US healthcare · Back-end revenue cycle · Patient financial experience

Patient Billing, Collections and Financial Assistance

After the payer has adjudicated the claim, what is left belongs to the patient: the deductible, the coinsurance, the copay, or the whole bill when there is no coverage. Collecting it is the slowest, most regulated and most human part of the revenue cycle. This tutorial covers how patients became the third-largest payer, how to estimate and collect before service, how to design statements and payment plans, how financial assistance and the IRS 501(r) rules work, what the No Surprises Act, Medicare's QMB rules, the credit bureaus and state laws now forbid, and how to measure the whole thing.

BeforeEstimate

What will the patient owe?

Benefits from the 271, the contracted rate, and a good faith estimate when there is no coverage.

Money asked for before or at the visit is collected at several times the rate of money billed afterwards.

DuringStatement

Can the patient pay it?

Screen for financial assistance and Medicaid first, then offer a plan the household can afford.

A statement is a request, not a demand. The first 120 days are protected time for many patients.

AfterResolution

Charity, bad debt, or paid?

Every balance ends in one of three places, and the accounting and the law treat them differently.

Extraordinary collection actions are allowed late, rarely, and only after notice. In many states, not at all.

14 chapters4 interactive toolsFigures verified Oct 2026

Chapter 01

The big picture

Patient billing is the part of the revenue cycle where the counterparty is not a payer with a contract and an adjudication engine but a household with a budget. The amounts are smaller, the volume is larger, the collection rate is a fraction of what payers pay, and almost every step is governed by a consumer-protection rule rather than a provider manual.

Twenty years ago the patient share of a hospital bill was a rounding error. Rising deductibles, coinsurance in place of copays, and the growth of high-deductible plans have made patients the third-largest payer for most providers after Medicare and the largest commercial plan. At the same time, a decade of reporting on medical debt, lawsuits and wage garnishment produced a wave of federal and state rules that limit when and how a provider may collect. Doing this work well means collecting what is owed, early and respectfully, while leaving every patient who qualifies for assistance with nothing to pay.

Why it matters in numbers

Collection rate

34.4%

Share of what commercially insured patients owed that providers actually collected in 2024, down from 37.6% in 2023 (Kodiak Solutions, February 2025). In Q1 2026 the yield on the self-pay-after-insurance portion across all payers was 30.1%.

Deductibles

$1,886

Average single deductible for covered workers with a deductible in the KFF 2025 employer survey. 34% of covered workers now face a single deductible of $2,000 or more; at small firms it is 53%. A third of covered workers are in a high-deductible plan with a savings option.

Medical debt

$220 billion

Medical debt owed by people in the United States, with about 14 million people (6% of adults) owing more than $1,000 and 3 million owing more than $10,000 (KFF analysis of the 2021 SIPP). About half of hospital bad debt now comes from patients who had insurance.

Who is involved

Patient and guarantor: The person who received care and the person legally responsible for the bill. They are often the same adult; for a minor the guarantor is a parent, and for a dependent on a family plan the subscriber may be a different person from the patient.
Patient access and financial counselors: Produce the estimate, collect at the point of service, screen for Medicaid and financial assistance, and set up pre-service payment plans. The best collection outcomes are decided here, before any statement exists.
Patient accounts / self-pay follow-up: Owns the balance once the payer has adjudicated: statements, calls, portal messages, payment plans, disputes, and the decision to write off, refer or place with an agency.
Financial assistance team: Administers the financial assistance policy (FAP): applications, presumptive eligibility, appeals, and the record the IRS, the state and the auditors will ask for.
Collection agencies and debt buyers: First-placement and second-placement agencies that work balances under the FDCPA, Regulation F and state law as the provider's business associate and agent. Debt buyers purchase accounts outright; for a nonprofit hospital a sale is itself an extraordinary collection action.
Payers and Medicaid: The adjudication that creates the patient balance (CAS*PR on the 835) and the coverage that can erase it: retroactive Medicaid, a QMB or Medicaid crossover, a secondary plan, or a successful appeal.
Regulators: IRS (501(r) for tax-exempt hospitals), CMS (No Surprises Act, QMB, price transparency, Medicare bad debt), CFPB and FTC (FDCPA, Regulation F, credit reporting), state attorneys general and insurance departments (state medical debt and surprise-billing laws).

What goes wrong

Billing the wrong person

A QMB patient billed for Medicare cost sharing, an in-network patient balance billed for an out-of-network anesthesiologist, a FAP-eligible patient charged gross charges. Each is a violation with a refund and sometimes a penalty attached.

Billing too late

Statements that arrive 60 to 90 days after the visit, after the explanation of benefits and after the patient has forgotten the encounter. Late bills are disputed more, paid less, and run into timing rules on both Medicare bad debt and 501(r).

Collecting too hard

Credit reporting, lawsuits and garnishment against low-income patients who were never screened for assistance. The reputational and legal cost in 2026 far exceeds the recovery, and in a growing list of states the actions are simply prohibited.

Chapter 02

The patient as payer

A patient balance is created by the design of the patient's insurance. Understanding deductibles, coinsurance, out-of-pocket maximums and plan year timing explains why the same service produces a $0 balance in December and a $1,700 balance in January, and why collection rates fall every year.

Where the balance comes from

Deductible: The amount the member pays before the plan pays anything for most services. Resets each plan year (usually January 1, but employer plans may use a different anniversary). Preventive care under the ACA is exempt. A $2,000 deductible means the first $2,000 of allowed charges in the year belong to the patient.
Coinsurance: A percentage of the allowed amount, typically 10% to 30%, owed after the deductible is met until the out-of-pocket maximum is reached. Unlike a copay it cannot be known exactly until the claim is priced, which is why estimates are estimates.
Copay: A fixed amount per visit or prescription, known in advance and usually collected at check-in. Common for office visits, emergency visits and drugs; less common for surgery and imaging in deductible-based plans.
Out-of-pocket maximum: The ceiling on in-network cost sharing for the plan year. For 2026 the ACA limit is $10,600 for an individual and $21,200 for a family; HSA-qualified high-deductible plans are capped lower at $8,500 and $17,000. Balance bills from out-of-network providers do not count toward it.
High-deductible health plan (HDHP): For 2026 an HSA-qualified plan must have a deductible of at least $1,700 (self-only) or $3,400 (family). Members may have a health savings account to pay from; many do not fund it. 33% of covered workers were enrolled in an HDHP with a savings option in 2025.
Non-covered services: Cosmetic procedures, items excluded by the plan, services denied for lack of authorization where the patient signed a valid waiver, and care from a provider the plan does not recognize. The full charge, or the self-pay rate, is the patient's.
Self-pay: No coverage at all, or coverage the patient chooses not to use. Entitled to a good faith estimate under the No Surprises Act, and usually to an uninsured discount from the provider's own policy.

The trend in numbers (KFF Employer Health Benefits Survey, October 2025)

Measure	2025	What it means for billing
Average annual premium, single / family	$9,325 / $26,993	Employers hold premiums down by raising cost sharing; the shift lands on the patient balance
Worker contribution to family premium	$6,850 (26%)	Households already pay a large fixed cost before any care; a deductible on top is often unbudgeted
Average single deductible (workers with a deductible)	$1,886	A typical January imaging or surgery visit lands entirely on the patient
Workers with a single deductible of $2,000 or more	34%	53% at firms with 10 to 199 workers, 28% at larger firms
Average single deductible, small vs. large firm	$2,631 vs. $1,670	Employer size is a usable proxy in propensity models
Enrolled in an HDHP with a savings option	33%	One in three commercially insured patients will owe the full allowed amount early in the year

Why patients pay less than payers

The balance is a surprise

Patients did not know the number

Only 41% of patients in Experian Health's 2025 survey received a cost estimate before care (up from 29% in 2022), and the share who said it was accurate fell to 71%. A bill that was never expected competes with rent.

