Reducing bad debt through digital transformation: How LifeBridge Health minimized their bad debt by 20%

Rising hospital bad debt continues to be an ever-ringing toll for US health systems - that is, a deep, melancholic sound. not a bright, uplifting melody. Since reaching a total of $56.5 billion in 2018, these unrecoverable expenses incurred by healthcare providers have only been exacerbated by the growing responsibility patients have for their medical expenses and the poor financial conditions caused by the pandemic.

According to a 2021 survey conducted by Sage Growth Partners, 36% of health systems faced more than $10 million in bad debt. These precarious financial conditions carried into 2022, which began the year with four straight months of negative operating margins and ended with over 20 health systems reporting losses.

While the accrual of bad debt can be due to a number of contributing factors including “errors in registration, coding, or billing” and other reported causes such as provider-specific, revenue cycle management policies, industry-wide regulations, and insurance reform, patient responsibility is often the most significant factor. Kalorama Information, a market research firm that specializes in the healthcare industry, names patient payment responsibility as one of the largest factors for bad debt in hospitals, estimating that patient out-of-pocket expenses could reach as high as $491.6 billion by 2025.

Though the overall outlook for hospital bad debt continues to be bleak, it is possible to reduce the accumulation of bad debt by a significant margin. In a recent talk given at 2022’s Oracle Cerner Health Conference, Flywire client, LifeBridge Health, sharedhow theyreduced their overall bad debt by 20% by leveraging digital transformation to enable better financial outcomes for patients. Their digital transformation journey allowed for a better consumer experience, providing more affordable payment options, greater patient engagement, and pathways to needed consolidation. This journey led to an increase in patient collections, lower collections costs, and reduced staff burden- proven ways to have a demonstrably positive effect on bad debt levels.

Continue reading for a blueprint for how health systems can use digital transformation to decrease their own bad debt balance, including:

  • an examination of the growing patient responsibility in healthcare
  • successful strategies for combating bad debt
  • insights into the principles LifeBridge Health used to achieve $10 million in bad debt savings

The continuing rise of patient debt in healthcare

If hospital bad debt and patient medical debt are intrinsically linked, then bad debt not only manifests as the financial hardships carried by health systems, but also offers a real window into contemporary economic conditions and the struggles American families are having paying for their medical care. As an article from Health Catalyst states: “Despite funding resources, such as Medicaid or government stimulus money, health systems still fail to collect money from procedures as a result of patients’ job circumstances or even high-deductible plans that employed persons cannot pay.”

Medical debt is a real problem for American families who are having a hard time budgeting for these expenses. Less than half of Americans are setting aside more than $50 per month for medical expenses even though 41% of Americans are carrying debt due to medical bills. This debt isn’t just limited to balances carried by the health system, but also includes secondary debt from credit cards, collections agencies, banks and other lenders. The average American household now holds more than $5,000 in medical debt.

The continued taking on of water by American families due to medical expenses, and the unchecked surge of those costs, is causing real fear within Americans about seeking out medical care. In a recent Flywire survey of 2000 patients about their billing and payment experience, 85% of patients stated that they were concerned about rising medical costs while 40% said that they had delayed or postponed a procedure or treatment because they couldn’t afford it. This is a major concern for health systems because, as patients begin to put off medical care, overall hospital income declines.

It’s important to note that while healthcare costs are particularly difficult to manage for the uninsured, insured patients are having just as difficult a time and just as dramatic an impact on bad debt numbers. Research firm KFF says that currently, “About one-third of insured adults worry about affording their monthly health insurance premium, and 44% worry about affording their deductible before health insurance kicks in…”. This aligns with a report by Modern Healthcare, which found that the amount of bad debt from insured patients has increased more than five-fold in the last three-year period.

With the growing exposure patients have to medical debt and its relationship to bad debt, it becomes clear that helping patients make healthcare more affordable creates a win-win scenario, minimizing debt for both the patient and the provider.

Strategies for minimizing bad debt through digital transformation of the patient experience

According to data platform Healthcare Catalyst: the strong tie between hospital bad debt and patient medical debt means that successful approaches to debt management focus on creating affordable paths for patients to manage their healthcare: “An effective bad debt management approach provides the patient with every financial resource possible and allows the health systems to focus less on payment and more on delivering the best care.”

