Bad Debt Rising:
When to Sell
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 hospi-
tals 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 administra-
tors 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 cum-
bersome transferring all that data from one agency to
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 commu-
nity. “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.”
This project is a collaborative effort by
Senex Services Corp. and the
Healthcare Financial Management Association.
Winkle is not alone in her fear. In fact, the major con-
cerns expressed by CFOs and other hospital leaders