The amount is large relative to income

Deductibles outrun savings

A $2,000 deductible is more than a month's take-home pay for a large share of households. Kodiak's data show patients are likely to pay bills of $500 or less and much less likely to pay bigger ones; the median balance a hospital carries is now well above that line.

The bill arrives late and confusing

Statement after EOB after visit

Payer adjudication takes two to six weeks; the patient statement follows. By then the patient has an EOB that says "this is not a bill," a statement that is, and no easy way to reconcile them.

The fix is timing and clarity

Collect at the front, explain at the back

Point-of-service collections rose to 24.8% of all patient payments in Q1 2026 (from 22.7% a year earlier) as providers moved money forward. Clear, itemized, digital statements with a plan offer recover more of the rest.

Fictional example · Jordan Doe

Jordan Doe (DOB 1985-04-12, member ID NWH123456789) is covered through Acme Manufacturing's plan with Northwind Health Plan (group GRP00451): a $2,000 deductible, 20% coinsurance and a $6,000 out-of-pocket maximum. In January Jordan has an MRI at Riverside Medical Group billed at $1,800 with a contracted allowed amount of $950. Nothing of the deductible has been met, so the 835 shows CAS*PR*1*950.00: Jordan owes the entire allowed amount and Northwind pays $0. The same MRI in December, after the deductible was met, would cost Jordan $190 (20% of $950). The provider's work is the same; the patient balance is five times larger in January.

Chapter 03

Estimates and point-of-service collections

The cheapest dollar to collect is the one the patient agreed to before the service. Pre-service financial clearance combines eligibility, benefits, the contracted rate and the patient's accumulators into an estimate, then asks for payment or arranges a plan while the patient is still engaged.

Building an estimate

1
Verify eligibility and pull benefits Scheduling, and again 1–3 days before
The 271 response returns the deductible, how much has been met (remaining), coinsurance percentage, copays by service type, and the out-of-pocket maximum with the amount used. Network status of the rendering provider and facility decides which column applies.
2
Price the expected services Scheduling
Use the CPT/HCPCS codes the clinician expects and the payer's contracted allowed amount (or the payer-specific negotiated charge from the price transparency file). For bundled episodes include the facility, professional, anesthesia and pathology components or say which are excluded.
3
Apply the benefits in order Automated
Copay first where one applies, then the remaining deductible against the allowed amount, then coinsurance on what is left, all capped by the remaining out-of-pocket maximum. The result is the patient's expected share.
4
Deliver it, in writing Before service
Self-pay and uninsured patients must receive a good faith estimate (GFE) under the No Surprises Act. Insured patients receive a plan-based estimate as good practice and under several state laws. Keep the estimate with the account: it is the reference for any later dispute.
5
Ask Before service or at check-in
Request the copay and the estimated deductible share, offer a card on file or a pre-service payment plan, and screen for financial assistance or Medicaid when the household cannot pay. Emergency care cannot be conditioned on payment (EMTALA), so the ask moves to discharge.

Accumulators move

A deductible checked on Monday may be met by Wednesday if another provider's claim posts first. Estimates should say that the amount depends on claims processed before this one, and the point-of-service ask should be framed as "estimated" with a refund promise if the plan pays more. Over-collection must be refunded promptly; many states and the 501(r) rules treat delayed refunds as a compliance issue.

The good faith estimate for uninsured and self-pay patients

Requirement	Rule	Practice note
Who receives it	Any uninsured patient, and any insured patient who says they will not use coverage, when a service is scheduled or an estimate is requested	Ask the coverage question at scheduling and record the answer
When it is due	Within 1 business day if scheduled at least 3 business days ahead; within 3 business days if scheduled 10 or more days ahead or if requested without scheduling	Automate from the scheduling system; manual GFEs miss the clock
What it contains	Patient identifiers, the primary service, expected codes and diagnoses, itemized expected charges, the provider and facility names and NPIs, and disclaimers including dispute rights	Use the self-pay rate, not gross charges, if that is what you will bill
Co-providers and co-facilities	The law requires the convening provider to include them; HHS has deferred enforcement of that element pending further rulemaking, and as of 2026 it remains deferred	Say which providers are excluded so the patient is not surprised
Dispute right	If the final bill from a provider exceeds that provider's GFE by $400 or more, the patient may start patient-provider dispute resolution within 120 calendar days of the bill, for a $25 fee	Collections must pause while a dispute is open; see Chapter 08

Point-of-service collection practice

Ask every time

Copays and known amounts

Copays are owed under the plan and are collected at check-in without discussion. Scripts that assume payment ("Your copay today is $40; would you like to use the card on file?") outperform scripts that ask whether the patient would like to pay.

Estimate and offer

Deductibles and coinsurance

Present the estimate, the full amount, and two alternatives: pay today, or a plan starting today. Capture a card on file with written consent to charge the final balance up to a stated cap once the claim adjudicates.

Know when not to ask

Emergency, QMB, FAP-eligible

EMTALA bars delaying emergency screening or stabilization for payment questions. QMB patients owe no Medicare cost sharing. A patient already determined FAP-eligible owes at most the discounted amount. Flags in the registration system must stop the ask.

What point-of-service collection looks like by payer (Kodiak, Q1 2026)

Payer category	POS cash as share of patient payments	Why
Traditional Medicaid	50.2%	Small, fixed copays where they exist at all; little left to bill later
Medicare Advantage	27.6%	Copay-based benefit designs that are known at check-in
Commercial and managed care	24.7%	Deductible and coinsurance balances that depend on adjudication
Medicaid managed care	23.0%	Low copays, high churn in eligibility
Traditional Medicare	15.0%	Part B 20% coinsurance on an allowed amount that is not known until the claim prices; Medigap and QMB crossovers resolve much of it

Overall, point-of-service collections were 24.8% of patient payments in Q1 2026, up from 22.7% in Q1 2025, yet the overall yield on patient balances still slipped to 30.1%. The front end is improving; the back end is where the money is lost.

Pre-service financial clearance checklist

Eligibility verified within 3 days of service, with network status of every billing entity Facility, surgeon, anesthesia, pathology, radiology
Benefits captured: remaining deductible, coinsurance, copay, remaining out-of-pocket maximum
Prior authorization and referral on file where required A missing auth converts a patient estimate into a provider write-off
Estimate produced and delivered in the patient's preferred channel and language GFE for self-pay within the statutory clock
Medicare patients checked for QMB and Medicaid; ABN issued where a service may be non-covered
Financial assistance screening offered when the estimate exceeds what the patient says they can pay Presumptive screening where available
Payment collected, card on file consented, or a payment plan started, and the outcome recorded on the account

Chapter 04

Propensity to pay and segmentation

Not every balance should be worked the same way. Propensity-to-pay models sort accounts by the likelihood and ability of the household to pay, so that staff time goes where it changes the outcome, assistance goes to patients who qualify, and patients who can pay get a frictionless path to do so.

Segmentation is also a compliance tool. A patient with an estimated income under 200% of the federal poverty level should be routed to financial assistance screening, not to an agency. A balance under a statement threshold should be written off rather than mailed four times at a loss. A Medicare patient with QMB status should never be billed at all.

