How to Get Out of Financial Trouble: Strategies for Reducing Hospital Debt

Updated on October 3, 2023
easing patient financial stress

Hospitals are essential to our healthcare system, providing vital care to needy patients. However, many hospitals face significant financial challenges, with high debt levels and limited resources. To ensure the long-term viability of these institutions, steps must be taken to reduce debt and improve financial health. 

This post will explore some strategies hospitals can use to accomplish this goal.

Maximizing Revenue: 11 Strategies for Reducing Hospital Debt

Let’s look at a few strategies hospitals can use to reduce debt.

1. Know how much your care will cost

Hospitals make money by taking care of people, so their debt needs to be in line with the services they offer. If a hospital does a lot of surgeries, it will need a lot of operating rooms, which will cost a lot to build and keep up. 

If the hospital doesn’t make enough money, it won’t be able to pay its bills and will likely default on its bonds. 

Check if the capital structure is suitable for the type of care the hospital needs to provide or the risk level of the patients it treats.

2. Talk to insurers about lowering your rates

Even in the same area, larger, more well-known hospitals and health systems can get much more money from private payers than smaller, less well-known ones. Hospitals can make more money and see more patients if they persuade health plans to charge more and send patients to the less expensive hospital.

3. Refinance or restructure to cut debt

Hospitals can also work with organizations that deal with the capital market to see if they can refinance or restructure their debt to make it easier to pay.

When deciding how to pay for a big project, hospitals have to figure out if they have enough cash or if they need to borrow money and pay it back. If interest rates are low, taking on debt may be a good idea.

4. Reduce ‘bad’ debt

Some hospitals train their patient access staff to look for patients who might not pay and set up payment plans at the point of service to improve their chances of getting paid. Some hospitals have also set up places for people who don’t have health insurance to sign up for Medicaid.

5. Tell patients about other ways to pay off medical debt

The idea that care should be tailored to the needs of each patient doesn’t just apply to the clinical side of healthcare. On the administrative side (which includes finances), team members in the registration and patient accounting departments can offer different ways for patients to pay that fit their needs. 

For example, suppose a self-pay patient can’t pay for a procedure in full. In that case, the hospital can offer other options, such as checking to see if the patient is eligible for Medicaid or offering a medical settlement program where they have to pay less than the total bill amount. 

Most of the time, patients don’t pay for medical services because they don’t know how to read their bill or pay it differently.

Price transparency can help health systems talk to patients about these costs and find the best ways to pay. Tools that make prices clear, like the Vitalware Hospital Price Index, help health systems understand the gross charges, minimum and maximum procedure charges for each service, and other details about the costs of any procedure. 

When people on the revenue cycle team know how much a procedure will cost, they can work with patients to find the best solution for everyone

6. Increase revenue

Hospitals can also increase revenue by expanding services, increasing patient volume, and improving billing and collection processes. This can include implementing new technologies, such as electronic health records, and developing new partnerships with payers and other healthcare providers.

7. Improve the coding on claims forms

Reimbursement rates can drop if doctors don’t code correctly, don’t code for the right amount of time they spend with the patient or don’t code for effects that happen when the doctor and patient talk to each other. 

For example, if a patient with HIV is coded as malnourished, it means that the patient needs more than just standard care.

Improving a hospital’s bottom line requires that doctors learn how to properly code for conditions and effects simultaneously.

8. Implement cost-saving measures

Hospitals can also implement cost-saving measures, such as reducing waste, increasing efficiency, and implementing lean management principles.

9. Review expenses

Hospitals can reduce debt by reviewing expenses and identifying areas to cut costs. This can include reducing staff, consolidating departments, and negotiating better prices with suppliers.

10. Optimize revenue cycle management

Hospitals can also optimize their revenue cycle management by improving their billing processes, streamlining reimbursement, and reducing denied claims.

11. Diversify revenue streams

Hospitals can diversify their revenue streams by expanding into new service lines, developing partnerships and affiliations, and participating in alternative payment models.


It’s important to note that there is no one-size-fits-all solution to reducing debt, and different strategies will work better for various hospitals, depending on the circumstances. It’s always best to consult financial experts and healthcare consultants about developing a debt reduction plan tailored to the hospital’s specific needs.

Lyle Solomon

Lyle Solomon has extensive legal experience, in-depth knowledge, and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998 and currently works for the Oak View Law Group in California as a principal attorney.