Patient Bankruptcy – What Revenue Cycle Professionals Need to Know for Their Organization’s Own Fiscal Health

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What do experts mean when they say high health care bills are the number one cause of bankruptcy in the US?

Studies differ on exactly what percentage of personal bankruptcies filed each year are associated with high medical bills.  Some say the number is greater than 40%. Others estimate the number is larger, even more than 60%.  Regardless of where experts may pinpoint the exact percentage, it seems clear most agree that high healthcare bills are the most common reason cited by debtors for filing bankruptcy, more common than things like job loss and divorce. What’s probably most startling about these numbers is that many researchers note that a significant percentage of these folks actually have health insurance.

What all of these statistics suggest is that the patient who files bankruptcy is not an outlier and not an insignificant part of your provider organization’s overall financial picture.  This article will discuss what revenue cycle professionals need to know about bankruptcies among their patient populations to protect themselves fiscally and from compliance risks. 

The historical approach

When asked, many providers reveal that when they learn a patient has filed bankruptcy, they simply write off debts which are patient responsibility in lieu of filing the appropriate paperwork with the bankruptcy court to collect the sums to which they are entitled. Many providers who do file claims often do so only for very high balances or on a case-by-case basis and very few have a comprehensive strategy that includes proactive identification of bankruptcy filings.

The provider’s need for a solution

As noted previously, the proliferous nature of what some have called medical bankruptcy means that more and more patients cannot pay and are filing bankruptcy as a result.  When a patient files bankruptcy, a statutory protection called the “automatic stay” attaches making it unlawful for a provider to attempt to collect the debt in ways other than presenting a claim to the bankruptcy trustee. Conversely, claims which are timely and properly presented to the bankruptcy trustee are entitled to payment to the extent of bankruptcy estate assets.  Typically, claims must be filed in a short time measuring from the first meeting of the creditors. They must also be filed using the prescribed format and must also follow rules as to what information must be redacted or face liability for violation of HIPAA and bankruptcy rules.

What this means is that many providers have an opportunity not only to protect themselves from unnecessary risk relating to violation of the automatic stay but also to create a new and sizeable revenue stream.  A provider can accomplish both objectives by establishing a proactive bankruptcy identification tool and a comprehensive claim filing strategy. 

Tools available to providers

There are several search tools available to proactively identify bankruptcy filings which can help providers avoid violations of the automatic stay, including the federal PACER database. Once a process is in place to identify bankruptcies, providers can create a process to file by manually producing claims or by filing electronically.  And a very common practice within a bankruptcy strategy is to partner with specialized firm and/or vendor to help with this process.

The value of creating a comprehensive bankruptcy strategy

Regardless of which of the available tools a provider chooses to build its bankruptcy strategy, implementing a program which is proactive and comprehensive will create a new revenue stream and protect the organization from unnecessary risk. 

Like many patients today, providers are facing their own fiscal challenges and it just makes sense for smart providers to take these steps and take advantage of the benefits that come with it.