Inputs that predict payment

Signal	Source	Direction	Caution
Balance size	Account	Smaller balances are paid at much higher rates; balances in the thousands rarely resolve without a plan	Segment by size before anything else
Coverage status	Registration, 271	Insured patients with a deductible balance pay more often than uninsured patients with the same balance	Uninsured accounts should be screened for Medicaid and FAP before being treated as self-pay
Estimated household income and FPL%	Patient-stated, credit-bureau or demographic estimate, prior FAP determinations	Below 200% FPL: presumptive charity. 200–400%: sliding scale. Above: ability to pay is likely	Third-party income estimates are models, not facts; use them to route, never to deny
Prior payment behavior	Patient accounting history	Patients who paid prior balances, or completed a plan, usually pay again	Old bad debt may reflect a dispute, not an unwillingness
Estimate given before service	Estimate record, GFE	Patients who were told the amount pay sooner and dispute less	An inaccurate estimate hurts more than none
Digital engagement	Portal activation, email, mobile number, text consent	Patients reachable by text and email pay faster and at lower cost	Text and autodialed calls need consent under the TCPA
Balance age	Days since first statement	Collectability falls sharply after 90 to 120 days	The 120-day 501(r) clock and the Medicare bad debt clock both run from the first statement
Credit-based scores	Bureau "healthcare" scores	Predictive of payment, widely used by vendors	A soft inquiry; some states restrict use, and a score never justifies skipping FAP screening

From segment to workflow

High propensity

Self-service, low touch

Digital statement the day the claim adjudicates, text and email reminders, one-click payment and plan enrollment in the portal, no calls. Cost to collect is pennies and the recovery is high. Over-working these accounts annoys the patients who were going to pay anyway.

Medium propensity

Plans and people

Statement plus an outbound call or message offering a plan sized to the household. A human conversation at day 30 to 45 is where most of the recoverable money in this segment is decided. Pre-approved plan terms let staff say yes without escalation.

Low propensity, able to pay

Agency early, respectfully

Patients with means and a record of not paying. Full statement cycle, then first placement, within the rules: no extraordinary collection action before day 120 for a nonprofit hospital, 30-day notice before any ECA, no credit reporting in states that forbid it.

Low propensity, unable to pay

Assistance, not collections

Presumptive charity screening, Medicaid enrollment help, and a FAP application. For a nonprofit hospital, finding these patients is a legal obligation (reasonable efforts); for every provider it is cheaper than four statements and an agency fee that recovers nothing.

Do not let a score replace screening

A propensity score is a probability of payment, not a finding of ability to pay. The IRS, state attorneys general and plaintiffs' lawyers have all treated "we sent them to collections because the model said so" as the problem, not the defense. Every path to an extraordinary collection action should pass through a documented financial assistance screen first.

Chapter 05

Statements, digital billing and payment plans

The statement is the provider's one guaranteed communication with the patient about money. It must be correct, timely, readable, and lead directly to a way to pay, a way to ask questions, and a way to apply for help.

Anatomy of a good statement

Amount due, once, large: One number, the date it is due, and the ways to pay it. Everything else on the page explains that number.
Itemization that reads like the EOB: Date of service, provider, service description in plain words, charge, what insurance paid and adjusted, and what remains. Patients compare the statement to the EOB; the numbers must tie.
Guarantor and patient clearly named: A parent receiving a statement for a child, or a subscriber for a spouse, needs to see both names. HIPAA permits the guarantor to receive the bill; sensitive services may need the patient's confidential communication request honored.
Payment options on the first statement: Online portal and QR code, phone, mail, and the payment plan terms available without calling. Plan offers that appear only on the third statement are offered too late.
Financial assistance notice: Nonprofit hospitals must include a conspicuous written notice on billing statements that financial assistance is available, with the phone number and website for the FAP (26 CFR 1.501(r)-4). Several states require it of all hospitals.
Dispute and questions contact: A phone number, hours, and a secure message path. For self-pay patients with a GFE, the patient-provider dispute resolution right should be referenced.
Language and accessibility: Plain language, large type, translations for the languages that meet the 501(r) "limited English proficiency" thresholds (the lesser of 1,000 people or 5% of the community served), and accessible digital versions.

Cadence: a typical cycle

1
Claim adjudicates, patient balance posts Day 0
The 835 CAS*PR amounts transfer to patient responsibility. Insured balances should not be billed before the payer has adjudicated, and secondary coverage must be exhausted first.
2
Digital notice and first statement Day 1–5
Text or email with a link to the itemized statement, and a paper statement unless the patient opted out. This date starts the 501(r) 120-day clock and, for Medicare cost sharing, the bad debt clock.
3
Reminder and second statement Day 28–35
A plan offer sized to the balance, and a financial assistance prompt for balances above a threshold or where the income estimate is low.
4
Call campaign and third statement Day 60–70
Outbound calls or messages to the medium-propensity segment. Record every contact: the date, channel, outcome, and whether the FAP was mentioned.
5
Final notice Day 90
For a nonprofit hospital this is the written 30-day notice required before any extraordinary collection action: it must say assistance is available, name the ECAs intended, state a deadline no earlier than 30 days out, and include the plain-language FAP summary. For others it is the pre-placement letter.
6
Placement or write-off Day 120+
Accounts not resolved move to a first-placement agency, a presumptive charity write-off, or (Medicare cost sharing) the bad debt log once "reasonable collection effort" is complete. The FAP application window stays open to day 240.

Digital billing in 2026

Patients want it

62% prefer to pay online

J.P. Morgan's 2025 healthcare payments report found 62% of consumers prefer to pay medical bills online, and 72% of consumers under 35 have switched or would switch providers for a better payment experience. Paper remains the default at most providers.

Channels

Text, email, portal, IVR

Text-to-pay links have the fastest response; portal statements tie to the EHR record; IVR covers patients without smartphones. Consent rules differ: texts and autodialed calls to mobile phones need prior express consent under the TCPA, and Regulation F sets opt-out rules for agencies.

Card on file and auto-pay

Consent in writing

Pre-service authorization to charge the adjudicated balance up to a cap, with the estimate attached, is lawful and effective. It must state the cap, the timing, how the patient will be notified before a charge, and how to cancel. Charging an un-estimated amount without notice generates chargebacks and complaints.

Payment plans

A payment plan converts a balance the patient cannot pay today into one they can pay over time. The provider's goal is a term short enough to be worth administering and a payment small enough to be kept. Plans offered inside the statement, with no call required, enroll the most patients. Interest-free plans administered by the provider or a bank partner have displaced most interest-bearing medical credit products, which the CFPB and several states have criticized for deferred-interest terms; some state laws now cap interest on medical debt outright.

Payment plan calculatorSizes a plan and checks it against an affordability cap. Policy limits (minimum payment, maximum term, interest) come from your own plan policy and state law.

Balance $

Term (months)

Minimum monthly payment $

Interest rate (APR %)

Monthly household income $ (optional)

Affordability cap (% of monthly income)

First payment date

Plan design that holds

Offer the plan on the first statement with the monthly amount already computed for that balance.
Set a floor, not a ceiling. A $25 minimum keeps administration sensible; a maximum term of 12 to 36 months by balance band keeps plans finite. Some state laws set the cap: Colorado limits hospital plans to 4% of monthly household income for patients at or below 250% FPL, and Maine caps plans at 4% of income below 400% FPL.
Auto-pay by default, with a reminder before each charge and an easy pause for hardship.
Add new balances to the existing plan rather than opening a second plan for the same household.
Missed payment handling: two reminders and a call before the plan is cancelled, and the FAP offered again at that point.

A plan does not stop the clocks

A balance on an active, current payment plan is not in default, and for 501(r) it would be hard to justify any ECA against it. But for Medicare bad debt a balance that is being paid is not "uncollectible," so it cannot go on the cost report until the plan fails and collection effort finishes. Document the plan and its payments on the account.

Chapter 06

Financial assistance and 501(r)

Financial assistance (charity care) is the provider's decision to forgive some or all of a balance because the household cannot pay. For tax-exempt hospitals it is a condition of exemption, spelled out in Internal Revenue Code section 501(r) and the Treasury regulations at 26 CFR 1.501(r)-1 through -7. For other providers it is policy, often shaped by state law, and increasingly by the same expectations.