Given the strong negative impact bad debt has on health systems, it’s shocking to learn that very few have concrete strategies in place to minimize bad debt exposure or recover bad debt. As found in an article from Definitive HC, over 1 in 5 hospitals do not have a bad debt recovery process. It could be said that this in part be due to, until recently, there not being a plethora of tools available for health systems to educate patients on their financial options and arm them with affordable solutions without engaging in costly, time-consuming, manual based procedures. But as more digital solutions become available in the revenue cycle space, those times have changed.

Flywire hc personalization image 3 2x

Addressing Affordability

In working with 4 of the top 10 largest health systems in the US and over 70 active clients, there are 6 pillars that Flywire recommends in order to address affordability through digital transformation. These types of tactics increase collections by making the patient experience richer and easier to manage.

Leverage machine learning and analytics to provide personalized touchpoints to patients by understanding their capacity to pay and communication preferences.
Automate the financial experience to ease the burden on staff creating less phone calls, less sticking points, and accelerating payments.
Deploy an omnichannel approach to coordinate the different forms of engagement, including text, email, chat, and paper statements.
Provide remote payment options for self- service, so that patients can pay their bill anytime and anywhere.
Use digital technology to enable automated, instant communications, like chatbots. Allow patients to find answers to questions like “ What's my balance? Has my insurance paid? Can I set up a payment plan? What are my options?" on their own time.
Deliver affordable solutions like payment plan offers to combat cost. If a patient can afford $100 on a $1,000 balance, don't send them a bill for $1,000. This slows down payment and creates an unsatisfying financial situation. Instead, automatically send them a payment plan for $100 a month over the next ten months and let them get actionable on their healthcare expenses from the beginning.

LifeBridge Health: Insights into hospital bad debt reduction

LifeBridge Health is an integrated delivery network located in and around Baltimore with five acute care hospitals, and over 1,900 beds. With a medical group practice of over 960 providers across 175 locations, LifeBridge is a large system.

When it comes to the patient’s financial experience, size can breed complexity. When LifeBridge started their digital transformation journey, they had eight different telephone numbers from which patients could call about their bill, whether it was to make a payment, set up a payment plan, or ask questions. Compounding the confusion, agents taking the calls were often in different locations throughout the system, causing variability in training and messaging.

Affordability and ease of payment was also an issue as there were multiple online portals, which caused additional confusion, and payment plans were only extended up to 12 months with patients having to go through an application and approval process.

LifeBridge Health solved these challenges by implementing more digital solutions to encourage self-service, increase affordability, and provide the information patients needed to make financial decisions instantly. Their digital transformation included:

  1. Using data-driven, machine learning protocols to expand their payment plan terms, going beyond 12 months, up to 60 months interest free without application or approval.
  2. Offering a singular digital platform by which patients can pay their bills, self-selecting the payment option or payment plan that best fits their financial condition.
  3. Introducing 24/7 telephony, so patients can not only go online and pay, but they can call in and pay via their outstanding balance in an automated way.
  4. Offering consolidated statements to reduce billing confusion.

Implementing these changes allowed LifeBridge Health to consolidate their call centers and reduce early out vendors to create less confusion around billing outreach and saving them over $1million dollars annually.

From consolidating their call centers to revamping their statements, to offering better online options to settle balances, LifeBridge Health built a new financial experience aimed at consumerism and powered by digital.

“Not only are we addressing the patient experience and improving that, but what we've learned is that if we provide patients with more options in a friendly manner patients have a likelihood to pay. It continues to be a return on investment...From a digital payment standpoint, we saw an increase in payments just on the hospital side alone, over $7 million in additional patient payments. We also saw a 19.6% decrease in bad debt expense.That is about $10 million annual expense on the hospital side.”- Joe Koons, Vice President of Revenue Cycle, LifeBridge Health.

To learn more about LifeBridge Health’s success with Flywire, check out our LifeBridge Health page, with additional resources that cover every aspect of their transformation journey.