Bad debt climbs as patient defaults, denials impact hospital revenue growth

Editor's Note

Bad debt—payments hospitals expected to collect but ultimately had to write off—is increasing across hospitals as patients struggle to pay their share of healthcare costs and insurers raise the rate of claim denials, Modern Healthcare reported June 19.

Citing a Kaufman Hall analysis of data from about 700 hospitals, the outlet reports median bad debt as a percentage of gross revenue rose 2.9% year over year as of April. Separate from charity care, the unpaid balances are increasing complexity as costs rise and more patients are enrolled in high-deductible health plans. Kaufman Hall’s Erik Swanson is quoted as saying net revenue growth is not keeping pace with gross revenue, and that hospitals are holding onto debt longer before writing it off.

Cleveland Clinic CFO Dennis Laraway told Modern Healthcare that 87% of the system’s 2024 bad debt came from insured patients who failed to pay copays, deductible balances, or coinsurance. The system saw a 15% increase in bad debt over the past year. It initially attempted to implement a policy requiring patients to pay their copay before outpatient services or risk cancellation but revised the approach following public backlash. The health system now offers 0% interest payment plans to help patients keep appointments.

The article also highlights mounting payer denials as a major contributor to lost revenue. Initial denial rates increased 7.6% year over year, and write-offs due to final denials rose by 33.3% — figures attributed to Kodiak Solutions, which analyzed data from 2,100 facilities. Denials were often linked to high-cost inpatient claims and disputes over medical necessity. In fact, hospitals are now losing approximately 3% of net revenue to final denials, which is reportedly on par with the operating margin of many not-for-profit systems.

The full report offers additional detail, including recommendations from revenue cycle experts to mitigate these trends and additional testimony from Northwell Health and other sources.