The four 501(r) requirements for tax-exempt hospitals

501(r)(3)

Community health needs assessment

A CHNA every three years with an adopted implementation strategy. The one 501(r) element with its own excise tax: $50,000 per year per hospital facility for failure (IRC 4959). Not a billing function, but the Schedule H reviewer checks it alongside the FAP.

501(r)(4)

Financial assistance and emergency care policies

A written FAP stating eligibility criteria, whether free or discounted care is offered, the basis for calculating amounts charged, how to apply, what the hospital may do to collect, and the list of providers covered. Widely publicized: on the website, in paper form on request, in the facility, and on billing statements, with a plain-language summary and translations.

501(r)(5)

Limitation on charges

FAP-eligible patients may not be charged more than the amounts generally billed (AGB) to insured patients for emergency or medically necessary care, and must be charged less than gross charges for any other care.

501(r)(6)

Billing and collections

No extraordinary collection actions until the hospital has made reasonable efforts to determine FAP eligibility: at minimum, no ECA for 120 days after the first post-discharge statement, a 30-day written notice before any ECA, an application period of at least 240 days, and reversal of ECAs if the patient turns out to be eligible.

Amounts generally billed (AGB)

Method	How it works	Notes
Look-back	AGB percentage = allowed amounts from claims in a prior 12-month period ÷ gross charges for those claims. Payer base: Medicare fee-for-service alone; Medicare plus all private insurers; or Medicaid alone or with Medicare. AGB for a bill = gross charges × AGB percentage.	Recalculate at least annually and begin using the new percentage within 120 days after the 12-month period ends. Separate percentages may be used for inpatient, outpatient or other categories.
Prospective	Price the care as if the patient were a Medicare fee-for-service (or Medicaid) beneficiary: AGB is the total Medicare would allow, including the patient share.	Simpler for physician groups that already price from the Medicare fee schedule.
What counts as "charged"	Only what the patient personally owes after insurance and discounts. An insured FAP-eligible patient whose cost sharing is below AGB is compliant even if insurer plus patient paid more than AGB.	A safe harbor allows a charge above AGB if the patient had not yet applied and the hospital refunds the excess (over $5) once eligibility is found.

Who qualifies: FPL-based eligibility

Almost every FAP measures household income against the federal poverty guidelines (FPL) that HHS publishes each January. The 2026 guidelines (Federal Register, January 15, 2026) set 100% FPL at $15,960 for one person in the 48 contiguous states and DC, adding $5,680 per additional person, with higher figures for Alaska and Hawaii. Hospitals then set a free-care ceiling and a sliding-scale ceiling. Where state law sets the floor, the policy must at least match it.

Household size	100% FPL (2026, 48 states + DC)	200%	300%	400%
1	$15,960	$31,920	$47,880	$63,840
2	$21,640	$43,280	$64,920	$86,560
3	$27,320	$54,640	$81,960	$109,280
4	$33,000	$66,000	$99,000	$132,000
5	$38,680	$77,360	$116,040	$154,720
6	$44,360	$88,720	$133,080	$177,440
Each additional person	+$5,680	+$11,360	+$17,040	+$22,720

Alaska: $19,950 for one person plus $7,100 each additional; Hawaii: $18,360 plus $6,530. Guidelines are effective January 13, 2026 unless a program sets its own date.

Financial assistance eligibility estimatorUses the 2026 federal poverty guidelines and a model sliding scale. Your hospital's FAP and state law set the real thresholds; this shows how the arithmetic works.

Household size

Annual household income $

Location

Free care up to (% FPL)

Sliding scale up to (% FPL)

Gross charges for the care $

Patient balance before assistance $

AGB percentage (look-back) %

Presumptive eligibility

What it is

Charity without an application

The regulations let a hospital determine FAP eligibility from information other than an application: enrollment in Medicaid, SNAP or WIC, homelessness, a prior determination, or a third-party income model. The patient must be told the basis and how to apply for more generous assistance if the presumptive grant is less than the maximum.

Why use it

Reach, cost and compliance

Most eligible patients never complete a six-page application. Presumptive screening at registration and before placement moves those balances to charity instead of bad debt, which is both the right outcome and a better Schedule H and cost-report story. Some states (Oregon, Washington, Colorado among them) require screening of all uninsured patients.

The application process

1
Offer and screen Registration, discharge, every statement
Scripted offer when the estimate exceeds what the patient can pay; presumptive screen on every uninsured account and every account above a balance threshold.
2
Application and documents Within the 240-day window
Income proof (pay stubs, tax return, benefits letters), household size, and whatever the FAP lists. The FAP may not require documents it does not list. Incomplete applications get a written notice of what is missing and a reasonable time to supply it; ECAs stay suspended meanwhile.
3
Determination Promptly; many states set 30 days
Written decision with the basis, the discount, the amount owed, and the appeal path. Eligibility usually covers all open accounts and a forward period (6 to 12 months).
4
Adjust, refund, reverse On approval
Post the charity adjustment, refund any payment over the eligible amount (the regulations excuse amounts under $5), recall any placement, and reverse any ECA already taken: vacate judgments, release liens, delete credit reporting.

State financial assistance mandates (examples)

State	Who	Threshold and terms	Collection limits
Colorado (HB 21-1198, Hospital Discounted Care)	All hospitals and their affiliated providers	Screen every uninsured patient (within 45 days of care); discounted care for households at or below 250% FPL; payment plans capped at 4% of monthly income for hospital bills, 2% for physician bills, 36 payments maximum	No collections until screening, insurance billing and a 30-day written notice are complete
Maine (2025 amendments)	Hospitals	Free care below 200% FPL (previously 150%); payment plans capped at 4% of income for patients below 400% FPL	Pairs with the state's 2025 credit-reporting ban
Maryland (2025)	Hospitals	Mandated discount tiers by income; interest limits on unpaid bills	No lawsuits to collect bills of $500 or less; credit reporting banned from October 1, 2025
Virginia and Rhode Island (2025)	Hospitals / all medical creditors	Interest caps on medical debt	Bans on liens and foreclosure against primary residences and on wage garnishment for medical debt
Washington, Oregon, California, Illinois	Hospitals	Mandatory screening and FPL-based free and discounted care tiers set in statute (California's AB 1020; Washington's charity care law, with tiers that differ by hospital size)	Waiting periods before collection and limits on ECAs; several also restrict credit reporting

Charity, bad debt and the uninsured discount are three different things

An uninsured (self-pay) discount is a pricing policy: every self-pay patient gets it, regardless of income, and it is not charity. Charity care is forgiveness based on inability to pay under the FAP, decided before or after service, and reported as such on the Medicare cost report (Worksheet S-10) and IRS Schedule H. Bad debt is a balance the provider tried to collect from a patient presumed able to pay and could not. Converting bad debt to charity after a late FAP determination is correct and expected; counting an uninsured discount as charity is a reporting error auditors look for.

Chapter 07

Collections, agencies and bad debt

When statements and plans do not resolve a balance, the provider decides between forgiving it, keeping it in house, placing it with an agency, or (rarely now) taking legal action. The order of events, and the dates, are regulated. A written collection policy that matches the FAP and the state's rules is the foundation.

Extraordinary collection actions (ECAs)

The IRS defines ECAs for tax-exempt hospitals at 26 CFR 1.501(r)-6(b); state laws borrow the list and extend it to other providers. An ECA is any of the following, taken to collect a bill for FAP-covered care:

Sale of debtSelling the account to a debt buyer (narrow exceptions)
Credit reportingReporting adverse information to a credit bureau
Deferring or denying careRequiring payment of an old bill before providing medically necessary care
LienOn property, other than personal-injury settlement liens
ForeclosureOn real property
SeizureAttaching or seizing a bank account or personal property
Civil actionFiling a lawsuit
Arrest or body attachmentCausing arrest for nonpayment or for missing a hearing
Wage garnishmentAfter judgment

Not ECAs: placing an account with a collection agency that does not take any of these actions, sending statements, calling, and filing a claim in a bankruptcy. Placement is therefore allowed early, but the agency is bound by the hospital's FAP and the same 120-day rule for anything on the list.

