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Rising patient debt strains the US healthcare system, but improving financial assistance, revenue management, and patient engagement can help reduce the burden.

The financial stability of America’s healthcare system is under strain due to rising levels of uncompensated care, including patient debt. Each year, US hospitals face billions in costs from this burden to adhere to their ethical commitment to provide quality care while taking the consequences of the debt upon themselves. Unfortunately, this presents a dilemma for many professionals, particularly those operating under the not-for-profit (NFP) tax status classification. This strain threatens their ability to fulfill their mission of delivering accessible care to all members of their community regardless of insurance coverage status.

The Price of Wellness

Medical bills have taken a toll on Americans’ finances. A recent study by the Kaiser Family Foundation reveals that 57% of US adults have experienced healthcare debt, and 40% are still dealing with these financial challenges. Yet, with new approaches and solutions, bad debt can be reduced by as much as 20% or more—providing significant relief to patients and professionals alike.

At its core, the healthcare system’s financial struggles stem from a complex web of factors, including patient’s inability to pay, gaps in coverage, and technological inefficiencies. However, the impact of patient bad debt is felt far beyond the balance sheet.

Patients with significant financial obligations often avoid preventive care, cancel necessary treatments, and fail to complete specialist referrals. Nearly 70% of professionals say patients will postpone care appointments because they don’t understand their costs or cannot afford them, while 15% say these cancellations happen frequently, ultimately leading to poorer health outcomes.  A Federal Reserve Board study in 2022 reported that 28% of US adults were forced to skip or delay medical care because they could not afford to pay for it. For health systems to thrive in the future, they must adopt a newer, more multifaceted approach that addresses these challenges head-on.

Solutions for Addressing the Financial Burden

Reducing the financial strain on health systems requires strategies elevating operational efficiency and the patient’s economic well-being. Here are several key approaches that can help healthcare organizations reduce bad debt while improving patient care:

1. Implement Patient Financial Assistance Programs
   Patients must be able to access financial support, such as flexible payment plans, financial counseling, and charity care options. By offering these services and presenting them in a consumer-friendly digital experience, professionals can help patients manage their medical bills, mitigating the risk for debt spiraling out of control.
2. Optimize Revenue Cycle Management (RCM)
   Innovative technology and data analytics are crucial in helping health systems reduce bad debt. By correctly identifying insurance coverage before service, the correct workflow is initiated. This includes patient out-of-pocket estimates, collecting patient responsibility at the time of service, offering patient financial assistance, identifying insurance coverage gaps, and vetting patient eligibility for Affordable Care Act (ACA) plans or Medicaid. With newly fortified workflows in place, professionals can reduce administrative errors and improve cash flow using technological capabilities previously unavailable to them.

Health systems should also explore new digital tools that offer patients real-time, mobile access to their financial information. Sending digital statements and offering online payment options make it easier for patients to understand and fulfill their financial obligations, reducing the risk for unpaid balances.

1. Strengthen Patient Engagement
   Patients are more likely to take responsibility for their medical expenses when they feel informed and supported by their healthcare professional. Proactive, consumer-friendly outreach can help patients better understand their financial responsibilities while building trust in the healthcare system. This type of engagement, including educational resources, timely payment reminders, and clear communication about treatment costs, can reduce the risk for bad debt.
2. Collaborate With Payers & Professionals
   By working closely with payers and other professionals, health systems can develop innovative solutions to reduce costs, improve care coordination, and enhance patient outcomes. These partnerships can lead to better financial management strategies and greater efficiency across the healthcare continuum.

How Physicians Can Get Involved

While many operational aspects of reducing patient debt lie outside the physician’s direct control, there are still several ways they can contribute to the solution. Physicians can implement strategies to help patients manage their costs. This is especially important for people facing multiple treatments for severe conditions. By adopting a patient-centered approach, care teams can identify and implement innovative solutions that reduce financial burdens, improve patient outcomes, and ensure the sustainability of healthcare organizations.

Physicians and their immediate teams should seek to understand their health system’s revenue cycle management practices, especially patient financial access and patient financial assistance programs, and advocate strongly to prioritize these issues and solutions. There are always pressing issues in the revenue cycle function, and the patient’s inability to pay for care must be represented and communicated at the leadership table. There are large revenue gains available for the organization to support its margin-mission challenges. By staying informed on these initiatives and participating in RCM discussions, physicians can ensure that their care decisions align with the health system’s clinical and financial goals.

Additionally, physicians can help build trust with patients and advocate for their financial well-being. Physicians often hear first-hand from patients about their frustrations with insurance and billing processes, and in many cases, they share the same frustrations, desiring better payment programs and accessible tools. By encouraging patients to continue discussing their financial concerns openly and connecting them with available resources, physicians can help alleviate the anxiety that accompanies medical expenses and promote timely care. By working together, they can help ensure the long-term sustainability of healthcare organizations while delivering high-quality care to all patients.