hospital accounts receivable

They merged their identities, their facilities, and their mission statements. And then they attempted to merge their bad debt. In the case of two large Midwest hospitals that merged in 1997, determining what to do with a combined bad debt of more than $100 million was one of the most difficult decisions hospital administrators had to make. Faced with the challenge of how to address the hospital's unpaid accounts receivable was a team of financial executives from the two hospitals--the CFOs, patient accounts directors, and controllers.

Debbe Winkle, former interim director of patient accounts for one of the hospitals, was on the team. She recalls that, following the merger, leadership was focused on such things as combining the two hospitals' computer systems and determining which accounts were at which collection agencies. "The last thing we wanted to be dealing with was bad debt," she says.

One option the team explored was moving the accounts from a primary, agency to a secondary agency. "Not all of us wanted to pursue that option," says Winkle, who owns Outsource Receivable Services in Indianapolis. "Once you've written your A/R off to bad debt and sent it somewhere else, it can be very cumbersome transferring all that data from one agency to another."

The hospital's other option was to sell its bad debt. In the 1990s, however, it was rare for hospitals to sell their accounts receivable to a debt buyer, and Winkle and the rest of the team wanted to ensure that the hospital maintained a positive image in the community. "Our number one concern was that once we sold the accounts, we would lose all control," Winkle says. "We didn't want a bunch of bad public relations in the community, especially right after a merger."

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