Earlier this year, at the urging of the White House, the three major credit reporting agencies agreed to remove medical debt under $500 from Americans’ credit reports. Now, the Administration is making a big push for all medical debt to be expunged from credit reports.
While this is welcome news for patients, it could make the revenue cycle management (RCM) process for healthcare providers more challenging. Smaller medical practices in particular struggle to collect outstanding patient debt. If patients no longer have to worry about that debt impacting their credit score, will they be less likely to make timely payments?
The CFPB Proposals
In late September, the White House made the case for removing all medical debt from credit reports. About 100 million Americans have unpaid medical debt, and it has disproportionately affected underserved communities. With medical debt impacting credit scores, many people find themselves unable to purchase homes, buy cars, and open their own businesses.
To address the issue, the Consumer Financial Protection Bureau (CFPB) has begun a rulemaking process that could prevent medical debt from impacting Americans’ credit scores. In a statement, the agency noted that while about 20% of Americans have medical debt, research has shown that this debt is less predictive of future repayment than reporting on traditional credit obligations. Additionally, medical billing tends to be error-prone and/or inaccurate, often due to disputes over insurance payments.
The CFPB outlined its proposals that are currently under consideration. The agency is aiming to:
- Prohibit credit bureaus from including medical debt and collection information on credit reports.
- Prevent creditors from relying on medical bills when evaluating borrowers’ credit applications.
- Keep debt collectors from using the credit reporting system as leverage to pressure consumers into paying questionable debts.
Next Steps for Providers and RCM
The rulemaking process, which would amend the Fair Credit Reporting Act (FCRA) will likely be a lengthy one; both healthcare providers and patients shouldn’t expect any changes until at least 2024. Still, providers will want to watch these developments closely.
With a large portion of medical debt already having been dropped from credit reports earlier this year, as noted in our previous coverage, and potentially all the debt being dropped next year, revenue cycle management (RCM) could become more challenging.
The best option that providers have to fend off negative impacts is to modernize their payment practices. Enabling your team to collect payments upfront or at the point of service is key. For any balances that need to be settled after the appointment or treatment takes place, consider storing card information on file with authorization to charge up to a certain amount, allowing patients to pay via text, setting up recurring payment plans and offering financing solutions, – all proven methods to help patients meet their financial obligations.
With Practice Management Bridge, Rectangle Health can help your practice improve RCM, no matter what challenges lie ahead. For more information on how medical debt is changing, be sure to download Rectangle Health’s Executive Report, The State of Medical Debt.
