Moody's: Higher deductibles, surprise billing legislation will increase hospitals' bad debt

Money and medicine
Moody's warns the trend of bad debts will erode health systems' financial performance even as Congress pushes legislation to reduce "surprise billing" that could benefit consumers but place more billing and collection responsibilities on hospitals. (Getty/holwichaikawee)

After an initial drop after Medicaid expansion, bad debt is on the rise again among nonprofit providers, according to a new report. 

In their latest healthcare report, Moody's Investors Service analysts largely credit the rise to changes in insurance benefit design, such as high-deductible health plans (HDHPs), which have shifted greater financial responsibilities to patients.

Use of HDHPs increased from 4% of overall insured in 2006 to 29% in 2018. 

The analysts also blame rising healthcare costs and efforts to address confusing medical bills. 

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Moody's warns the trend of bad debts will erode health systems' financial performance even as Congress pushes legislation to reduce "surprise billing" that could benefit consumers but place more billing and collection responsibilities on hospitals. 

They also warn rule changes by the Financial Accounting Oversight Board's to the revenue recognition accounting standard will limit the transparency of bad debt. "The revised standard narrows the definition of bad debt and no longer requires disclosure on financial statements," Moody's analysts said in the report.