At a glance
Bad debts in the healthcare sector are increasing as patients take on greater financial responsibility. Providers can reduce their exposure by leveraging digital tools to strengthen baseline data accuracy and improve patient financial engagement.
Key takeaways:
- Bad debt is due to several factors, such as inaccurate registration data, patient confusion about costs, and limited payment options, all of which can leave patients with balances they may not be able to pay.
- Traditional collections approaches tend to be manual and reactive, meaning disclosure often occurs too late to impact payment, while teams struggle to manage growing payment volumes on their own.
- To reduce bad debt, healthcare organizations must act sooner, leveraging accurate data, upfront price estimates, and proactive patient financial engagement.
Nearly a third of patients don’t feel confident they can cover health care costs, according to Experian Health. State of Patient Access Survey 2026. Concerns about affordability are the main reason patients think the payment experience has gotten worse over the past 12 months.
For suppliers, this lack of trust often translates into bad debt. When patients are worried about rising healthcare costsThey may delay care or move forward without a clear payment plan. Both scenarios increase the risk of insolvency, as self-pay or underinsured patients may be unable to pay for services and the bill is eventually written off. This can also occur when a patient has active coverage that was lost, unverified, or billed incorrectly.
If providers do not have the necessary steps to identify bad debt exposure, they will have difficulty collecting full payment for services and maintaining high standards of care. This article examines the causes of bad debt in the healthcare sector and what providers can do to solve them. boost self-pay collections.
What causes bad debts in the healthcare sector?
Bad debts rarely boil down to a single problem. In most cases, it is the result of failures in the admission and billing processes, combined with the patient’s ability to pay. For example:
| Factors Driving Bad Debt in Healthcare |
| The costs are not clear from the beginning: When patients don’t receive or understand pricing estimates, they are more likely to delay payment or disengage. |
| Patient data is incorrect or incomplete: Missing or outdated details lead to billing errors and missed coverage, reducing payers’ reimbursement. |
| Insurance verification falls short: Eligibility errors and incorrect benefit information can lead to denied claims, leaving patients with unexpected out-of-pocket costs and providers with little time to seek alternative payment sources. |
| Healthcare financial authorization processes are too slow: If patients do not know they may be eligible for financial assistance or payment plan options before receiving care, balances could be defaulted. |
| Payment options are too limited: When patients can’t find a way to pay that works for them, they may end up paying nothing. |
Why traditional collection strategies fall short
Patient billing has traditionally followed the same pattern: treat the patient first, bill later, and then pursue payment if it doesn’t arrive. But when the balance hits collections, an opportunity to help the patient understand and pay their bill has been lost. Teams spend time working on accounts that would likely never be paid, resulting in higher collection costs.
like him Increase in the number of uninsured and underinsured patientsMore balances are coming into the self-pay category. Relying on slow and reactive manual systems will no longer be enough.
Proven Strategies to Reduce Bad Debt in Healthcare
Reducing bad debt in healthcare starts at the beginning: resolving errors and guiding patients to the right payment options before balances become more difficult to collect. Here are some strategies and tools to consider:
Improve data accuracy in the registry
Bad data creates bad debt. Patient Access Curator™ improves initial accuracy by running multiple data checks on the record to verify patient identity and insurance information in real time. This reduces the risk of patients being billed incorrectly and prevents the creation of unnecessary self-pay balances.
Improve price transparency and patient estimates.
In a recent interviewMindy Fortson, chief customer officer at Experian Health, described how more providers are offering estimates to patients, but noted that doing so is increasingly difficult.
“All contracts are different depending on the payers and the employer. There is insurance verification. And providers have to determine what the deductibles are. All of that contributes to being able to give a more accurate estimate at the point of service.”
Mindy Fortson, Chief Client Officer at Experian Health
Patient estimates solves this by using real-time eligibility data, payer contracts, and historical claims to generate reliable estimates before or at the point of service. Estimates can be shared via text message or the patient portal, so patients get clear, timely information in a format that works for them.
Segment patients by financial risk
Without segmentation, teams must treat all accounts as if they have the same risk. Instead, providers should consider using propensity to pay models to forecast payment probability and improve revenue recovery. By using data to select, qualify, and segment accounts, Collection Optimization Manager Automate this process so staff can prioritize self-pay collections activity more effectively.
Learn how Weill Cornell Medicine implemented a smarter collections strategy that generated $15 million in recoveries, and how you can do the same. This webinar shows how to move faster, work smarter, and raise more—without adding staff.
Engage patients early and often
Proactive patient financial engagement means communicating early with patients about their financial responsibilities and giving them a clear way to take action. Communicating when costs are still a priority makes patients more likely to respond and pay.
Tools like Mark patient and PatientText can be used together with Collection Optimization Manager to send automated, targeted reminders and voice or text payment options.
Offer flexible payment options
The final step to improve patient collections is to offer a variety of payment methods, whether in person at the front desk or by clicking a link in an automated text reminder. Secure Payment® allows patients to pay securely at any time, using any payment method. Patients can settle multiple bills at once or take advantage of payment plans to spread the cost in a more manageable way.
The role of digital transformation in reducing delinquencies
Data from Experian Health shows that providers are increasingly turning to technology to help take collections from reactive to proactive. He Patient Access Status Survey found that 35% are automating data entry and 28% are using artificial intelligence (AI) to improve speed and accuracy.
“With growing opportunities for AI to alleviate front office workloads and reduce claim denials, there is reason to be optimistic about overcoming some of these challenges.”
Mindy Fortson, Chief Client Officer at Experian Health
This requires the use of technology to improve the financial experience and make care more manageable, for example by offering clearer cost estimates and easier payment options. When patients can easily understand their costs and act accordingly, they are more likely to commit and less likely to leave balances unpaid.
Frequently asked questions
Bad debts are rising because patients are shouldering a greater proportion of the costs, while confidence in their ability to pay remains low. Financial pressure, high deductibles, and bill confusion all contribute to lower collection rates.
Clear and timely communication means patients are more likely to understand their financial responsibility and pay on time. Patient outreach tools such as Mark patient and PatientText helping providers connect with patients before and after visits, reducing confusion and increasing collections.
Accurate data, real-time eligibility checks, clear estimates and early participation improve collections. Segment accounts with Collection Optimization Manager helps teams focus effort where a conversion is most likely to result, while providing flexible payment options makes it easier for patients to pay.
Data and enable analytics providers to predict payment behavior and prioritize accounts. With solutions like Patient Access Curator and Collection Optimization ManagerProviders can improve data quality at the time of registration and offer targeted scope, resulting in higher recovery rates and lower collection cost.
Looking ahead: What future trends should healthcare leaders expect in AI and automation?
Experian Health Data shows that healthcare leaders expect AI and automation to become widespread in the next three to five years for revenue cycle management. Additionally, advances in predictive analytics, natural language processing, and automation in healthcare are expected to continue. To remain competitive and financially resilient, healthcare leaders must be prepared to invest in emerging artificial intelligence and automation technology and have a deep understanding of how to apply these tools strategically.
Learn how Experian Health helps healthcare organizations reduce bad debt and increase patient collections.
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