The 501(r)(6) timeline

Day (from first post-discharge statement)	Rule	Citation
0	First post-discharge billing statement. All clocks start here. For multiple episodes aggregated on one account, the clock may run from the most recent episode's first statement.	1.501(r)-6(c)(3)
0–120	No ECAs (other than deferring care, which has its own notice rules). Statements must carry the FAP notice. Reasonable efforts to determine eligibility are underway.	1.501(r)-6(c)(3)(i)
≥30 before ECA	Written notice that assistance is available, the ECAs intended, and a deadline no earlier than 30 days after the notice, plus the plain-language FAP summary and a reasonable attempt at oral notice.	1.501(r)-6(c)(4)
120	Earliest day an ECA may begin, provided the 30-day notice was given and no application is pending.	1.501(r)-6(c)(3)(i)
to 240	Application period: a complete application at any time in this window must be processed, with ECAs suspended, and ECAs reversed if the patient is eligible. The period can run longer if the 30-day notice ends later.	1.501(r)-6(c)(4)(iii), -6(c)(6)

Statement and collections timeline plannerEnter the first statement date to lay out the statement cycle, the 501(r) and Medicare bad debt dates, and the earliest lawful placement and ECA dates.

First post-discharge statement date

Statement interval (days)

Statements before final notice

Planned first ECA or placement day

Provider

Tax-exempt hospital (501(r) applies) For-profit hospital or physician practice

Balance is Medicare deductible or coinsurance (bad debt rules) Self-pay patient who received a good faith estimate (NSA dispute window)

Working with collection agencies

Contract

What the agreement must say

Business associate terms under HIPAA; a copy of the FAP and the requirement to honor it; the list of actions the agency may and may not take (no credit reporting, no litigation without written approval, no ECA before day 120); contingency fee by placement tier; recall rights; and data return at termination. Debt sales are a separate decision and, for a nonprofit, an ECA.

Oversight

Audit the agency like a vendor

Monthly reconciliation of placements, payments and recalls; call monitoring samples; complaint logs; the agency's Regulation F compliance program; licensing in every state where patients live; and recovery rates by segment. Patient complaints about an agency are complaints about you.

Placement strategy

First and second placement

First placement at 120 to 150 days for accounts not on a plan or application; recall at 6 to 12 months. Second placement to a different agency recovers a small additional share. Most providers now stop short of litigation entirely; where it is used, it is reserved for large balances, documented ability to pay, and a second review by someone outside collections.

FDCPA and Regulation F apply to the agency

And often to you by contract or state law

The FDCPA governs third-party collectors: validation notice within 5 days of first contact, 30-day dispute period, no calls before 8 a.m. or after 9 p.m., no more than 7 call attempts per debt in 7 days (Regulation F's presumption), no false or misleading statements, and opt-out for texts and email. Statutory damages: up to $1,000 per action plus actual damages and fees; class actions up to the lesser of $500,000 or 1% of the collector's net worth.

Charity, bad debt and the accounting

Outcome	Definition	Where it is reported	Money back?
Charity care (financial assistance)	Balance forgiven under the FAP because the household cannot pay; determined by application or presumptively	Medicare cost report Worksheet S-10 (uncompensated care, affects DSH uncompensated care payments); IRS Form 990 Schedule H; state community benefit reports	Indirectly, through Medicare DSH uncompensated care pools and state programs
Bad debt	Balance from a patient presumed able to pay that could not be collected after reasonable effort	Operating expense or revenue deduction under GAAP (ASC 606 treats most of it as an implicit price concession); S-10; Schedule H (not community benefit)	Medicare reimburses 65% of allowable Medicare deductible and coinsurance bad debt that meets 42 CFR 413.89
Uninsured discount	Policy discount from gross charges for every self-pay patient	Contractual-style adjustment; not charity on S-10 or Schedule H	No
Small balance write-off	Balances below a cost-to-collect threshold (often $5 to $25) written off without statements	Administrative adjustment with its own code	No; and a Medicare balance written off without a bill is not reimbursable bad debt

Medicare bad debt: the rules that matter for patient billing

What qualifies: Unpaid Medicare deductibles and coinsurance for covered services, after a reasonable collection effort, actually uncollectible when claimed, with no likelihood of future recovery under sound business judgment (42 CFR 413.89; Provider Reimbursement Manual 15-1, Chapter 3).
First bill within 120 days: For cost reporting periods beginning on or after October 1, 2020, the first bill to the beneficiary must be issued within 120 days of the Medicare remittance advice (or the secondary payer's remittance when there is one). Late first statements forfeit the bad debt.
Reasonable collection effort, 120 days: Statements and follow-up comparable to what the provider does for non-Medicare patients. A balance unpaid more than 120 days after the first bill may be deemed uncollectible. Any payment restarts the 120 days. An account at a collection agency is not uncollectible until the agency's effort is complete.
Indigent and dual-eligible patients: A Medicaid-enrolled or hospital-determined indigent beneficiary needs no collection effort, but the provider must bill the state first and hold a Medicaid remittance showing what the state paid or refused before claiming the crossover balance as bad debt. A patient's own statement of indigence is not enough.
65%: Allowable Medicare bad debt is reimbursed at 65% through the cost report for hospitals, SNFs and other cost-reporting providers. Physician practices paid under the fee schedule do not receive bad debt reimbursement.

Two clocks, one statement date

The Medicare bad debt clock and the 501(r) ECA clock both run from the first statement. Because the first bill must go out within 120 days of the remittance, and reasonable effort must continue for 120 days after it, a hospital that bills Medicare cost sharing late both loses the bad debt and misleads its collections team about when an ECA is permitted. Make the statement date a monitored data element on every account.

Chapter 08

Patient protections: No Surprises Act, QMB, credit reporting and state law

Four bodies of law decide whether a patient balance may exist at all, and whether it may be collected the way it used to be. Each creates a flag that must stop a statement, a placement or a report before it happens.

No Surprises Act (effective January 1, 2022)

Protection	Who is covered	What the provider may bill the patient	Rule
Emergency services	Patients with group or individual commercial coverage, including self-funded ERISA plans	Only in-network cost sharing, even at an out-of-network ED or freestanding ED, including post-stabilization until the patient can be safely moved and consents	PHSA 2799B-1; 45 CFR 149.410
Non-emergency care by an out-of-network provider at an in-network facility	Same	Only in-network cost sharing, unless the provider obtained valid notice and consent at least 72 hours before (or the day of, for same-day scheduling). Notice and consent is never valid for ancillary services: anesthesiology, pathology, radiology, laboratory, neonatology, assistant surgeons, hospitalists, intensivists, or where no in-network alternative exists	PHSA 2799B-2; 45 CFR 149.420
Air ambulance	Same	In-network cost sharing only	45 CFR 149.440
Good faith estimate	Uninsured and self-pay patients	Whatever is billed, but a bill $400 or more above the GFE from that provider can be taken to patient-provider dispute resolution within 120 days for a $25 fee	PHSA 2799B-6 and 2799B-7; 45 CFR 149.610 and 149.620
Penalty	Providers and facilities	Civil money penalties of up to $10,000 per violation (HHS, or the state where it enforces), plus refund with interest	PHSA 2799B-4

During a PPDR dispute

Once the patient has initiated dispute resolution, the provider may not move the bill to collections, threaten to, or collect late fees, and must recall an account already placed, until the dispute entity decides. If the parties settle, the provider must reduce the bill by at least $12.50 (half the fee). The decision is binding: either the GFE amount, or the billed amount if the extra charges were unforeseeable and reasonable.

