Bad debt rate
The bad debt rate is money that was owed and not collected, measured against gross patient service revenue — the share of billed revenue written off because someone able to pay did not.
Updated
The bad debt rate is bad-debt write-offs as a percentage of gross patient service revenue over the same period. Bad debt is a balance somebody was obliged to pay and did not — most often a patient balance after insurance, occasionally a payer balance abandoned as uncollectible.
It is not the same as a contractual adjustment, and the distinction is the whole point of the metric. A contractual adjustment is the difference between what you billed and what your contract entitles you to; it was never collectible, so writing it off says nothing about collection performance. Bad debt was collectible. Folding the two together produces a number that moves whenever payer mix changes.
Charity care is a third category again: money forgiven under a financial-assistance policy, by decision rather than by failure. Whether an organisation classifies a balance as charity or bad debt is a policy choice, and it moves this figure directly.
How it’s calculated
Bad debt ÷ Gross patient service revenue × 100
Both figures cover the same period. Bad debt here is the bad-debt deduction alone — not contractual adjustments, and not charity care. If your write-off ledger mixes the three, this calculator will divide whatever you enter, so separate them first or the result measures your payer mix rather than your collections.
How to read it
Read it against your own history, with your own classification rules held constant. Because the split between bad debt and charity care is a policy decision, a change in that policy moves this figure without anything changing in what patients actually paid.
A rising rate points upstream more often than it points at collections: coverage checks that did not happen, estimates never given, or payment not requested at the point of service. Read it beside how much patient responsibility you are billing in the first place — a practice with growing high-deductible volume can hold its collection effort steady and still watch this climb.
What moves it
- Patient financial responsibility volume, which rises with high-deductible plan mix
- Eligibility and benefits verification before service, and whether an estimate was given
- Point-of-service collection, and whether a balance is requested before the patient leaves
- The organisation's own charity-care policy and where it draws the line against bad debt
- Statement cadence, payment plans, and when an account is referred out
Commonly confused with
- Contractual adjustment: A contractual adjustment is the part of a charge your contract never entitled you to collect. Bad debt was collectible and was not collected. Only one of them is a performance signal.
- Charity care: Charity care is forgiven under policy; bad debt is uncollected despite effort. The line between them is drawn by the organisation, so moving the line moves both figures without changing a dollar of what was paid.
- Net collection rate: Net collection rate measures collection across everything collectible, payer and patient alike. The bad debt rate isolates what was given up, and is usually the patient-side story inside the collection figure.