Tenet Healthcare: Bad Debt Pacesetter?

On Wednesday, insideARM’s Cynthia Wilson filed a story on Tenet Healthcare’s good news about bad debt.  The story, “Tenet Bucks Bad-debt Trend,” reported that the Texas-based hospital system’s 2007 bad debt as a percentage of revenue was just 12.7 percent, the lowest reported amount in the for-profit hospital sector.

If the numbers are accurate, they certainly qualify as “bucking a trend.”  But there’s a caveat in the article that says to me: Whoa, Nellie!

For comparison, Health Management Associates reported a bad debt encumbrance at its hospitals in 2007 that was nearly 11 percent higher than Tenet’s figures.  And Tenet’s self-pay collection rate was 13 percent last year, three percent higher than the for-profit sector’s average.

The supposed drivers of Tenet’s rosy numbers are practices that have long been touted by those invested in improving hospitals’ revenue cycle management strategies: centralizing internal collections, pre-registering patients, and getting self-pay patients to reach into their pockets (however deep or shallow) at the point of sale. 

What’s the best thing about “upfront money” for hospitals, most of which struggle to collect self-pay accounts?  In an industry where self-pay too often means no-pay, upfront money’s greatest attribute is that… it’s money.

While all of these factors may have contributed to Tenet’s success, the hospital operator also excelled in another category: charity care allocations and uninsured discounts.

Whoa, Nellie.  The Fitch report that compiles data for the for-profit hospital sector explicitly noted that the agency will be keeping its ear to the door for signs that Tenet’s “[charity care] policies are too aggressive.”

There are lessons to be learned here.  Diligent and innovative collection practices (internally or in partnership with a third party agency) are integral to improving hospitals’ bottom lines.  At the same time, there are many ways to make the ordinary seem extraordinary (isn’t that the gist of Tuna Helper?), even in healthcare finance. 

And horses make effective, dual-purpose metaphors for parsing trends and aberrations surrounding healthcare bad debt.