A definable under/over line separates paying from non-paying patients

Patients who owe providers $500 or less in out-of-pocket expenses tend to pay down the bill. Those who owe more than $500 are evidently inclined to ignore collections efforts and pay nothing at all.

Kodiak Solutions discovered the fine line after analyzing more than 3 million claims and payments recorded by more than 1,850 hospitals and 250,000 physicians. The data is from 2022-23 and resides in Kodiak’s revenue cycle analytics platform, which the company’s clients use to monitor revenue cycle performance.

Kodiak (formerly Crowe healthcare consulting) released its findings in a February report.

How adeptly hospitals, health systems and physician practices manage the $500 “pay vs. walk away” line makes the difference between net revenue and bad debt, the company suggests.

Kodiak further found that, on a national scale, less than half of patients’ out-of-pocket payment responsibilities, 47.6%, actually gets collected.

Applying this rate to the amount U.S. patients owe for their care—around $1.1 billion—suggests providers split the difference, collecting $500 million or so while writing off that same amount.

Kodiak observes that many of these missed payments likely became bad debt during the COVID-19 pandemic, “a period in which every dollar counted.”

Adding to the pain more recently was the April 2023 decision by the three leading consumer credit rating agencies—Equifax, Experian and TransUnion—to stop factoring in unpaid medical debts of $500 or less.

That development “likely eliminated an incentive—a lower credit score—for patients to pay their small-dollar unpaid medical bills,” Kodiak comments.

Some other key findings from the report:

• Patients with some form of insurance coverage accounted for 53% of the estimated $17.4 billion that hospitals, health systems and medical practices wrote off as bad debts in 2023.
• The 47.6% out-of-pocket collection rate of 2022-23 represents a sharp drop from 2021, when the rate was 54.8%.
• For bills of $100 or less, provider orgs collect only 69 cents on the dollar. As the bills rise in dollar amount, the collection rate only falls further.

Kodiak net revenue and revenue cycle specialists offer three recommendations for managing the line separating paying from non-paying patients:

1. Solidify point-of-service collection practices at all scheduled patient encounters.
2. Implement policies to collect deposits on accounts where patients will have a higher dollar financial responsibility on an episode of care.
3. Provide patients with financing options for higher-dollar balances, as 50% of all patients’ financial responsibilities are between $1,001 and $5,000.

The report is available for downloading in full for free.