Tough Economy, Holiday Pressures Call for Flexibility When Collecting Medical Debt

As the economic crisis was becoming known to the world in September, a clearer picture of the hospital industry’s economic challenges was coming into view, and it was not a pretty picture.

A survey by the American Hospital Association showed the industry’s uncompensated care expense was up eight percent from July through September, compared to the year ago period. Meanwhile, the majority of hospitals surveyed said the percentage of patients unable to pay for care was rising.

Hospital industry analysts are predicting hospitals’ financial health will worsen in 2009 as the recession -- which officials now say began in December 2007 -- leaves more people unemployed, uninsured and unable to pay for medical care. Likewise, some analysts fear budget deficits could mean cuts in Medicare and Medicaid coverage, which account for 50 percent of the industry’s revenues.

“The prognosis for the hospital sector is negative and we suggest that things will likely get worse before they get better,” Barclays Capital Analyst Adam Feinstein wrote in a note to investors.

Feinstein noted that the for-profit hospital sector’s collection efforts at the point of service kept the sector’s third quarter 2008 bad debt expense as a percentage of revenue relatively flat compared to a year ago. Nonetheless, Kaulkin Ginsberg Health care Analyst Michael Klozotsky says medical debt placements with collection agencies continue to increase, in part because many insured patients are delaying paying their medical bills in favor of paying other household expenses.

“Folks are struggling to stay in their homes and probably are unlikely to worry about paying a medical bill,” Klozotsky said. And despite the weak economy, consumers will want to celebrate the holidays in some way, leaving even less money for other expenses.

Klozotsky said collecting medical debt in these tough economic times may require a change in strategy for some agencies, a sentiment that was shared by a vast majority of respondents in a recent accounts receivable management industry survey.

According to the latest Kaulkin Ginsberg Quarterly Credit & Debt Collection Industry Confidence Survey, healthcare receivables collectors are increasingly considering altering their collection strategies. The survey asked how likely agencies were to modify collection strategies given the economic situation, and 36.4 percent answered “Very Likely.” Another 55.7 percent said they were “Somewhat Likely” to change strategies.

In the near term, Klozotsky suggests collectors focus on small accounts that might be paid in one to three payments, without competing much with monthly living expenses and holiday plans.

“If an account has a balance of $150, it may be a small enough bill that they might in fact be able to pay or agree to pay it over two or three months,” Klozotsky said. “While that doesn’t solve (hospitals’) overall debt problem, every drop in the bucket is still a drop in the bucket.”

If collectors are lucky enough to get patients avoiding bill collectors on the phone, be sensitive to the issues affecting their lives and be willing to work out a longer term payment agreement, says Jay Gonsalves, owner of Action Collection Agency in Middleboro, Mass.

“You’re really endeavoring to work with patients to get accounts paid as quickly as you can,” said Gonsalves, who also is president of ACA International. “Do it in such a way that is sensitive to whatever issues are involved with the patient.”

Editor's Note: Kaulkin Ginsberg is the parent company of insideARM.com.