Growing Bad Debt Is Not the Disease, But the Symptom — Part 1

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Even in today’s highly charged economic climate, there are some healthcare providers who outwardly appear to accept bad debt as a fact of life; others attempt to solve it by throwing more money at it, usually unsuccessfully; but the best-run healthcare providers know to look upstream to find the source of bad debt and eliminate wasteful business processes that are causing it to grow.

What follows are four areas every healthcare provider might overlook (but should explore) when bad debt unexplainably balloons. For this article we also turned to Janet Gondeck from our sister company, J.C. Christensen Associates (JCC), which frequently works with healthcare providers to curtail bad debt.

Lack of patient payer due diligence

One of the biggest sources of growing bad debt is lack of due diligence when it comes to payers. Missed insurance, workers compensation, even Medicare and Medicaid, can artificially balloon bad debt.

“There was a point where I had four people on staff who billed insurance to the tune of millions of dollars,” says Gondeck of JCC. “I have one person now.” Once you devote resources to patient insurance due diligence, the impact on bad debt is immediate and the results can be long lasting.

Real-world example. One of our clients, a large healthcare organization, hired ProSource to assist with a migration to a new A/R system. Our job was to manage accounts receivable on the legacy system during the transfer.

When we arrived, the client had a large backlog of A/R that after our analysis revealed some business practices that were compromising the provider’s revenue stream. For one, the clinical side of the operation tolerated bad debt, especially when it belonged to patients with relatively low balances, many of which had been denied claims.

The usual practice was to let these small balances accumulate to the tune of millions of dollars and then write them off to bad debt at the end of the year. By working with ProSource, our client reassigned staff from collections (and hired ProSource to backfill those duties) and had them focus on insurance follow-up.

ProSource worked all the accounts, even those with small balance accounts. This approach not only streamlined the client’s overall accounts receivable process but it also made their monthly bad debt forecasts more accurate.  Bad debt placements became more stable and predictable, instead of mysteriously ballooning one month and shrinking the next. Overall recovery increased, bad debt fell, and, by moving more staff to insurance, days outstanding were reduced.

Get it right and keep it right.

This is actually two areas of focus in one. Bad debt can represent issues further upstream, specifically within registration and data accuracy.

What healthcare providers do not need is to chase bad money or waste time chasing bad information. Many times an explosion in bad debt can be the result of a lack of resources or the proper resources at registration. If data about patients is not collected accurately, the affect downstream can be disastrous and eventually result in a collectable account mistaken for bad debt.

Many times data is bad not because it was inaccurate when collected, but because it is too old, says Gondeck. Holding accounts receivable for long period puts them at risk that the patient will move or get a new phone number or make some other life change.

Real-world example: We recently had a large healthcare organization client with growing bad debt that simultaneously found working with its collection partners did not meet expectations. Part of the challenge was that there was a clean handoff of accounts from provider to partner, and as a result there was not sufficient reporting to enable analysis into the root causes of growing bad debt.

After ProSource was retained, we worked within the client’s back office systems via a virtual private network link, so that the actions on the accounts by our staff were visible in real time to our client. The client was able to focus on efforts upstream and, among other tactics, focused on those challenges at registration to enable that department to be more effective. At the same time, because ProSource and the client worked off the same systems, the handoff of accounts receivable could be done faster and, more importantly, when bad data such as a wrong address or phone number was found, it was corrected in the provider’s system.

Continue to Part 2: Knowing your staff and patients keys to ending bad debt.


Roberta Schultz, Director of Operations, ProSource - Roberta Schultz has over 23 years of healthcare Revenue Cycle and A/R Management experience which includes managing various revenue cycle projects for multiple healthcare facilities including physician, hospital, and healthcare organizations.

Janet Gondeck, Operations Manager, J.C. Christensen & AssociatesJanet Gondeck has nearly 20 years of collections experience and began her career at JCC as a healthcare Collection Agent. She has held positions as team leader, supervisor, manager and currently serves as Operations Manager for JCC’s healthcare portfolios working with some of the most prominent healthcare institutions in the nation.

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Posted in Medical Receivables, Patient Access, Patient Financial Services .

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