Healthcare Numbers – From $129 Billion to 3

February 28th, 2008

Receivables management is all about numbers, particularly in the healthcare industry. Healthcare providers measure delinquency rates, “days sales outstanding,” allowances for doubtful accounts, bad debt expenses, recovery rates, contingency fees, net back, and a host of other figures. Collection agencies measure placements, contacts, recovery rates, contingency fees, net back, revenues, and of course profitability. Debt buyers quantify and follow the number of portfolios available for purchase, the prices of debt portfolio, liquidation rates, expense items, and returns on purchased portfolios.

Simply put, paying attention to and improving on the numbers leads to better growth and profitability.

Kaulkin Ginsberg’s research publication, Healthcare ARM Report, 2006 (October 2006), describes the numbers that are important to healthcare receivables management – from the perspective of healthcare providers and from the ARM companies that service their accounts. For example:

$129 Billion = Amount Set Aside by Healthcare Providers to Cover Bad Debt

Kaulkin Ginsberg research concludes that healthcare providers set aside $129 billion every year to cover bad debt. This figure was based on company revenues and average bad debt allowances within a representative sample of the population. This does not speak to the amount of money written off of balance sheets as bad debt expenses within the healthcare industry, which is smaller than the amount of money set aside to cover these expenses. Still, $129 billion amounts to roughly 7 percent of industry revenues, suggesting that receivables management is a fundamental challenge for many healthcare providers. This challenge not only weighs on short-term financial performance but provides incentive for these companies to collaborate with effective service partners.

$3 to $4 Billion = Face Value of Purchased Debt Portfolios

In relative terms, the size of the healthcare debt purchase market is quite small today. While an estimated $110 billion in face value of delinquent debt purchases took place in the United States during 2005, an estimated $3 billion to $4 billion in face value of healthcare debt was purchased during that year. Still, this figure is growing quickly. As healthcare providers – particularly larger hospital chains – increase their willingness to sell portfolios and debt buyers, as a whole, grow more interested in the purchase of these portfolios, the healthcare debt buying marketplace will continue to grow. In fact, mainstream debt buyers largely consider medical debt to be a significant growth market in the years to come.

$2.4 Billion = Amount of Revenues for Healthcare ARM Companies

Kaulkin Ginsberg models the healthcare sector of the ARM industry at $2.4 billion, amounting to 16 percent of the ARM industry’s $15 billion in annual revenues. This number is calculated based on assumptions about the average amount of bad debt written off by hospitals, the number of hospitals in the U.S., the percent of healthcare providers’ revenues written off as bad debt, healthcare industry revenues, the percentage of bad debt placed or sold by healthcare providers, average recovery rates, and average fees on healthcare collections.

3 = Number of Basic Threats to Healthcare Receivables Management

While the healthcare ARM market is attractive for many reasons, a number of threats pose some risk, potentially limiting the sector’s growth in years to come. Increasing regulation, including new regulatory initiatives in states across the country, have increased the complexity of operating in this highly legal industry. Improvements in the internal collection systems within healthcare providers have lowered recovery rates for ARM companies as poorer quality paper has been placed or sold. Increased competition has also led to lower fees and a variety of other challenges. These threats require executives to manage their companies strategically in order to improve short-term financial performance and long-term value.

For more information, contact us at



Comments are closed.


New York State Now Offers Free College Tuition: The Potential Beginning of a Major Nationwide Trend

April 27, 2017

The Department of Education contract for debt collection services is one of the most lucrative and sought after contracts today by ARM companies. However, state-level legislation like The Excelsior Scholarship could have profound effects on the student loan market.....

» see this post    » all posts

Non-Employment Index: An Alternative Employment Stat

April 26, 2017

The U.S. unemployment rate is a popular measure for looking at the health of the U.S. economy, but alternative measures like the non-employment index may provide even greater insight. In this blog, Kaulkin Ginsberg's analysts examine the strength of the U.S. economy using this alternative measure and its relation to the ARM industry.....

» see this post    » all posts

Healthcare: The Ever-Growing Industry

April 25, 2017

The healthcare industry is one of the most widely analyzed industries in the US due to its seemingly never ending growth. As such, it's no surprise the ARM industry is so focused on the potential impact of a repeal and replace bill for the ACA. ....

» see this post    » all posts


ACA of Texas Publishes "Three Critical Healthcare Industry Trends for Outsourced Business Services" in its Winter 2017 Magazine

March 16, 2017

The ACA of Texas Publishes "Three Critical Healthcare Industry Trends for Outsourced Business Services" by Kaulkin Ginsberg in its Winter 2017 Magazine. Kaulkin Ginsberg details its belief that the growth in patient lending and financing programs, clinical integration networks, and physician quality reporting systems for the Centers for Medicare and Medicaid Services (CMS) could have profound effects on companies focused on servicing healthcare providers in 2017 and beyond.....

» see more

ACA of Texas Publishes "M&A Trends in the U.S. ARM Industry" in its Winter 2017 Magazine

March 15, 2017

The ACA of Texas Publishe "M&A Trends in the U.S. ARM Industry" an article by Kaulkin Ginsberg in its Winter 2017 Magazine. This article examines the key trends and developments driving M&A activity in the U.S. ARM industry by market segment.....

» see more

Mike Ginsberg Leading Panel Discussion at DBA International 20th Anniversary Conference

February 1, 2017

Mike Ginsberg, President and CEO of Kaulkin Ginsberg, will be speaking in a panel discussion on Trends in Debt Buying on Wednesday, February 8th at the DBA International 20th Anniversary Conference in Las Vegas, Nevada....

» see more