How Changes to Medical Debt Reporting Can Impact Your Medical Practice
Updated: Dec 6, 2022
Your healthcare business may opt to utilize a long-term and often vital tool to recover unpaid debt: reporting balances to the credit bureau. Oftentimes, this action may trigger a stagnant account to become active and you realize additional revenue. Unfortunately, lingering medical bill balances do affect patients who have insurance and the ability to pay some but not all the balance. In fact, an industry survey across age groups shows millennials have the highest medical debt at 52%.
But, starting July 1, 2022, reporting changes by the three major credit reporting agencies begin. One of the changes will get rid of paid medical collection debt from a consumer’s credit report right away. Previously, the debt may remain on a credit report for up to 7 years, even though it’s been paid. But now, the credit report agencies say they will no longer include it in their credit reports.
Also, the agencies plan to extend the time it takes for unpaid debts to show up on credit reports from 6 months to 12 months. This will give consumers more time to sort out their unpaid debt with you or their insurer. Additionally, overdue medical debt below $500 will be removed from consumer credit reports, starting in the first half of 2023.
Other Actions That Will Impact Healthcare Providers and Patients at Large
The Biden-Harris administration also announced plans to guide agencies to take actions that will lessen the burden of medical debt on Americans. Actions to be taken by some agencies include:
1. Investigation of Billing Practices
The HHS has been directed to evaluate healthcare providers billing practices and their effect on access and affordability of care. The organization will look over various data, including medical bill collection practices and financial assistance, from thousands of providers and recommend better policies for the public.
Also, The Consumer Financial Protection Bureau (CFPB) plans to investigate and hold accountable debt collectors who violate consumers’ rights. Back in January, the CFPB released a bulletin reminding providers and insurers of the No Surprise Act and its commitment to preventing unlawful medical debt collection and reporting.
2. No Medical Debt in USDA Loan Repayment Calculations
The US Department of Agriculture (USDA) will no longer consider medical debt when determining whether borrowers can repay their loans. This means that medical debt will not be included in the borrower repayment calculation. So, more Americans will be able to meet the USDA rural housing service loan requirements and can get a mortgage.
3. Removal of Medical Debt from VA Care
With the new rule established by the Department of Veteran Affairs, veterans’ medical debt from VA care will no longer be reported. This step was taken to help veterans improve their creditworthiness. And, it will enable more veterans to get a mortgage, secure a job, and generally live better.
In closing, while some debate that medical debt shouldn’t be included at all on credit reports, this option has recovered millions of unpaid balances for healthcare businesses. In light of these changes, it is incumbent upon your practice to continually educate your front and back office team on figuring out a viable solution to meet patients where they are in their finances.
This may mean taking less than you’d want or customizing a temporary payment plan until your patient is on sound footing again. As well, ensure your third-party collection agencies have processes in place to accurately report balances to the credit reporting bureau and help your patients navigate the cumbersome and sometimes lengthy dispute process with insurance companies.
When you find your resources are stretched thin to consistently reach out to patients, insurance companies, or third-party payors, RMK steps in to alleviate this time-consuming portion of the revenue cycle to improve financial recovery and ensure patient satisfaction.