Medicare, Medicaid and TRICARE patients

The NSA balance-billing bans do not apply to them because they already have stronger protections: assignment and limiting charges in Medicare (non-participating providers may charge at most 115% of the reduced fee schedule amount on unassigned claims), the QMB prohibition, and Medicaid's bar on billing enrollees beyond nominal cost sharing. MA plan members are protected by plan contract terms and CMS rules.

Qualified Medicare Beneficiaries (QMB)

The rule

No Medicare cost sharing, ever

Federal law (Social Security Act 1902(n)(3)(B), 1866(a)(1)(A), 1848(g)(3)(A)) prohibits all Original Medicare and Medicare Advantage providers and suppliers from billing QMB patients for Part A or Part B deductibles, coinsurance or copays. It applies whether or not the provider accepts Medicaid. The state Medicaid program may pay some or all of it; the provider must accept the state's payment as payment in full.

Scale

More than 8 million people

QMB covered more than 8 million individuals in 2023, more than 1 in 8 Medicare beneficiaries. Status appears in HETS eligibility responses, on the Medicare remittance (alert remark codes N781, N782 and N783 state that no deductible, coinsurance or copay may be collected), and on the patient's Medicare Summary Notice.

If it happens anyway

Refund, recall, fix the flag

Recall any account from collections, refund every dollar collected, correct the registration record, and bill the state for the crossover. Repeated QMB billing is a violation of the provider agreement and a frequent subject of CMS reminders to MA plans and providers.

Medical debt and credit reporting, as of October 2026

Layer	Status	Effect on provider practice
CFPB rule (January 2025) removing medical debt from consumer reports used for credit decisions	Vacated July 11, 2025 by the U.S. District Court for the Eastern District of Texas (Cornerstone Credit Union League v. CFPB); the CFPB did not defend it. No federal ban is in effect.	Federal law (FCRA) still permits reporting, subject to the bureaus' own policies and state law
Credit bureau voluntary policies (Equifax, Experian, TransUnion, 2022–2023)	In effect. Paid medical collections removed; unpaid medical collections not reported until at least one year past due; medical collections under $500 not reported at all.	Most hospital balances never reach a credit file; those that do arrive a year late and only above $500
State bans	In effect in 15 states as of October 2026: California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia and Washington, plus the District of Columbia (effective August 20, 2026). Nevada and Texas allow reporting only after conditions (price transparency compliance; an advance estimate) are met.	Reporting a resident of these states is unlawful regardless of the bureau's policy; several laws also void the debt if it is reported
Tax-exempt hospitals (501(r))	Credit reporting is an ECA everywhere: not before day 120, not without the 30-day notice, and reversed if the patient is found FAP-eligible.	In practice many systems have stopped reporting entirely

State medical debt laws: the patterns

Credit reporting bans: The most common 2023–2026 enactment; some versions bar providers and agencies from reporting, others make reported medical debt void or unenforceable.
Interest and fee caps: Maryland, Rhode Island and Virginia limited interest on unpaid medical bills in 2025; earlier laws in states such as Colorado and New York cap pre- and post-judgment interest on medical debt. Check before charging any plan interest or late fee.
Limits on extraordinary actions: Bans on wage garnishment and home liens or foreclosure (Virginia, Rhode Island, 2025), prohibitions on suing for small balances (Maryland, $500 or less), and required waiting periods and notices before any legal action.
Mandatory screening and FAP floors: Statutory free-care and discount tiers tied to FPL, screening of all uninsured patients, and prohibitions on collection until screening is done (Colorado, Oregon, Washington, Maine, Illinois, California).
Surprise billing laws: State laws that predate or extend the NSA for fully insured plans, sometimes to ground ambulance, which the federal law does not cover.
Debt relief appropriations: Delaware, Illinois, Rhode Island and Vermont funded purchases and cancellation of residents' existing medical debt in 2025; such programs usually buy from providers at a steep discount and require the provider's FAP to meet conditions.

Operational rule

Maintain a state-of-residence table in the patient accounting system that drives three flags: may report to a bureau, may charge interest (and the cap), and may take legal action (and the preconditions). Agencies must receive the flags with the placement file. Review the table quarterly; the Commonwealth Fund and the National Consumer Law Center maintain trackers, and 2025 alone produced six new reporting bans.

Hospital price transparency (45 CFR Part 180)

In effect

What hospitals must publish

A machine-readable file of all standard charges (gross, discounted cash, payer-specific negotiated, de-identified minimum and maximum) for every item and service, and a consumer-friendly display or estimator for at least 300 shoppable services. For 2026 the file must also carry the median, 10th and 90th percentile allowed amounts (from 835 data) where a negotiated charge is a percentage or algorithm, the count behind them, hospital type 2 NPIs, and a signed attestation of completeness and accuracy by a senior official. Effective January 1, 2026; CMS began enforcing the new elements April 1, 2026.

Penalties

Up to $5,500 a day

Civil monetary penalties of $300 per day for hospitals with 30 or fewer beds and $10 per bed per day for larger hospitals, capped at $5,500 per day (a maximum of about $2 million a year), after a warning and a corrective action plan. From 2026 a hospital that waives its ALJ hearing receives a 35% reduction, unless the violation is a failure to post the file or the shoppable services display at all. Patient billing uses the file as the source of the discounted cash price in self-pay estimates.

Chapter 09

Talking with patients about money

Most patient balances are resolved, or lost, in a conversation. The skills are simple to describe and hard to do under pressure: say the number, explain it, offer choices, screen for help, and write down what happened. HFMA's patient financial communications best practices and the 501(r) notice rules both expect the same things.

Principles

Lead with the number and the why

"Your plan applied this visit to your deductible, so the $950 allowed amount is yours to pay. Your insurance paid $0 this time." Patients accept amounts they understand.

Offer two paths, then help

Pay in full, or a plan sized to the balance. If neither works, pivot to assistance without judgment: "We have a financial assistance program; may I ask a few questions to see if it could reduce this?"

Never threaten what you will not or cannot do

No mention of credit reporting, lawsuits or interest unless the policy and the state allow it and the account has reached that stage. A threat that is not true is a deceptive practice under the FDCPA (for agencies) and state UDAP laws (for everyone).

Respect timing and consent

Calls between 8 a.m. and 9 p.m. patient local time, no calls to a workplace that forbids them, texts only with consent, and an honored opt-out. Record the preference in the account.

Privacy

Confirm identity before discussing a balance; speak only to the patient, guarantor or an authorized representative; keep sensitive service descriptions off voicemails and envelopes.

Escalation triggers

Patient says they cannot afford food or rent, mentions a disability or a lawsuit, disputes the service itself, or asks for an itemized bill and the policy. Each routes to a supervisor, the FAP team, or the dispute process the same day.

Scripts

Point of service · estimated deductible balance

"Based on your plan's benefits, your estimated share for today's MRI is $950."

"That is because your $2,000 deductible has not been met yet this year. The exact amount depends on the claims your plan processes before this one, and we refund any overpayment within 30 days. Would you like to pay that today, or set up monthly payments starting today? If this amount is a hardship, we have a financial assistance program and I can check whether you qualify."

Inbound · "I already paid my insurance, why am I getting a bill?"

"Your premium pays for the plan; this is the share the plan asks you to pay for this visit."

"Let me walk through it with the explanation of benefits in front of us. The charge was $1,800; your plan's contracted rate is $950, so $850 was written off. The plan applied the $950 to your deductible, which is why it shows as your responsibility. Here is where that appears on your EOB. Would it help to set up payments, or shall I check whether you qualify for assistance?"

