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What is patient financial clearance?

Uncompensated care is a growing concern for hospitals, health clinics and skilled nursing facilities.

In 2016 and 2017, community hospitals provided $38.4 billion in uncompensated care a $2.3 billion increase from 2015.Between 2012 and 2017, bad debt resulting from Medicare patients not paying deductibles and coinsurance increased by 17%.

How can healthcare organizations actively combat write-offs and payment delays while maintaining high patient satisfaction? One way to do so is through proactive financial clearance.


What is financial clearance?

Financial clearance is a process that determines a patient’s ability and likelihood to pay. Using that information, providers can design intake and collection processes tailored to the unique needs of different patient populations, including eligibility for financial programs, patient counseling and payment plans.

In short, financial clearance improves the patient experience and the productivity of your staff.


A rising need for payment flexibility

With high-deductible health plans on the rise, more patients are opting to self-pay for medical care but it’s an uphill battle for the average American. Forty-four percent of adults don’t have the savings to cover an emergency expense of $400 or more,2 yet the average outpatient hospital visit costs almost $500.3

For those who do use insurance to cover medical expenses, the costs are also going up. The average patient balance after insurance (PBAI) rose from 8% of the total bill in 2012 to 12.2% of the total bill in 2017.4 The average family spent $7,726 on premiums and cost-sharing in 2018, an 18% increase over the $6,571 spent in 2013.5

The growing financial burden on patients makes it tougher for healthcare organizations to collect. Not only that, but it can lead to feelings of frustration and confusion, which hinder the patient experience.

Tackling financial conversations head-on with proactive financial clearance gives providers a clearly defined path toward the most likely payment method while helping patients feel confident about the options they have to pay for care.


How does financial clearance work?

Financial clearance combines two complementary components: patient identity verification and propensity-to-pay scoring.

Credit and non-credit data sources are used to verify identity and address data during admission or intake, which cuts down on patient information errors. Incorrect patient information is one of the leading reasons for claims denials and past due accounts, which cost time and slow down the revenue cycle.

Next, the patient (or financial guarantor) is assessed a propensity-to-pay score, which indicates the individual’s ability and likelihood to pay. The score is linked to a set of custom messages designed to help segment patients into various population groups. For example, a score within one range might prompt the user to collect a co-pay on the spot, while a score within a different range might recommend an installment plan.

In this way, healthcare organizations can capture payment more confidently knowing they’ve offered the most suitable option for the individual. In turn, staff spends less time acting as a bill collector and patients leave with a sense of empowerment over the cost of their care.


Boost payments with ABILITY COMPLETE Financial Clearance

Whether you’re a hospital, ambulatory care center or skilled nursing facility, ABILITY can help you analyze where and when you’re most likely to collect. Strengthen your financial performance, improve your staff’s productivity and most importantly, better serve your patients. Request a complimentary demo of ABILITY COMPLETE Financial Clearance today.


1 American Hospital Association Uncompensated Hospital Care Cost Fact Sheet, January 2019,

2 Federal Reserve Report on the Economic Well-Being of U.S. Households in 2017, May 2018,

3 Study: Average hospital outpatient visit cost approaching $500, Tauren Dyson, United Press International, December 13, 2018,

4 Patient Balances After Insurance Continue to Increase in 2018, Driving Bad Debt and Uncompensated Care, TransUnion, June 26, 2018,

5 Tracking the rise in premium contributions and cost-sharing for families with large employer coverage, Matthew Rae, Rebecca Copeland and Cynthia Clark,, August 14, 2019,

Inovalon and design®, Inovalon® and ABILITY COMPLETE® are trademarks of Inovalon, Inc.

By Inovalon