In March 2025, a new federal rule will take effect. This rule will stop unpaid medical bills from showing up on consumer credit reports. It aims to help patients who have trouble paying medical debt. But it also creates new problems for healthcare providers managing their payments. Usually, unpaid medical bills hurt patients’ credit scores. This gave patients a reason to pay their bills.
Without unpaid bills on credit reports, patients might feel less pressure to pay. This could make it harder for hospitals and doctors to collect money. The problem might be bigger for patients with commercial insurance, who often have higher costs to pay on their own.
Data from 2,000 hospitals and 275,000 doctors show some important trends. Together, they manage over $262 billion in unpaid bills and nearly $1.6 trillion in yearly revenue. Patients with commercial insurance are taking on more financial responsibility. But at the same time, they are paying less of what they owe after insurance covers part of the cost.
Between 2023 and 2024, there was a 1.5% rise in initial denial rates for commercial health plans. Medicare Advantage plans saw a 4.8% increase. Denial rates mean how often insurance claims are rejected when first submitted. More denials mean more work to fix or appeal claims before money is paid. Higher denial rates plus more patient costs make it more likely bills won’t get paid on time.
Another problem is that many patients do not understand their insurance plans. They may not know their out-of-pocket costs or the details of coverage limits. This confusion slows down payments and increases the amount of money hospitals and doctors have to wait for.
Revenue leaders are trying different ways to handle these challenges. One good method is working closely with clinical departments. When clinical staff and billing teams work together, they can reduce claim denials by checking documents and codes before sending claims.
Automation is also becoming important. It helps process simple accounts and speeds up claims handling. This allows staff to spend more time on complex cases. Automation also lowers errors that happen when work is done by hand, which can cause more denials.
Teaching patients is another key step. When patients know about their insurance benefits, co-pays, deductibles, and payment choices before care, they are less confused after visits. Organizations now use financial counseling and pre-service notices to help patients plan for costs.
Leaders also use payor scorecards. These track how often insurance companies deny requests for information on claims. With that data, healthcare groups can negotiate better deals and spot insurers who deny too many claims. Sharing this data helps make payors more accountable.
Removing unpaid medical bills from credit reports changes how patients behave financially. Before, medical debt could stay on credit reports for years. This affected patients’ ability to get loans, mortgages, or housing. Hospitals used this as a way to encourage payment—patients wanted to avoid credit damage.
With the new rule, that incentive is weaker. Patients who used to pay bills to protect credit scores might delay paying or avoid it. This makes it harder for healthcare providers to collect money.
The rule aims to relieve patients from financial hardship caused by medical debt on credit reports. But for hospitals and doctors, this might lead to more unpaid bills and losses unless they try new ways to collect payments.
Hospitals and doctors watch key performance indicators (KPIs) to measure how well their payment teams work. The main KPIs include:
Watching these KPIs helps leaders spot problems early and create solutions. For example, more initial denials might mean claim coding or paperwork is wrong. Lower point-of-service collections could show patients are confused or not counseled well before care.
With new rules about medical debt reporting, tracking bad debt will be more important. Ignoring rising bad debt could cause big financial problems.
Artificial Intelligence (AI) and automation tools are being used more to help with rising denial rates and patient payment problems.
AI can write appeal letters when claims are denied. This saves staff time and helps claims get processed faster. AI creates accurate appeals that fit each case.
AI also looks at large amounts of data to find why claims are denied or delayed. It shows which insurance companies deny the most, which departments have issues, and where problems happen in the payment process.
Automated workflows cut down on manual data entry and flag accounts needing quick attention. Automation also helps send personalized messages to patients about payments and plans. This can improve payments made at care time and reduce bad debt.
AI can improve front office tasks too. For example, some AI tools help answer phones and respond to patient billing questions. This lowers wait times and frees staff to do other work.
As denials rise, hospitals and doctors see the value in working together. Linking clinical work with payment teams helps make sure claims have the right documents and codes. This keeps claims in line with insurance rules.
Sharing data about claims and denials between providers also helps. It allows teams to learn from each other and negotiate better contracts. Payor scorecards show which insurance companies deny too often, so contracts and rules can be adjusted.
With medical debts no longer on credit reports, healthcare groups must change how they manage payments. It is more important to prepare patients early through education, checking insurance eligibility, and financial counseling.
Using AI for data analysis, automation, and patient contact can reduce manual work and help collect more payments. Connecting clinical and payment functions helps make claims right the first time and lowers denial chances.
Practice managers, owners, and IT staff who plan ahead and take action will help their organizations stay financially stable as these changes take hold.
The primary headwinds are increasing initial and final denial rates, a growth in Medicare managed care, and rising patient financial responsibility combined with challenges in collecting payments.
Kodiak benchmarks KPIs using objective claims data from 2,000 hospitals and 275,000 physicians, analyzing trends to create a National Payor Scorecard tailored to revenue cycle performance.
Initial and final denial rates are steadily increasing, particularly among commercial health plans and Medicare Advantage plans, which pose challenges for providers.
Hospitals can integrate clinical departments with revenue cycle operations, automate account management, enhance analytics for root cause identification, and deploy generative AI for appeals.
Commercially insured patients are responsible for a larger share of their bills yet are paying less, aggravating revenue cycle performance and increasing bad debt.
Organizations can develop granular payor scorecards, create data-sharing communities, and strengthen contract language to mitigate inflated RFI denial rates.
New federal regulations are removing unpaid medical bills from consumer credit reports, diminishing the incentive for patients to pay their medical debts.
Revenue cycle leaders should monitor initial denial rates, accounts receivable aging, point-of-service collections, and bad debt to understand revenue cycle performance.
Enhancing patient education about health plan benefits can lead to better understanding of patient responsibilities and potentially improve collection rates.
Automation minimizes manual processing of low-value accounts, enables better allocation of resources, and enhances efficiency in claims management.
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