Outbound · day 45, no response

"I'm calling about the balance from your visit on October 2; this is not a collections call."

"The balance is $1,450 after your insurance. We can set up a plan of $121 a month for twelve months today, or a different amount that fits your budget. We also have a financial assistance program; the application is on our website and I can send a link by text if you prefer. Which would you like?"

Dispute · "This is more than the estimate you gave me"

"You're right to raise that. Let me compare the bill to the estimate line by line."

"If a provider's bill is $400 or more above the written good faith estimate, you have the right to dispute it through the federal patient-provider dispute resolution process within 120 days of the bill date, and we pause collection while that happens. Before you do, let me see whether the difference is a service that was added during your care or an error we can correct right now."

Financial assistance offer

"Our financial assistance policy can reduce or remove this balance if your household income is below a certain level."

"For a household of three the full discount applies below about $54,600 a year, and partial discounts above that. I can take the application over the phone now, or send it to you; the balance stays on hold while we review it, and if you qualify we also refund anything you have paid above the discounted amount."

Disputes and complaints

1
Stop the clock Same day
Place a dispute hold on the account: no statements, no agency activity, no interest. Note the date, the patient's claim, and the owner.
2
Investigate against the record Within 10 business days (many state laws); 30 days maximum
Compare the claim, the 835, the estimate, the registration, and the charge detail. Most disputes are a coding or posting error, a missed secondary, an unapplied payment, or a QMB or NSA flag that was not set.
3
Answer in writing On resolution
What was found, what was corrected, the new balance, and the next step, including the PPDR or state complaint route if the patient still disagrees.
4
Feed it back Monthly
Categorize disputes by root cause and send the counts to registration, coding and posting. A dispute rate above a few percent of statements is a process failure upstream.

Chapter 10

Patient-collection KPIs

Patient A/R behaves nothing like payer A/R, so it needs its own measures. The questions are: how much of what patients owe do we collect, how early, at what cost, and how much of what we fail to collect should have been charity in the first place?

The core measures

Measure	Formula	Reference points	What moves it
Patient collection rate (yield)	Patient payments ÷ patient responsibility billed, same cohort of accounts, measured at 180 or 365 days	Commercially insured: 34.4% in 2024 (Kodiak). All payers, self-pay after insurance: 30.1% in Q1 2026	Estimates, POS asks, digital statements, plan offers, FAP screening (which removes uncollectible balances from the denominator)
Point-of-service cash as a share of patient payments	Payments collected before or at the time of service ÷ all patient payments	24.8% in Q1 2026 across payers; 50% for Traditional Medicaid, 15% for Traditional Medicare	Copay discipline, estimate accuracy, card on file, pre-service plans
Patient days in A/R	Patient A/R ÷ (patient responsibility billed over 90 days ÷ 90)	Much higher than payer days; track the trend, not a benchmark	Statement lag after adjudication, plan terms, placement timing
Statement lag	Days from 835 posting (or self-pay discharge) to first statement	Target under 5 days; Medicare bad debt requires under 120	Posting backlog, secondary billing, hold rules
Bad debt as a share of gross or net revenue	Bad debt write-offs ÷ revenue	Hospital bad debt exceeded $17 billion nationally in 2023; about half from insured patients	Deductible growth, FAP reach, collection timing
Charity care as a share of gross revenue	FAP adjustments ÷ gross revenue	Compare with Schedule H peers and with bad debt: rising charity with falling bad debt usually means screening is working	Presumptive eligibility, application completion
Cost to collect, patient	Statement, staff, vendor and agency costs ÷ patient cash collected	Agency contingency fees of 15% to 30% on first placement are typical; in-house digital collection costs a small fraction of that	Channel mix, segmentation, automation
Plan performance	Plans completed ÷ plans started; average term; default rate	Auto-pay plans complete far more often than invoice plans	Term and payment sizing, reminders, hardship handling
FAP measures	Applications started, completed, approved; presumptive determinations; days to decision; bad debt later converted to charity	Bad-debt-to-charity conversion above a few percent means the front end is missing eligible patients	Screening at registration and before placement
Compliance exceptions	QMB balances billed; ECAs before day 120; credit reports in banned states; disputes open past 30 days; GFEs issued late	Target zero	System flags, agency audits

Reading the numbers together

Healthy

POS up, yield stable, charity up, bad debt down

Money moving forward, eligible patients found early, fewer balances aging into agencies. Cost to collect falls as digital share rises.

Watch

Yield falling with deductibles rising

The national pattern. Check estimate accuracy, statement lag and plan enrollment before concluding that patients simply cannot pay; and check whether the FAP thresholds still match household reality.

Problem

Bad debt rising, charity flat, complaints up

Eligible patients are being collected instead of screened. Expect FAP conversions after placement, regulatory attention, and agency recoveries that do not cover their fees.

Cohort, not calendar

Measure yield on the accounts billed in a month and follow them for 180 and 365 days. Calendar-month cash divided by calendar-month billing mixes old and new balances and hides what changed. Segment every measure by payer category, balance band, and whether an estimate was given; the differences are where the improvement is.

Chapter 11

Rules and regulations

Patient billing sits under tax law, Medicare law, consumer financial law, privacy law and a fast-growing body of state statutes. The federal rules below apply nationwide; state law is listed where it is now the binding constraint.

Federal · IRS

Internal Revenue Code 501(r); 26 CFR 1.501(r)-1 to -7 (final regulations December 2014)

Conditions of tax exemption for hospital organizations: a CHNA every three years (501(r)(3), excise tax of $50,000 under IRC 4959 for failure); a written, widely publicized financial assistance policy and emergency medical care policy (501(r)(4)); charges to FAP-eligible patients limited to amounts generally billed (501(r)(5)); and no extraordinary collection actions before reasonable efforts to determine FAP eligibility: 120 days, 30-day notice, 240-day application period, reversal and refunds (501(r)(6)). Minor errors corrected and disclosed under Rev. Proc. 2015-21 are excused; willful or egregious failures risk the facility's exemption. Reported annually on Form 990 Schedule H.

Federal · No Surprises Act

Consolidated Appropriations Act 2021, Division BB; PHSA 2799A and 2799B; 45 CFR Part 149

Balance-billing bans for emergency services, out-of-network care at in-network facilities and air ambulance, with the notice-and-consent exception (never for ancillary services); good faith estimates for uninsured and self-pay patients (149.610); patient-provider dispute resolution for bills $400 or more above the estimate, within 120 days, $25 fee (149.620); civil money penalties up to $10,000 per violation (2799B-4). Enforcement of co-provider estimates and of estimates and advanced EOBs for insured patients remains deferred pending further rulemaking as of 2026. States with their own surprise-billing laws enforce first for fully insured plans.

Federal · Medicare and Medicaid

QMB billing prohibition; Medicare bad debt; assignment and limiting charges

Social Security Act 1902(n)(3)(B), 1866(a)(1)(A) and 1848(g)(3)(A): providers may not bill QMB beneficiaries for Medicare cost sharing and must accept the state's payment as payment in full. 42 CFR 413.89 and Provider Reimbursement Manual 15-1 Chapter 3: Medicare bad debt requires a first bill within 120 days of the remittance, reasonable collection effort for 120 days, and a Medicaid remittance before claiming crossover balances; reimbursed at 65%. 42 CFR 447.15 limits Medicaid providers to the state's payment plus nominal cost sharing. EMTALA (42 USC 1395dd) bars delaying emergency screening or stabilization to ask about payment.

