The Accounts Receivable Management and Revenue Cycle Management sectors are navigating significant headwinds that are reshaping how debts are collected heading into the final weeks of 2024, according to a report released recently by Corporate Advisory Solutions. Rising delinquencies, the return of student loan payments, and evolving credit reporting rules for medical debt are driving change across these sectors, which industry professionals need to keep in sharp focus.
Driving the news: The third quarter saw rising delinquency rates, student loan repayments restarting, and healthcare debt being excluded from credit reports — all of which are contributing to a shift in the ARM and RCM landscapes.
- Delinquency Surge: Rising delinquency rates are an ongoing concern in the ARM sector. Average consumer debt continues to climb, with the latest data showing an increase of over 30% compared to 2021. This surge is contributing to a larger volume of charged-off balances entering the collections process, leading to more placements for agencies and ultimately boosting collection activity.
- Student Loan Repayments: Following the Supreme Court’s decision ending student loan forgiveness, the 12-month grace period concluded at the end of September. Millions of consumers must now resume their student loan payments, which is expected to further stretch consumer finances and could lead to even more delinquencies as we move into 2025.
Zoom in: Healthcare RCM is undergoing notable changes as well, primarily due to consolidation and shifts in reporting practices.
- M&A Surge: The RCM space saw elevated merger and acquisition (M&A) activity, driven largely by healthcare-focused private equity and sponsor-backed companies. This trend reflects a growing desire to build end-to-end solutions to manage rising costs while expanding capabilities.
- Medical Debt Reporting Changes: The exclusion of medical debt from credit reports is also shaking up the sector. While this has led to a drop in medical debt on consumer credit files, many healthcare RCM companies are now looking towards legal collections as an alternative way to recover larger balances.
Between the lines: As private equity continues to play a larger role in healthcare RCM, there is growing scrutiny on how these financial entities are influencing the healthcare industry. Critics argue that private equity’s drive for higher returns might come at the cost of consumers, who are already grappling with rising medical debt.
The bottom line: The ARM and RCM sectors are both navigating a challenging environment shaped by rising consumer debt, changing regulations, and market consolidation. Companies that can adapt to these shifts by strategically optimizing their operations and leveraging M&A opportunities will be better positioned to lead as those industries head into 2025.
What’s next: Expect an increased reliance on legal strategies for collecting medical debt and continued M&A as firms look to build out more comprehensive, resilient business models amid economic and regulatory uncertainty.
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