How's your bad debt?


It didn’t surprise HME consultant Karen Moore when Rotech Healthcare announced this week, as part of its latest financial earnings, that its bad debt was too high and that it would fight to get it under control.

Moore, vice president of AnCor Healthcare Consulting, says many HME providers are looking to reduce bad debt as a way to make up for lost revenue.

“With all the decreases in reimbursement, that’s where you can do some picking up,” she said. “The industry standard is 3% but a lot of companies are running as high as 6% to 8%. If you can reduce that and put it directly to your bottom line, that’s major.”

Rotech reported contractual and bad debt adjustment levels of $6 million higher than expected for the fourth quarter. That’s on top of a $17.8 million reduction in net revenue due to various reimbursement cuts last year.

Before providers get too excited about boosting their bottom lines, though, Moore says reducing bad debt isn’t always easy.

“Everyone wants a simple answer, but I’ve been in the HME industry for 20 years, and there’s no simple answer,” she said. “It’s almost 100 small things.”

Some of those “small things”: Making sure you hold employees accountable for their quality of work and productivity, and making sure you have systems in place to collect co-pays and other secondary payments upfront, Moore says.

About the latter, Moore says: “The clinics in hospitals are getting a lot smarter about this. I’ve read where some clinics, if you don’t give them insurance, they request a fairly larger retainer amount before they’ll even see you.”

Reducing bad debt also takes time—three months if a provider’s company is in fairly good shape, at least six months if it’s not, Moore says.

“If it’s an ideal situation and you have a team of well trained and well managed employees in place, and you just need tweaks and processes and controls, then you can see results in a few months,” she said.

Liz Beaulieu


Bad debt has always been a health care problem from when I started in, I hate to say it, 1975. The biggest obstacle for HME's is you go to the patient as opposed to the Hospital, Lab, Doctor etc. where the patient goes to the provider because the patient needs the provider at their choice for whatever; be it an exam or a procedure of some kind made at the discretion of the patient. A referral telling a patient someone is going to be bringing them xyz is not always viewed by the patient as a needed out of pocket expense. HME's for the most part provide aids not cures and that has a completely different perception. Fact is fact a person sitting in an ER with their finger in an ice cooler isn't going to tell the ER I am not paying the co-insurance so I don't need you to re-attach my finger but they may sleep on their couch or crawl up the stairs before paying the co-insurance for the hospital bed suggested by the referral!

What is more surprising is that in this unprecedented environment of audit activity and government scrutiny, neither Karen nor Dominic recommended something that DMEPOS providers ARE in control of: collecting the required documentation up-front during the referral process rather than crossing one's fingers and hoping that it will come through later. Even the best customers can take months to return CMNs, let alone copies of a face-to-face visit or oximetry testing results. These are leading causes of bad debt. Even the most loyal and talented employees can't collect on bad debts caused by a lack of documentation. The referral source and patient are much more motivated to help provide the necessary paperwork when they're waiting for a discharge or delivery than months down the road when the therapy or equipment is well-established or no longer medically necessary. DMEPOS providers need to change their intake practices to control what they CAN control: the front-end admission process.

I am not sure I understand Lisa's response about the relevance between the documentation collected and bad debt. Most of the industry's bad debt is the result of patient responsibility or irresponsibility. All needed Documentation to bill third party payors has no relevance to this issue. ALL documentation to substantiate the efficacy of the order, delivery and billing has ALWAYS been the responsibility of the Provider.