovery amounts that hospitals can claim, it's not surprising that many are leveraging specialized software and engaging third-party service providers. These tools and services are designed to maximize Medicare bad debt reimbursements by ensuring that all requirements, especially proofs of patient's financial struggles, are met, documented, and well-presented.

C. Stay Updated with the Affordable Care Act Provisions

  • Understand the Affordable Care Act's Nuances: The Affordable Care Act (ACA) introduced various financial programs tailored to support hospitals, especially those catering to a higher percentage of indigent patients. These initiatives potentially provide additional funding sources for uncompensated care. However, the ACA is vast and intricate, necessitating hospitals to be well-versed with its nuances. By doing so, they can effectively navigate the act's complexity and tap into opportunities to optimize their reimbursements.

2. Evaluating Patients' Financial Health Proactively

A. Identify Potential Payment Challenges

  • Spot the Red Flags: Recognizing potential payment difficulties early on can drastically reduce bad debts. Certain indicators, like junk health insurance policies or exceptionally high-deductible plans, often signal a patient's financial struggles. For instance, encountering a deductible amounting to $10,000 or more should immediately raise alarms, as it's rare for individuals to have such substantial healthcare savings readily available.

B. Explore Diverse Payment Solutions

  • Alternative Payment Channels: It's essential to remember that patients who appear to be on the verge of becoming bad debts might still have other avenues available. Many might be eligible for alternative payment methods, such as Medicaid. Additionally, hospital charity care programs can provide relief to patients, ensuring they receive necessary care without adding to the institution's bad debt.

3. Engaging Patients with Proactive Communication

A. In-depth Financial Guidance:

  • Educate About Financial Obligations: Patients often struggle to navigate the complex landscape of healthcare finances. Offering financial counseling sessions, either in person or through digital platforms, can demystify these challenges. When patients understand their financial duties, they're more likely to commit to payment plans, helping accelerate A/R turnover and minimize bad debt.

B. Harness Every Opportunity:

  • Optimize Patient Interactions: Beyond the clinical care, each patient interaction is a valuable moment to remind, educate, and clarify billing-related queries. While the first meeting with the patient often sets the stage for financial discussions, every subsequent touchpoint—be it during follow-ups, discharge, or even phone calls—should be leveraged for reaffirming payment obligations and resolving doubts.

4. Integrating Advanced Solutions: The Power of Adonis's RCM

A. Early Identification and Intervention:

  • Prevent Debt from Turning Bad: Delayed payments that linger in the accounts receivable often metamorphose into bad debts. With Adonis's Revenue Cycle Management (RCM) system, hospitals are equipped with a powerful tool that provides real-time, data-driven insights. This allows them to pinpoint potential bad debt risks well before they escalate. The integrated system also streamlines AR and collection processes, optimizing the financial health of the institution.

B. Automation: The Pathway to Consistency and Precision:

  • Automate for Efficiency: The world of medical billing is riddled with complexities, and human errors can slip in despite the best intentions. Adonis's RCM stands out by automating crucial segments of the billing process. Whether it's dispatching timely invoices, scheduling consistent follow-ups, or flagging potential risks, the system ensures a level of precision and proactivity that's hard to achieve manually.

5. Continuously Re-evaluating Charity Care Policies

A. The Value of Nonprofit Designation:

  • Understand the Nonprofit Status: Hospitals offering charity care and various community-centric services benefit from a nonprofit status, bringing along specific tax exemptions. This status is not merely a financial benefit but a testament to their commitment to serving the community, emphasizing the importance of their charity initiatives.

B. Stay Relevant Amidst Changing Landscapes:

  • Adapt to Changing Realities: The global pandemic has reshaped many aspects of our lives, including how people access and pay for healthcare. An increasing number of individuals lost their conventional employer-backed insurances, resulting in a surge of underinsured or completely uninsured patients. Hospitals, now more than ever, need to recalibrate their financial aid policies, ensuring they remain relevant and supportive to the evolving patient demographics, addressing the financial needs of a broader spectrum of the community.

Our Final Thoughts

The financial health of hospitals plays a critical role in ensuring continuous and quality patient care. As bad debts continue to burden the healthcare sector, proactive patient engagement, the adoption of advanced technological solutions like Adonis's RCM, and the regular reassessment of charity care policies become indispensable. By harnessing these strategies, healthcare institutions can not only mitigate the challenges posed by bad debts but also foster a more transparent, efficient, and patient-centric financial ecosystem. As the healthcare landscape undergoes rapid changes, those hospitals that prioritize proactive measures and adaptability will not only achieve fiscal stability but also strengthen their commitment to serving their communities.

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