Addressing the Rising Challenge of Bad Debt in Healthcare Finance

Rising bad debt and charity care have emerged as a defining financial challenge for U.S. hospitals. What initially seemed like a temporary disruption has evolved into a sustained trend, prompting finance leaders to reconsider how revenue risk manifests across the organization. According to Pat DeAngelo, President of Claims Management at CorroHealth, the most concerning signal is not the year-over-year increase itself, but its persistence, even as patient volumes remain relatively stable.

Bad debt and charity care are up roughly 10% year-to-date and more than 40%, compared to 2022. That growth reflects hospitals absorbing more financial risk for the same care delivered. Insurance changes, cost pressures, and delayed patient payments all play a role.

Yet DeAngelo points to a deeper operational issue. Hospitals are being asked to do more administrative work earlier in the process with fewer people and fewer dollars. When that breaks down upstream, the financial impact surfaces downstream as uncompensated care.

The forces squeezing hospital margins all at once

Several pressures are converging. Reimbursement continues to tighten, particularly across government programs, while the cost to collect has risen sharply. Staffing expenses alone have multiplied over the past five years, with wage rates in some markets tripling or even quadrupling. As labor costs rise, hospitals struggle to staff teams with the experience required to manage increasingly complex denials.

This complexity has real consequences. Denials today, rather than being routine corrections, often involve layered clinical documentation, payer-specific rules, and nuanced appeal strategies. When teams lack the capacity or expertise to work denials thoroughly and on time, accounts age quickly. What starts as a delay becomes lost revenue.

Workforce constraints add another layer. DeAngelo notes that organizations without flexible or remote work options face an even steeper challenge recruiting skilled revenue cycle staff. In a labor market where talent can choose where and how they work, inflexible models quietly erode a hospital’s ability to protect revenue.

When staffing gaps turn into revenue gaps

The effects of staffing shortages go beyond HR, resulting in measurable financial consequences. As denials increase, under-resourced teams are forced to triage rather than fully resolving cases. High-dollar or complex claims compete with repetitive, lower-value work for the same limited attention. Over time, productivity falls and bad debt rises.

DeAngelo describes this as a snowball effect. Each missed follow-up or delayed response increases downstream workload. Eventually, teams spend more time chasing aging accounts than preventing revenue leakage in the first place. Hospitals with thin margins have little room for that inefficiency.

Where location quietly shapes financial risk

Regional differences highlight critical patterns. In the West and Midwest, hospitals face a combination of higher Medicaid exposure, workforce shortages, and increased payer friction around eligibility and authorization. These regions also tend to experience more strain in the middle of the revenue cycle, where the claims quality and timeliness are most vulnerable.

Talent availability varies by geography. DeAngelo observes that organizations in the Northeast often retain stronger denials management expertise, while parts of the Midwest and South face greater difficulty recruiting staff capable of handling today’s claim complexity. Medicaid policy differences further complicate matters. In states such as Illinois, where Medicaid funding can be exhausted before year-end, hospitals face uncertainty that directly affects collectability.

Patient responsibility also differs regionally. In many Western, Midwestern, and Southern markets, patient willingness or ability to pay post-insurance balances remains lower. Even when coverage exists, skepticism about responsibility persists, increasing self-pay balances and, ultimately, bad debt.

From cleanup mode to risk prevention

As uncompensated care rises, hospital finance leaders are shifting how they think about protection. The focus is moving away from recovering dollars after the fact and toward preventing revenue from slipping away early on. That shift reframes claims management as a risk discipline rather than a back-office task.

Many organizations are reassessing long-held assumptions about outsourcing and partnerships. What once felt like an admission of failure is increasingly viewed as a practical response to capacity and expertise gaps. DeAngelo notes growing acceptance of blended models that combine internal teams with external resources to reduce cost to collect while maintaining quality.

The change is cultural as much as operational. Leaders are recognizing that no internal team, regardless of dedication, can absorb unlimited complexity without support.

The volatility no finance team asked for

Medicaid redeterminations have introduced new unpredictability into payer mix and reimbursement. Volatility undermines forecasting and makes it harder to align staffing and operational investments with expected revenue. While hospitals have limited influence over policy outcomes, they can adjust how precisely they manage eligibility verification, documentation, and payer-specific requirements.

Traditional labor-heavy processes struggle in this environment. Without timely visibility, organizations often discover problems only after revenue has already aged into bad debt. Planning care delivery and financial programs around anticipated reimbursement realities becomes essential, even when those realities are less than ideal.

Numbers don’t tell the whole story

Most hospitals are not short on data. They can track denials, days in accounts receivable, and write-offs. What they often lack is insight into why claims fail and which ones deserve immediate attention. DeAngelo argues that real-time prioritization remains underutilized.

VISION Clinical Validation Technology® brings a new line of sight, aggregating information beyond standard EHRs and EMRs to reveal not just what is happening, but where to focus attention for the greatest impact. By comparing internal and cohort data, the GenAI-powered technology highlights where dollars are being left on the table and where recurring issues are starting to emerge, enabling finance leaders to direct efforts proactively and address root causes before they worsen.

That visibility supports education and correction. When recurring patterns are identified early, teams can address root causes before losses compound.

Automation needs the human touch

Claims management technology has evolved, but mindset matters. While automation should reduce repetitive work, it shouldn’t replace expertise. DeAngelo cautions against viewing artificial intelligence as a universal solution. AI can improve accuracy and speed in certain workflows but it does not eliminate the need for human judgment, particularly for complex, high-dollar claims.

PRISM Enterprise RCM Technology™ takes those insights and operationalizes them—layering on top of existing systems to route work based on skill set, automate work listing, and drive more consistent processes. By prioritizing claims according to business rules and financial importance, the AI-enabled platform ensures the right resources are deployed where they matter most, helping hospitals convert more accounts into revenue instead of bad debt.

Moreover, timely posting and reconciliation also play a crucial role. Resolving claims without closing the loop only adds unnecessary work and delays cash.

Building resilience before revenue slips away

Looking ahead, financially resilient health systems will be those that combine operational transparency with specialized expertise and intelligent workflows. Rather than replacing existing EHR or EMR systems, many organizations are layering technologies, like VISION and PRISM, that strengthen reporting, optimize task assignment, and ensure the right work reaches the right team at the right time.

Equally important is re-engineering how existing systems are used. Many platforms perform exactly as they were implemented years ago, even as payer behavior and denials have evolved. Updating workflows and pairing technology with the right mix of internal and external expertise allows hospitals to respond earlier and more effectively.

Bad debt and uncompensated care are unlikely to recede on their own. Hospitals that treat them as structural risks, rather than episodic problems, will be better positioned to protect margins while continuing to serve their communities.