Federal · Consumer financial law

FDCPA (15 USC 1692 et seq.) and Regulation F (12 CFR Part 1006, effective November 30, 2021)

Applies to third-party collectors, debt buyers and attorneys, and to providers only where they collect under another name or by state "mini-FDCPA" laws. Validation notice within five days of first contact with a 30-day dispute period; no contact before 8 a.m. or after 9 p.m.; the 7-in-7 call frequency presumption; limited-content voicemails; consent and opt-out rules for email and text; no false, deceptive or unfair practices. Statutory damages up to $1,000 per action and class caps at the lesser of $500,000 or 1% of net worth; one-year statute of limitations. The CFPB and FTC also police "unfair, deceptive or abusive" practices by creditors directly.

Federal · Credit reporting

Fair Credit Reporting Act (15 USC 1681); CFPB medical debt rule vacated

The CFPB's January 2025 rule barring medical debt from consumer reports used for credit decisions was vacated in full on July 11, 2025 (E.D. Tex.). The FCRA's existing rules still apply to furnishers: accuracy, dispute investigation within 30 days, and the 2022 requirement that medical collections be at least 365 days old before appearing. The bureaus' voluntary exclusion of paid debts and debts under $500 continues. Fifteen states and DC ban or restrict reporting of medical debt outright.

Federal · Privacy and communications

HIPAA (45 CFR Parts 160 and 164); TCPA (47 USC 227)

Billing and collection are "payment" activities permitted without authorization, subject to the minimum-necessary standard; collection agencies and statement vendors are business associates. Patients may request confidential communications and may restrict disclosure to a plan when they pay in full themselves. The TCPA requires prior express consent for autodialed or prerecorded calls and texts to mobile numbers; the FCC treats healthcare messages with limited exemptions that do not extend to debt collection.

Federal · Price transparency

45 CFR Part 180 (hospitals); Transparency in Coverage (plans)

Hospitals must post a machine-readable standard charges file and a consumer display of 300 shoppable services or an estimator. The CY 2026 OPPS final rule added median, 10th and 90th percentile allowed amounts with counts, hospital NPIs and a senior-official attestation, effective January 1, 2026 with enforcement from April 1, 2026, and a 35% penalty reduction for hospitals that waive an ALJ hearing. Penalties: $300 per day (30 or fewer beds) or $10 per bed per day up to $5,500 per day. Plans must offer cost estimators under Transparency in Coverage, which patient access teams can use for insured estimates.

State law · 2023–2026

Credit reporting bans, FAP floors, interest caps, ECA limits

Credit reporting bans in California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia, Washington and DC (plus conditional rules in Nevada and Texas). Statutory financial assistance tiers and screening duties in Colorado (HB 21-1198: 250% FPL, 4% of income plan cap), Maine (200% FPL free care), Washington, Oregon, California (AB 1020) and Illinois. Interest caps (Maryland, Rhode Island, Virginia, Colorado, New York), bans on garnishment and home liens (Virginia, Rhode Island), and small-balance lawsuit bans (Maryland, $500). Most apply to all hospitals and many to physician practices; the state of the patient's residence usually controls.

Industry standards

HFMA patient financial communications and medical account resolution best practices; AHA billing guidelines

Not law, but widely adopted and cited by regulators: clear, consistent communication at every point of contact; FAP screening before any collection action; a consistent account-resolution process with documented timelines; and board-approved billing and collection policies. Many state laws were drafted from them, and the IRS reasonable-efforts standard tracks them closely.

Chapter 12

Key numbers 2026–27

Item	Figure	Context
Cost sharing and plan design (2025–26)
Average single deductible, covered workers with a deductible	$1,886	KFF 2025 EHBS; $2,631 at firms with 10–199 workers
Workers with a single deductible of $2,000 or more	34%	53% at small firms, 28% at large firms
Enrolled in an HDHP with a savings option	33%	KFF 2025
Average premium, single / family	$9,325 / $26,993	Worker share of family premium $6,850 (26%)
HSA-qualified HDHP minimum deductible, 2026	$1,700 / $3,400	Self-only / family; Rev. Proc. 2025-19
HDHP out-of-pocket maximum, 2026	$8,500 / $17,000	Self-only / family
ACA out-of-pocket maximum, 2026	$10,600 / $21,200	The 2027 limit is set in the 2027 Notice of Benefit and Payment Parameters; confirm the final figure before using it
Medicare Part A inpatient deductible, 2026	$1,736	Part B deductible $283; Part B premium $202.90
Collection performance
Patient collection rate, commercially insured	34.4%	2024, down from 37.6% in 2023 (Kodiak)
Patient collection yield, all payers, self-pay after insurance	30.1%	Q1 2026, from 30.6% in Q1 2025 (Kodiak)
Point-of-service cash as share of patient payments	24.8%	Q1 2026, from 22.7% (Kodiak)
Patient responsibility as share of allowed amounts	23.0%	2026 (Kodiak)
Patients who received a cost estimate before care	41%	Experian Health 2025; 71% called it accurate
Consumers who prefer to pay medical bills online	62%	J.P. Morgan / InstaMed 2025
Medical debt owed in the US	$220 billion+	14 million people owe over $1,000; 3 million over $10,000 (KFF)
Financial assistance (2026 federal poverty guidelines)
100% FPL, one person (48 states and DC)	$15,960	Add $5,680 per additional person; FR Jan 15, 2026
100% FPL, family of four	$33,000	200%: $66,000; 400%: $132,000
Alaska / Hawaii, one person	$19,950 / $18,360	Add $7,100 / $6,530 per person
Colorado Hospital Discounted Care	250% FPL; 4% of income	36 payments maximum; screening within 45 days
Deadlines and thresholds
501(r): no ECAs for	120 days	From first post-discharge statement
501(r): written notice before an ECA	30 days	With plain-language FAP summary
501(r): FAP application period	240 days	ECAs suspended while an application is pending
501(r): refund threshold / CHNA excise tax	$5 / $50,000	Excess under $5 need not be refunded; IRC 4959
Medicare bad debt: first bill / collection effort	120 / 120 days	Reimbursed at 65%
NSA dispute threshold / window / fee	$400 / 120 days / $25	Bill above GFE from one provider
NSA provider penalty	up to $10,000	Per violation
FDCPA call window / call frequency	8 a.m.–9 p.m. / 7 in 7	Regulation F presumption per debt
Credit bureau medical debt policy	$500 / 1 year	Below $500 never reported; unpaid reported after a year; paid removed
States banning medical debt credit reporting	15 + DC	As of October 2026
QMB enrollees	8 million+	2023; more than 1 in 8 Medicare beneficiaries
Price transparency penalty	$300/day or $10/bed/day	Cap $5,500 per day; 35% reduction if ALJ hearing waived (2026)

What is changing

In effect 2026

State law is the frontier

With the federal credit reporting rule gone, state bans (15 states and DC), FAP floors, interest caps and ECA limits now decide what collections may do. Residence-based flags are mandatory infrastructure.

Coming

Price transparency enforcement and NSA rulemaking

CMS began enforcing the 2026 allowed-amount and attestation elements on April 1, 2026 and has been auditing more hospitals. Rules for insured-patient GFEs and advanced EOBs, and co-provider estimates, are still pending; when they arrive, estimate workflows will need FHIR-based plan connections.

Pressure

Deductibles and yield

Deductibles rise every year and the 2027 ACA out-of-pocket maximum climbs to $12,000. Collection yield has fallen for four years. The response is front-end estimates, digital-first statements, affordable plans and faster FAP screening, not harder collections.

Sources

Chapter 13

Glossary

Chapter 14

Knowledge check

Eight questions drawn from the chapters above. Pick an answer to see the explanation.

Score: 0 / 8

For training and reference. This page summarizes general rules and does not replace payer contracts, plan documents, CMS manuals, IRS guidance, state law or legal advice. Example names, IDs, balances and payers are fictional.

Figures checked October 15, 2026.