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Bad Debts

What is a bad debt in healthcare?

Bad debt in healthcare represents an estimate for a bill that the patient or other payor cannot, or will not, pay. Bad debt is also referred to as uncompensated care. 

Some healthcare providers will report a bad debt as the difference between what a patient was billed and the amount of the bill that was paid. 

Patients who cannot or will not pay their entire medical bill are often uninsured or underinsured, meaning they pay for the entire cost themselves or have a health plan with an out-of-pocket cost they cannot afford. 

Why does bad debt need to be minimized?

Bad debt is the amount of a bill that is left unpaid and, as a result, directly affects a hospital’s revenue. Depending on the amount of bad debt sustained by a hospital, this can drastically affect its success and the quality of care and services it can provide. 

There are several approaches that hospitals can take to reduce bad debt, such as identifying patients who are a financial risk before their procedure and creating a payment plan to avoid incurring bad debt. This also helps the patient gain financial control over their medical care. 

Another tactic to reduce bad debt is to minimize unnecessary emergency room visits. Doctors are accomplishing this by using telehealth, which helps to lessen the resources used on non-emergency cases. This then lessens the number of patients seeking expensive care when it is unneeded, reducing the risk of unpaid care.