The healthcare industry is shifting toward a system where patients are responsible for a greater share of their healthcare costs, and that's got healthcare providers worried because patients have a terrible track record when it comes to paying medical bills. In 2007 patients were responsible for 12 percent of healthcare expenditures, and that's expected to rise to 30 percent by 2012, says Red Gillen, a senior analyst at Celent. "Assuming that the current patient self-pay bad debt levels of 40-50 percent will remain the same in a market with rising deductibles and co-pays, this equates to...roughly $170 billion in bad debt overall," Gillen says.
This looming mountain of bad debt is driving the strategic thinking and product development around healthcare payments today, particularly for collections, or, in today's more careful vernacular, revenue cycle management (RCM). The complex web of providers, insurers and patients, coupled with the manual, paper-based processes used by many providers, makes reconciliation difficult and automating the process all the more vital. "Because of the potential benefits, RCM solutions vendors are enjoying a 'tipping point' in 2008," Gillen writes in his report, The 'Retailish' Future of Patient Collections. "Celent projects that 37 percent of provider locations will have an RCM solution...by 2014," up from 19 percent in 2008.