Medical Debt Relief Could Mean a Big Shakeup for Providers

Medical debt relief could mean a big shakeup for providers

Collecting patients’ outstanding balances has always been challenging for healthcare providers, and it might soon become more difficult. Recent actions by the credit reporting agencies to help relieve patients of medical debt could require medical practices to rethink how they handle collections. 

Medical Debt Is About to Change

In 2022, the Biden-Harris Administration put pressure on the Nationwide Credit Reporting Agencies (NCRAs) and medical providers to reduce the burden of medical debt for the American public. The White House said that medical debt is the largest source of collections—more than credit cards, utilities and auto loans combined. And medical debt impacts communities disproportionately; Black and Hispanic households are more likely to hold debt than white households, according to data from the U.S. Census Bureau.

As a result, Equifax, Experian and TransUnion have agreed to remove medical debt under $500 from Americans’ credit reports. While this helps patients who are facing financial hardships, it creates a business conundrum for providers. Patients, potentially, now have less incentive to pay their medical bills, given that failure to do so won’t have any immediate impact on their creditworthiness.

According to the credit bureaus, nearly 70% of medical collection debt is expected to be removed from consumers’ credit reports following this development. In a joint statement, the CEOs of all three agencies said that they are “committed to continuously evolving credit reporting to support greater and responsible access to credit and mainstream financial services.”

The change is the latest in a series of actions by the NCRAs to support consumers. The NCRAs said last year that paid medical collection would no longer be included in credit reports. Additionally, the agencies said that they would increase the time that debt appears on credit reports from six months to a year. These moves undoubtedly help millions of people with unpaid debt, particularly low-income individuals who are relying on good credit scores to receive approvals for loans or apartments. 

Adding to Medical Providers’ Struggles

Providers have already been struggling to collect on patient payments. High-deductible insurance plans that place more of the financial burden on patients have made it difficult for Americans to keep up with their medical bills. 

Moreover, medical practices and hospitals alike are still reeling from the worst days of the pandemic. Health system executives polled by the CWH Advisors 2022 Patient Pay Study said that normal collections protocol was disrupted for nearly two years. Workplace shortages and turnover continue to negatively impact collections.

Now, with substantial medical debt being dropped from credit reports, it could be even harder for providers to collect outstanding balances.

Optimizing the Payment Experience

Providers should take this opportunity to modernize their patient payment experience. Many practices, particularly smaller ones, are relying on antiquated methods for collecting patient payments, which is often why RCM can take upwards of 90 days.

Card on File: Securely storing a patient’s credit card information for future payments may not be a panacea for solving medical debt, but it comes close.  Saving card information in a secure solution like Card on File in Practice Management Bridge® allows a practice to make convenient collections as needed while keeping patients’ data completely confidential.

Text-to-Pay: Text payments are a quick and convenient way for medical practices to collect outstanding balances. Text message communication reduces the burden on staff, and has a higher success rate than calling and leaving voicemails. Text-to-Pay in Practice Management Bridge® enables providers to either send individual messages or bulk messages to collect outstanding balances. Patients immediately see balances due and can quickly pay online via a link.  

Patient Financing: For patients who would struggle to pay large balances, providers can offer services that enable a gradual payoff, like Rectangle Health’s Patient Financing solution. Financing is handled entirely by Rectangle Health’s partner HFD, and practices receive payment immediately after patients sign up for the service. Nearly 100% of patients are approved for financing, and they receive multiple payment plan offers just 30 seconds after applying.  

Are your patient payment processes in need of an upgrade? Request a demo and see how Rectangle Health can help modernize your organization. For more insights into the current state of medical debt, download our new Executive Report.


  1. (2022, April 12). FACT SHEET: The Biden Administration Announces New Actions to Lessen the Burden of Medical Debt and Increase Consumer Protection. The White House.
  2. (2021, April 7). 19% of U.S. Households Could Not Afford to Pay for Medical Care Right Away. U.S. Census Bureau.
  3.  (2023, April 11). Equifax, Experian and TransUnion Remove Medical Collections Debt Under $500 From U.S. Credit Reports. Equifax, Experian and TransUnion.
  4. (2023, March 18). Equifax, Experian, and TransUnion Support U.S. Consumers With Changes to Medical Collection Debt Reporting. Equifax, Experian and TransUnion. 
  5. Singletary, Michelle. “Finally, medical debt under $500 has been removed from credit reports.” The Washington Post. (2023, April 12). 
  6. (2023, March 23). 2022 PatientPay Study. CWH Advisors.

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