Discussion of "Extraordinary" Collection Actions

by Carrie Bauman

As a healthcare leader, you first confront the reality of medical debt and the consequences when standard billing fails. Extraordinary collection actions, lawsuits, wage garnishment, and asset liens are on the rise.

What is happening with medical debt in the United States?

Approximately 19 percent of U.S. adults had past‑due medical bills on their credit reports as of June 2020. In 2021, medical debt accounted for nearly 60 percent of all collection accounts on consumer credit reports. The median debt per collection is just $310, while the average is $773. While many debts are small, they collectively burden patients and threaten revenue streams.

Hospitals themselves are under scrutiny: among the top 100 U.S. hospitals by revenue, 26 have pursued legal actions against patients to collect debts. One study reported that around 5.2 percent of adults with past‑due hospital bills experienced lawsuits, with 3.9 percent undergoing wage garnishment. These are not isolated occurrences; they represent systemic risks that you cannot ignore.

Why are healthcare organizations facing pushback on collections?

Low dollar amounts per debt but high volume means substantial administrative overhead.
Growing consumer and regulatory backlash, recent U.S. court rulings, and CFPB scrutiny highlight consumer protections.
Operational inefficiencies, manual billing, prior authorization delays, and denial corrections, drain your team’s time and hinder collections.

How do extraordinary collection actions impact your facility?

While there may be short-term revenue gains, there are also hidden costs.

Reputational damage among patients and within your community.
Legal risks and compliance burdens such as lawsuits and garnishments increase.
Damage to patient retention, over 60 percent of individuals with medical debt avoid future care.
Missed opportunities, CFPB estimates eliminating medical debt from credit reports boosts average credit scores by 20 points and could enable an extra 22,000 mortgages per year.

What solutions can reduce extraordinary collection actions?

Automated AI‑powered revenue cycle management (RCM) platforms are emerging as an effective alternative. These systems replace reactive, debt-focused workflows with proactive, patient-centered optimization. Let’s discuss seven ways modern AI is transforming the revenue cycle.

Real – time dashboarding and predictive analytics
You gain visibility into claim age, patient balance, and payer behavior at-a-glance. This allows you to prioritize collections before they spiral into extraordinary actions.
Automated follow-up and messaging
AI prioritizes and sequences communications based on patient need and expected payoff, reducing manual work and enhancing patient responsiveness.
Denial detection and correction
By predicting denials using payer behavior data, AI flags claims that may require adjustments, preventing revenue loss upfront.
Smart prior‑authorization support
Automation handles repetitive tasks like submitting forms, freeing your team to focus on exceptions and clinical coordination.
Improved accuracy and reduced fraud
AI reduces human errors in billing and flags unusual transactions to prevent fraud or coding mistakes.
Faster payment posting and patient estimates
Automated execution reduces confusion and increases patient trust.
Administrative savings
Some facilities report 40 percent productivity gains and 99.5 percent document accuracy. One firm saved 15,000 hours per month through AI automation.

How does this translate into fewer lawsuits and liens?

Fewer accounts enter collections
Proactive outreach and payment options reduce the need for extraordinary actions.
Improved patient satisfaction
Clarity in billing lessens disputes, preserving relations.
Data-driven decisions
AI highlights which accounts justify collection investment, and which require financial assistance referrals.
Compliance built in
AI systems log outreach efforts and documentation, which helps defend against regulatory audits after garnishment or legal action.

Who benefits and how?

For Patient Access and Equity

Patients are less likely to get sued or garnished.
You improve equity: people of color and low-income patients will see fewer unfair collection outcomes.

For Your Finance and RCM Teams

You cut manual revenue-cycle tasks significantly.
You minimize appeals and redress costs.
You preserve cash flow without legal fees.

For Leadership and Compliance

Your policies align with new regulatory expectations.
You reduce reputational and legal liability:
- A recent federal ruling restored scrutiny on aggressive medical debt reporting.
- Credit bureaus have begun removing small medical debts and delaying reporting.

What are the barriers to adopting AI in the revenue cycle?

Initial implementation cost, but ROI typically follows in under 12 months.
Change management training staff to trust automation requires leadership.
For data integration, you need clean, interoperable financial and patient records.

1. Assess your RCM maturity

Review billing denial rates, time-to-pay, legal filings, and patient complaints.

2. Pilot AI‑powered workflows

Start small: try automated follow-up and estimate tools on one department before expanding.

3. Monitor KPIs regularly

Track reductions in denials, cash cycle days, administrative spending, and extraordinary actions.

4. Train and empower staff

Help your team understand AI suggestions, not replace them. This builds trust.

5. Scale and optimize

As automation proves its value, layers in predictive denial detection, dynamic payment plans, and financial counseling signals.

Key Benefits at-a-Glance

Benefits Table

Benefit Area	Impact
Claims accuracy	Fewer denials, faster reimbursements
Collection practices	Lower risk of wages garnished or liens placed
Patient experience	Better clarity, fewer surprises
Compliance readiness	Documentation of outreach and assistance offered
Financial health	Reduced legal costs and time spent chasing low-dollar debts

Why your Leadership Focus Matters

As CFO, VP of Finance, or RCM leader, you shape the balance between financial viability and community responsibility. Implementing AI‑enhanced RCM systems not only recovers revenue it does so in a fair, transparent way.

By shifting your team from reactive chasing to proactive prevention, you meet both business goals and patient expectations. You stay ahead of regulators and public scrutiny. And you position your facility as a fair and fair-minded healthcare provider, building trust and long-term growth.

What is Next?

Do you know your current rate of lawsuits, garnishments, or liens compared with denials and write‑offs?
Can your current revenue cycle team handle the work required to scale proactive outreach?
Do you have reliable data to support predictive analytics?

If the answer is “not yet,” consider piloting AI workflows now. The ROI will be measurable, not just in reduced legal actions, but in improved cash flow, lower operational costs, and better patient relationships. You cannot eliminate all medical debt, but you can prevent it from escalating into extraordinary collection actions. The tools you deploy today will shape how your facility is perceived and how fiscally strong it will be tomorrow.

Conclusion

As a healthcare leader, you face the daily tension between sustaining financial performance and maintaining patient trust. Extraordinary collection actions may appear necessary when revenue is at risk, but they often signal deeper breakdowns in your revenue cycle processes.

Now more than ever, you have access to tools that let you prevent those breakdowns before they cost you more in dollars, reputation, or patient loyalty. Artificial intelligence is not about replacing your team. It is about strengthening your processes, giving you visibility into problem areas, and helping you create smarter, faster pathways to resolution.

By investing in proactive RCM strategies, you protect your organization from the rising costs and regulatory scrutiny tied to aggressive debt collection. You also demonstrate that financial stewardship and compassionate care are not opposing forces. They are, in fact, aligned goals when managed intelligently.

You have the power to reduce the need for extraordinary actions not through compromise, but through clarity, automation, and timely decision-making. That is how you move from reactive recovery to sustained revenue health. And that is how you lead.

About Carrie Bauman

A 30-year veteran of healthcare IT, Carrie Bauman is responsible for marketing, communications and business development strategies that drive brand awareness, growth and value for clients, partners and investors.

carrie.bauman@whitespacehealth.com