The Average Rural Hospital Has Large Amounts of Bad Debt: Are You One of Them?

Bad debt is known as the uncompensated care from the amount that is not paid by the payer or patient regarding a portion of the bill for services rendered, and there’s been a significant increase in the amounts of bad debt hospitals have had to write off during recent years.

 

During the 3-year period from 2015 to 2018, hospital bad debt went up from less than $1 billion to around $56 billion. Out of all these hospitals, those in rural areas have been hit the hardest. Over the last ten years, more than 120 rural hospitals across the US have had to shut down. Right now, well over 900 rural hospitals, or more than 40% of the total number, are facing the possibility of closing their doors in the near future. This is especially difficult considering the number of individuals who desperately need healthcare in those areas. 

More than 20% of hospitals do not have a formal system for recovering bad debt

Why Do Rural Hospitals Have So Much Bad Debt? 

Rural hospitals are consecutively named to have the highest number of unpaid bills, or bad debt. The root cause is poverty; unlike larger cities, rural areas have less opportunity for economic growth, and therefore admit patients who more than likely can’t pay for the services they receive. Here’s a closer look at three reasons why rural hospitals have so much bad debt.  

Lack of Insurance

Because a majority of rural areas are impoverished, it stands to reason that they won’t have the money or resources to obtain health insurance. Many of these communities lack stable, well-paying jobs that provide benefits such as health insurance, and those in these areas are underpaid and unable to afford health insurance; some don’t even know how to access it. 

High Deductibles

For those that do have insurance, they’re likely paying lower monthly rates and facing a higher deductible, but without money budgeted for medical expenses. So while these individuals may be insured, it could prove to be impractical if their deductible is so high that they’re unable to afford medical services when rendered. 

Ineffective or Non-Existent RCM Processes

More than 20% of hospitals do not have a formal system for recovering bad debt, and many rural hospitals don’t have the in-house resources to properly investigate and pursue bad debt. This compounds the other issues that make it difficult for them to collect the revenue they’ve earned. Some rural hospitals just send a bill at the start of every new month and, if the money doesn’t come in over a certain period of time, they either write off the amount or hand it over to a third-party collection agency; these  agencies typically take a commission of around 30% of the amounts recovered. 

How Can Rural Hospitals Reduce the Risk of Bad Debt?

Starting small can help rural hospitals improve their revenue cycle management, and ultimately, allow them to make more money while delivering quality care. These simple tips are a good place to start: 

1. Get a system in place that flags high-risk patients as a financial risk. 

Your system should identify high-risk patients such as those without healthcare or with high-deductible plans as early as possible. Then, be proactive. Offer these patients a payment plan, or require them to pay a deposit upfront, particularly for non-emergency procedures. 

2. Educate patients about the true cost of procedures.

There should be a system in place where patients can be accurately informed about the total cost of a procedure or treatment, before they even undergo it. If they have health insurance, they should also be informed how much the insurer is likely to pay and how much they’ll have to pay. Clearly communicate cost with the patient because if the final bill comes as a total surprise to them, they’re much more likely to default.

3. Invest in a professional healthcare RCM company. 

An experienced and highly skilled RCM medical billing service will not only take over the job of communicating with insurance providers, but will also take care of electronic claims submissions and provide regular financial reports. It’s an investment up front, but one where you will surely get a positive ROI while having confidence knowing your billing and coding is being done right so you can maximize your revenue. 

Improve Your Collections and Boost Revenue for Your Rural Hospital

Running a healthcare organization is already exhausting and expensive; leave the complicated work of billing and coding to the professionals so you can focus on providing quality care. At Ultimate Billing, we’re committed to helping you collect more of what you make so you can profit while building a better reputation for your rural hospital.

 

If you want to streamline collections and boost your revenue, schedule a quick consultation with our team.