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At the Margins

How to make affordable financing a win-win for patients and hospitals

Sarah Gabriel

As more patients enroll in high-deductible insurance plans, hospitals are looking for new ways to improve upfront collections—including partnering directly with financial institutions to offer financing options.


Median Account-Based Health Plan Enrollment at Large Employers

Sometimes these partnerships take the form of a medical credit card, typically a bank-issued card pre-loaded with the patient’s debt, through which the financial institution buys the patient debt from the hospital and assumes full responsibility for collection.

However, because medical credit cards often carry significant interest rates in excess of 20%—which can limit patient eligibility and pose a public relations risk to the hospital—several providers are pursuing an alternative strategy that minimizes the drawbacks of traditional medical cards.



Assuming shared risk for patient balances

For example, St. Hubbins’ Health System, a pseudonymed five-hospital system in the East, jointly carries the risk for patient balances with a large bank, rather than transferring full responsibility to a third party.

The hospital maintains ultimate liability for all balances, which keeps interest rates low (generally below 10%) for patients in the program, and agrees to reassume patient debts for non-performing accounts after 90 days.

St. Hubbins’ Health System



Benefits to the hospital and the patient

St. Hubbins’ approach benefits the hospital because it receives 100% funding from the bank within 72 hours, which improves cash flow. The health system also realized considerable improvements in collections over baseline performance. Despite 50% of St. Hubbins’ accounts ultimately reverting to the hospital after 90 days, the system was able to reduce its bad debt by 47%.

From the patients' perspective, interest rates are lower than those on traditional medical credit cards and monthly bills are more manageable. The patient is only required to pay the larger of 1% of the principal balance (including interest and fees) or $10.

Learn More

Financial Leadership Council members can read our study, Optimizing Front Office: Best Practices for Securing Coverage and Maximizing Patient Collections, to learn more about improving point-of-service collections.

The Advisory Board’s Payment Navigation Compass improves patient access workflow through truly automated submission, retrieval, and preauthorization tracking. On average, our members are able to authorize 80% or more of patient accounts without any human intervention. Learn more.

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