Over 6 months into the pandemic and with nearly 7 million cases, COVID-19 continues to rock the US healthcare system leading providers to look for new ways to handle bad debt.

Healthcare providers are suffering significant financial damage as a result of the pandemic. Hospitals and health systems have been hit hard by low volumes, staggering revenues, and a slow recovery.

Pre-pandemic, hospitals have struggled with increasing bad debt (Bad debt refers to patient debt that is considered unrecoverable, i.e. when unemployment or bankruptcy prevents patient payments according to the new standard).

Healthcare providers have always struggled to collect payment from uninsured people and even from insured people who can’t or won’t pay skyrocketing out-of-pocket costs due to the rise of high deductible health plans.

Pre-Pandemic Bad Debt

Healthcare margins typically have been very thin with the median hospital margin at 3.5%. Even before COVID-19, a number of U.S. hospitals struggled with negative margins—in other words, they were losing money on operations.

In 2018, approximately 21 percent of all active hospitals reported $10 million or more in bad debt. A study from TransUnion also showed that patient balances after insurance (PBAI) grew by more than 52 percent between 2012 and 2017.

In the same period, Medicare bad debt increased by about 18 percent (totaling nearly $3.7 billion). Medicare bad debt occurs when recipients don’t pay deductibles and coinsurance.

Prior to the pandemic, the uninsured rate had been increasing incrementally for several years despite an improving economy. The uninsured count grew from 26.7 million in 2016 to 29.2 million in 2019.

This increase in uninsured patients often spells more bad debt for healthcare providers.

COVID-19’s Financial Impact to Healthcare

The American Hospital Association (AHA) estimates that US hospitals incurred more than $202 billion in losses between March 1st and June 30th (more than $50 billion a month) due to a combination of reduced revenue and increased costs during the pandemic.

According to Kaiser Family Foundation, an estimated 27 million people would lose their employer-sponsored insurance due to unemployment as a direct result of the COVID-19 pandemic.

The economic downturn brought about by the pandemic has disrupted insurance coverage for millions of people.

As job losses mount, an estimated additional 10 million people will likely end up uninsured. An additional 11 million people are estimated to turn to publicly supported insurance such as Medicaid, the Children’s Health Insurance Program (CHIP), and government-subsidized coverage on the Affordable Care Act (ACA) Marketplaces.

Data from over 800 hospitals in March revealed that levels of bad debt and charity care had already increased 13% over the previous year. With wider losses in coverage, this is only expected to worsen.

This shift in coverage means healthcare providers and practices will rely more on Medicaid and self-pay patients in the aftermath of the pandemic.

Providers Turn to Outsourcing to Reduce Bad Debt

Increasing healthcare costs, medical billing complexity, and self-pay patients were already leading to a rise in outsourcing of medical billing services pre-pandemic.

But now that COVID-19 has presented even more challenges to healthcare revenues, providers are finding ways to reduce overhead costs by turning to revenue cycle management (RCM) outsourcing.

Many providers have found themselves not adequately prepared to handle billing and collections amidst the pandemic with suboptimal collection rates and weakening margins. Hence, they reach out to revenue cycle management (RCM) partners to assist them.

Nearly 90% of hospitals either have outsourced or plan to outsource their billing functions this year, according to a 2020 Black Book report.

Adapting revenue cycle during the pandemic means putting greater emphasis on self-pay patients to ensure complete, timely payment throughout the recession.

Providers look to trusted RCM vendors to significantly reduce their bad debt through:

  • Implementing patient payment plans and convenient payment options. During the pandemic, providers have found payment plan options to be very successful at improving patient collections. In fact, the flexibility offered by payment plans are quite crucial for many patients during this time as they struggle to make ends meet during the recession. Personalized payment plans can significantly improve patient experience to build loyalty long after the pandemic is over.
  • Fielding patient calls from well-trained staff. Many providers have found their call lines flooded with questions from patients regarding payments once they learn they had been furloughed and would be without income for several months. Having an RCM partner act as a seamless extension of a healthcare facility becomes a huge benefit with patient financial advocates who can communicate information accurately and show care and compassion as they counsel patients throughout the financial experience.
  • Verifying insurance coverage. A TransUnion Healthcare analysis revealed that between 1 to 5 percent of self-pay accounts written off as bad debt actually have billable insurance coverage. Identifying insured patients who are also Medicaid eligible can increase hospitals’ revenue recovery from Medicare bad debt by as much as 10% a year.

Many unknowns persist surrounding COVID-19 and its impacts in the coming fall and winter months. This creates significant revenue volatility for hospitals and health systems nationwide.

Having a well-equipped and trusted RCM partner is key to succeeding during the pandemic particularly since there are more uninsured patients and significant staffing challenges.


About Mnet Health

We believe every patient deserves a helpful, transparent, easy to navigate financial experience in healthcare.

Mnet Health is the premier revenue cycle management and technology provider in the surgical industry. We provide custom patient-pay solutions to surgical hospitals and ambulatory surgery centers. As of 2020, Mnet Health partners with over 700 surgical facilities nationwide and is the preferred vendor of both United Surgical Partners International (USPI) and Surgical Care Affiliates (SCA) – both directly with and in support of centralized billing offices. Mnet’s custom brand, PaySUITE, is a white-labeled payment technology platform that helps surgical facilities and their providers grow their business by helping patients pay.

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