Most patients who don’t pay a hospital bill in full aren’t refusing to pay. They’re looking at a balance they can’t cover this month, and a payment plan is how they get there.
Most hospitals treat those plans as a patient courtesy. Look at the numbers, though, and they work more like an unsecured, interest-free loan portfolio run by the business office, often one that’s built and tracked by hand.
Bad debt is rising fastest at small hospitals
The pressure on that portfolio is growing. Hospital bad debt and charity care were up 10% year to date in Kaufman Hall’s October 2025 report, and 40% higher than in 2022 (Kaufman Hall National Hospital Flash Report, via Becker’s).
The increase is steepest at the smallest hospitals. For full-year 2025 compared with 2024, bad debt and charity per calendar day rose 14.6% at hospitals with 25 or fewer beds and 10.6% at those with 26 to 99 beds (Kaufman Hall, December 2025). With 40% of rural hospitals running negative operating margins (Chartis, 2026), there isn’t much room to absorb it.
What’s sitting in payment plans
About one in five adults (21%) are paying off medical or dental bills over time directly to a provider. Among adults with health care debt, a third expect to pay it off within a year and about a quarter within one to two years. Nearly one in five (18%) say they don’t think they will ever pay it off (KFF Health Care Debt Survey, 2022).
Every balance on an in-house plan works like a small unsecured, interest-free loan that your business office services. The longer the term, the more of it sits on your books, and the more of it is at risk if the patient stops paying.
The real cost of manual payment plans
How plans get set up matters as much as how many there are. At many hospitals, a patient calls, waits on hold, talks through options with someone in the business office, and that staff member builds the plan by hand. Then someone tracks it, reminds the patient, and follows up when a payment is missed.
That creates three problems:
- Patients don’t ask. Many people won’t call to negotiate a medical bill. They set it aside instead.
- Staff time goes to setup, not follow-up. Each plan takes a conversation, data entry and tracking.
- Balances drift. A patient who would have paid $50 a month pays nothing while they wait to call.
Financing isn’t automatically the answer
Moving long balances to a financing partner can take the risk off your books, depending on the recourse terms. Patient terms matter too. The CFPB found medical credit cards carry a typical APR of 26.99%, and patients paid $1 billion in deferred interest from 2018 to 2020 (CFPB, 2023).
Three questions for your next finance meeting
- What share of our patient collections is sitting in open plans today?
- What’s our default rate on plans longer than 12 months?
- When a balance is too large for our longest plan, where does it go, and on what terms for the patient?
How PayGround approaches it
With PayGround, patients choose a plan right from their bill, within guardrails your hospital sets: minimum payments and maximum terms. Larger balances can go to financing.
Once a plan is set, payments run automatically, reminders go out on schedule, and every payment posts to your EHR.
That keeps more balances out of collections without adding work. Your staff spend less time on setup calls and more on the accounts that need a person: denials, complex balances and patients facing real hardship. And nobody has to send a neighbor to collections over a plan they would have paid.
See both options on one bill
Visit our patient experience page to see what a patient sees when plan and financing options sit side by side. Then book time with us.