How Hospitals Can Address Medical Debt and Rebuild Trust

Medical debt erodes trust in health care and health systems. Hospitals have practical, evidence-based options to reduce harm while preserving financial stability.

Medical debt is a widespread problem—with up to 41 percent of Americans in debt due to overdue medical bills—leading to widespread financial, emotional, and physical health concerns while eroding trust in health systems. The U.S. has long dealt with health care affordability, which is only expected to worsen as millions lose health care coverage due to Medicaid cuts and expiring Affordable Care Act (ACA) tax credits. Further, as patients delay or forego care due to financial barriers, health conditions worsen, leading to more expensive care and other negative downstream effects.

It doesn’t have to be this way. Hospitals can reduce the harms of medical debt by better leveraging their existing financial assistance programs and curtailing the use of aggressive collection actions, without sacrificing their own financial stability. To understand hospital efforts, AcademyHealth, with funding from the ABIM Foundation, conducted a two-part environmental scan on the nature and prevalence of health system policies and practices related to medical debt mitigation and collection, and the impact of those policies on patients and clinicians.

Evidence-Based Approaches to Address Medical Debt’s Harms

Hospitals can implement practical, evidence-based strategies that can help mitigate medical debt. However, hospital actions vary widely, with discrepancies between hospital policies and actual practices, given limited standardized federal requirements. For example, more than 80 percent of hospitals maintain policies for providing free and discounted care, but eligibility criteria vary widely. Nearly half (45 percent) of hospitals spend less than one percent of their operating expenses on assisting patients financially. Most hospitals also allow past due medical bills to be sent to collections or have brought legal action against patients, with only a small minority of hospitals prohibiting aggressive collection practices.

Here are some actions hospitals can take to help reduce the harms of medical debt:

Provide and Promote Financial Assistance: Offer free or discounted care to eligible patients. Nonprofit hospitals are required under federal law to meet a community benefit standard, which includes providing financial assistance, in order to maintain their tax-exempt status. Under the ACA, they must also develop and widely publicize their financial assistance policies.
Participate in Hospital Presumptive Eligibility Programs: Allows hospitals to grant temporary Medicaid coverage (typically up to two months) to patients who are likely eligible, with the potential to transition to ongoing coverage.
Financial Navigation Support: Provide services that help patients, families, and caregivers overcome financial barriers, often available for patients with complex conditions such as cancer, and includes assistance with applications for financial and pharmaceutical aid, as well as support in understanding and using insurance benefits.
Prescription Assistance Support: Help patients access programs that reduce or cover the cost of medications. These services are often supported by foundations, pharmaceutical companies, and government programs.
Payment Plans: Offer flexible payment options that allow patients to pay medical bills over time, often with zero or low interest.
End Aggressive Collection Practices: Restrict or prohibit collection actions that can harm patients’ credit or financial stability, helping to protect patients from undue financial distress.

Patient-Centered Financial Assistance and Ethical Billing

Patient-centered financial assistance, ethical billing, and financial navigation are evidence-backed strategies that can reduce the burden of medical debt and bolster trust between patients, clinicians, and health systems. It’s critical for hospitals to avoid predatory practices including legal actions against patients, reporting medical debt to credit bureaus (which has significant downstream financial effects), and selling debt to third parties. At the same time, hospitals can maintain industry billing standards and establish financial policies that help patients access support, such as hospital financial assistance, temporary Medicaid, and other available resources. Hospitals can also play a role in holding insurers accountable for coverage, affordability, and prior authorization practices that can lead to medical debt, helping to address the root issue that many Americans cannot afford the care they need.

Culture Changes to Build Trust

Shifting hospital and organizational culture is necessary to ensure lasting change and building trust. System leaders can lead this shift, keeping in mind the role hospitals and health systems play in their communities and the consequences of widespread medical debt. Addressing medical debt can create a healthier population and ensure that financial resources and buying power remains within communities, which benefits both patients and local institutions.

Hospital staff, including clinicians, may also experience frustration regarding aggressive or predatory practices, which can erode trust internally among staff and externally with communities. Addressing these practices is therefore not only an ethical and operational imperative, but a critical trust-building strategy. To unify leaders, clinicians, and other staff, institutions can explicitly position trust as a shared organizational value and align their financial and billing policies with that commitment. Further, working with community organizations can help streamline financial assistance processes and support those affected by aggressive debt collection practices.

Beyond Hospitals: Additional Approaches to Addressing this Issue

This is not just an individual or health system issue. States also play a critical role in alleviating medical debt. State policy can help standardize processes, including mandating minimum hospital financial assistance and protecting patients from aggressive collection actions.

By adopting patient-centered financial assistance and ethical billing practices, hospitals can play a critical role in leading the effort to address medical debt. However, lasting change requires collective action—especially in the current health policy and financial environment—bringing all who are affected to the table to develop an attainable, just, and equitable approach to addressing medical debt.

More In Trust

View All

How Hospitals Can Address Medical Debt and Rebuild Trust

Find More Posts

Media Inquiries