The latest worry at hospitals—rising payment backlogs

Modern Healthcare – Monday, December 1, 2025
By Alex Kacik

Payments owed to nonprofit health systems are rising despite efforts to improve collections ahead of federal funding cuts.

Growing claim denials, inflation and an increase in the number of patients who pay for care out of their own pockets are driving up health systems’ accounts receivable balances — some by more than 20% from late last year.

Health systems have added technology and staff to streamline billing and collections. They are also tasking third-party companies to manage revenue cycle functions. Nevertheless, hospitals may not be making enough headway to blunt the impact of Medicaid cuts, higher premiums and the continued growth of high-deductible health plans — all factors likely to leave more patients financially strapped and struggling to pay their medical bills.

“Health systems are deploying technology and processes to better manage accounts receivable because that is ultimately real cash on their balance sheet,” said Mark Pascaris, senior director at credit ratings agency Fitch Ratings. “Health systems need as much cash on hand as they can get with upcoming cuts to provider taxes and state-directed payments coming down the line with the [One Big Beautiful Bill.]”

Hospital finance teams track accounts receivable and the age of outstanding payments to measure the efficiency of their revenue cycle operations. Those balances, which reflect what patients and insurers owe hospitals for care, shift as the economy ebbs and flows, patient volume changes, payer mix fluctuates and insurers adjust reimbursement policies.

The financial realities for health systems are daunting. More Americans are expected to lose health insurance coverage when policies tied to Medicaid work requirements and supplemental payment cuts take effect in 2027 and 2028, meaning they are more likely to pay out-of-pocket for healthcare. Rising employer healthcare costs could lead to more high-deductible health plans, further pressuring the finances of both consumers and hospitals.

Patient accounts receivable balances have been trending in the wrong direction at health systems of various sizes. The measure takes into account what patients and insurers owe hospitals but not what hospitals are waiting to receive from other facilities that use their emergency transportation or real estate, among other services not directly related to patient care.

According to unaudited financial statements, Altamonte Springs, Florida-based AdventHealth’s patient accounts receivable increased 24.5% to $1.78 billion from Dec. 31, 2024, to Sept. 30. Patient accounts receivable at Gaithersburg, Maryland-based Adventist HealthCare rose 17.4% to $172 million during the same time frame. At Rochester, Minnesota-based Mayo Clinic, the measure rose 6.6% to $2.26 billion. Cleveland Clinic’s patient accounts receivable increased 5.4%, to $1.95 billion.

A Mayo spokesperson said accounts receivable increased because of growth in patient volumes and revenue, noting a slight decline in days of revenue outstanding over that span.

For-profit health systems have tended to manage accounts receivable better than nonprofit providers, according to recent financial statements. Many for-profit systems have developed more rigorous billing and collection strategies than nonprofits, analysts said.

Nashville, Tennessee-based HCA, Dallas-based Tenet Healthcare Corp. and Franklin, Tennessee-based Community Health Systems each decreased accounts receivable amounts from Dec. 31, 2024, to Sept. 30.

“We’re deep into our efforts around digital transformation across our company, including in our revenue cycle,” HCA Chief Financial Officer Michael Marks said during a recent investor call. “Our focus in terms of AI and automation in our revenue cycle right now is really specifically focused on the growing denial and underpayment activities from the payers.”

More frequent insurer claim denials are increase the age of providers’ accounts receivable.

Historically, providers have tried to limit the percentage of their most overdue payments for care to less than 20%. But the share of health systems’ accounts receivable extending beyond 90 days has ticked up to 34%, said Matt Szaflarski, vice president of revenue cycle intelligence at Kodiak Solutions, citing national data from the consulting firm.

That 20% goal is unrealistic to expect in the current operating environment, he said.

“It’s not uncommon for organizations to have denials open for more than a year, which creates a lot of additional administrative burden,” Szaflarski said.

Years of healthy investment returns for large health systems have provided a buffer for operational headwinds, said Suzie Desai, managing director and healthcare sector lead at S&P Global U.S. Public Finance Ratings. But the stock market can shift quickly, she said.

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