Whether you are a healthy individual or living with preexisting health conditions, you probably know that hospital bills can be crazy expensive, which makes it very easy to incur medical debt.
Anyone could be a victim of medical debt. Even those who pay all the bills on time can land in a hospital bad debt.
Hospital bad debt is the debt that is considered unrecoverable. Hospitals get into bad debt when they cannot avail reimbursement for providing care, and it happens when patients are not willing to pay, cannot afford their medication, or cannot apply for financial assistance.
During a survey, 35% of hospital executives said that the healthcare system faces more than $10 million in hospital bad debt, while 6% reported a bad debt of more than $50 million.
Here are some mind-blowing hospital bad debt statistics you must know.
What Is Hospital Bad Debt?
Before we jump into the nitty-gritty of bad hospital debt, it is essential to know what does it mean hospital bad debt. So, hospital bad debt is the debt or write-offs that hospitals incur.
According to a survey conducted by Kaufman Hall, hospitals have seen a 40% increase in bad debt. So what leads hospitals into a bad debt situation?
Well, patients who are self-pay or uninsured (44%), Medicaid patients (41%), etc., lead the hospitals to bad debt.
Hospital Bad Debt Key Statistics
- One-third of Americans Can’t Afford a Medical Bill Over $100
In a 2017 poll from Amino, 37% of Americans said that they cannot afford an unexpected medical and would go into debt if the bill exceeds $100.
Of the respondents, 27% of the men said that they could not afford a bill of $100 or more compared to 44% of women.
Only a quarter of Americans said that they can afford an expected medical bill of up to 2,000 or more.
- 40% of Hospitals Have Seen Increase in the Bad Debt
According to a survey by the firm Kaufman Hall in August 2020, more than 40% of hospitals, 48% of compensated care, and 44% of uninsured patients have experienced an increase in bad debt.
Around 38% of hospital executives reported a lesser percentage of privately insured patients who bring in higher revenue than public insured patients.
- Over 20% of Hospitals Don’t Use Any Bad Debt Recovery Process
Around 36% of the hospital executives do not have any debt recovery process and use a third-party collection service to recover the bad debt.
Nearly 25% reported using an in-house approach, while 18% used a combination of both. 11% of hospital executives said that they think the prime contributor to the bad debt is ineffective revenue cycle management, and still, 85% of the hospitals use RCM software.
- One-Third of Hospitals Report $10 Million In Bad Debt
A survey conducted by Sage Growth Partners in June 2018 took data from 100 hospitals which showed that 36% of the executives reported that their hospitals are facings bad debt of more than $10 million, while 6% said that it is more than $50 million.
Of the respondents, half of the executives estimated that hospitals could only recover 10% of the original amount owed, with 9% indicating that only 20% of the debt is recoverable.
- 46% Of Americans Budget $50 Per Month for Healthcare Expenses
According to Amino, only 46% of Americans have a budget for their healthcare expenses and they set aside $50 or more per month for healthcare expenses, even with the rising prices and deductions of healthcare.
On the other hand, Americans save 79% for food, 59% for transportation, 49% for repayments, and 54% for health care, of which around 1/3 of the money goes into doctor’s visits, 28% for prescriptions, and 28% for insurance premiums.
Read: 12 National Debt Facts
US Healthcare System Explained
What are the Causes of Hospital Bad Debt?
There are several ways in which hospitals can experience bad debt, also known as write-offs.
Sometimes, write-offs are caused by tiny errors during registration, coding, or billing, but most of the time they occur when hospitals provide healthcare services or perform expensive procedures for patients who are uninsured or underinsured.
The number of uninsured patients is increasing of late due to the economic crises caused by the COVID-19 pandemic, and around 27 million Americans have lost their employer-sponsored insurance.
Insurance reforms are also considered the primary cause of bad debt growth, including an increase in copays and deductions.
A Glance at Trends of Bad Debt in Hospitals
Research has shown that a considerable percentage of hospital bad debt comes from the employees who provide care within them, which shows that healthcare workers are not immune to the struggles of paying for medical care, and they are also among millions of Americans facing medical debt.
Doctors and nurses are also susceptible to medical debt especially low-wage essential workers such as medical assistants, housekeepers, nursing assistants, home health aides, and cooks.
Data from the U.S Bureau of Labor Statistics shows that median wages in healthcare support and service were $13.48 per hour in 2019, considerably less than the median pay of doctors and nurses at $100 and $35.17 per hour.
The cost of the health insurance policy is still the same regardless of the income of the worker and costs higher than the compensation of the low-wage workers.
Also, insurance premiums are growing faster than total compensation, making it impossible for low-wage workers to afford the medical care they need.
Hospitals with Highest Bad Debt
Here is a list of the top 5 hospitals with the highest bad debt in the United States:
|Hospitals||Average bad debt|
|Orlando Regional Medical Center||$253,196,054|
|Memorial Hermann Southwest Hospital||$197,766,466|
|Prisma Health Richland Hospital||$183,453,703|
|WakeMed Raleigh Campus||$179,272,214|
|Christus Good Shepherd Medical Center||$165,085,900|
How To Limit Exposure to Hospital Bad Debt?
Here are some tactics that can help hospitals to limit or safeguard themselves against bad hospital debt:
1. Let the patients know about alternative payment options.
You can create a monthly payment system or offer low-interest and flexible payment plans so that the patients can pay you money without cashing out their banks all at once.
In recent years, providers have seen a 43% increase in requests for payment plans from patients. Adopting this tactic can help eliminate the possibility of hospitals not getting paid at all.
2. Identifying exposure to bad debt early
The hospital should be able to identify bad debt possibilities as soon as it encounters the patient.
The hospital can set up a bad debt policy that clears or flags patients that can lead to bad debt before the procedure even begins.
How Can We Reduce the Emergency bad debt?
The patient usually gets unexpected medical debt when the payer charges for other providers, and this could happen when the patient is unable to choose the right treatment and provider.
For instance, when a person gets a heart attack in a public setting, and people call the ambulance, he or cannot decide for himself or would find himself in debt of thousands of dollars for treatment, they didn’t choose to receive.
The amount of hospital bad debt can be reduced by spreading awareness and educating the patients.
Oftentimes, patients are unsure about the visit to an emergency room rather than urgent care visit.
Telehealth is used by many health care providers to reduce emergency department waiting time and reduce the source of spending on non-emergency cases.
Reducing the visits of costly patients who seek emergency care can also reduce unpaid visits.
Hospital bad debt has been on the rise, and adopting certain policies, identifying red flag patients, etc., could minimize the cause leading to this debt.
In this article, we took you through hospital bad debt statistics, hospitals trending on the list, how to avoid this problem, etc. We hope that this article answers your questions.
What is the amount of bad debt that hospitals have?
Across 4500 hospitals in the U.S., the average hospital debt accounted for $11.5 million in the year 2021.
How many people face medical debt because of medical bills?
41% of U.S. adults face medical debt, which ranges from $500-$10,000 or more.
Amit Gupta is the founder of National Planning Cycles, a company that helps startups, individuals, and small businesses with their financial planning. He has a vast amount of experience in the finance sector, having managed Google Play accounts for some of the world’s most successful unicorns. Amit is an expert in his field, and he uses his knowledge to help others achieve their individual goals.