The Rise of Hospital Bad Debt

Hospitals and health systems today are facing a growing tide of bad debt due to many factors, but the biggest problem is patients having to cover more and more of the costs for the care they receive. Healthcare facilities are trying to minimize the impact of bad debt, but obstacles like evolving reimbursement models and claim denials add to the problems they face. This article, and a Modern Healthcare article from June 19, talks about the increase in bad debt and how it impacts providers.

Bad Debt: More than Charity Care

An article from HFMA shows that bad debt and charity care are up 32 percent since 2022 in large hospitals over 200 beds, according to a March 2025 Kaufman Hall Hospital Flash Report. Many hospitals are seeing a higher volume of patients, but that does not always mean stronger financials thanks to uninsured patients and those covered by government payer plans. According to a KFF report, in 2023 7.9 percent of Americans were uninsured while 37.2 were covered by government payer plans (Medicare, Medicaid and military). Those patients tend to be at higher risk for bad debt balances.

Medical bad debt has become less dependent on whether a patient has insurance over the last few years. An article in Business Wire stated that insured patients accounted for more than half of the bad debt write offs as recently as 2023. Hospitals have tried to combat this in different ways. Cleveland Clinic implemented a policy that was originally set to take effect June 1 that would have impacted insured patients who hadn’t paid their copays in advance. At the time, Clinic officials framed the move as a way to streamline billing and reduce outstanding balances. But recently Cleveland Clinic posted in their newsroom an Update on Collection of Copays after facing backlash for the planned changes.

Denials on the Rise

Adding to the rise of bad debt problems is an increase in denial rates. The Experian Health 2024 State of Claims survey almost 3 out of 4 providers in the survey said that claim denials are increasing compared to the same survey in 2022. It was an uptick of 31 percent over the previous survey while confidence in automation and artificial intelligence dropped by more than 25 percent. Missing or inaccurate data, authorizations and incomplete/inaccurate patient information are the leading cause of climbing denials.

The consequences of denials range from delayed reimbursements, revenue leakage, administrative burdens and lower patient satisfaction, which all have an impact on health care finances.

The Need for Early Out

Learning from the mistakes others have made, it is important to understand how to work with patients to navigate financial challenges. Ensuring payment plans are affordable for those with insurance can make the difference between successfully collecting what they owe or writing it off as bad debt. Working with a successful early out partner has never had a greater impact on successful revenue recovery. Contact Americollect today to get your revenue recovery on the right track.