How Hospitals Use Automatic Screening to Erase Medical Debt Before Bills Arrive

When patients accumulate medical debt, the hospital is often the primary creditor.

Hospitals can provide financial assistance—commonly called charity care—by offering free or reduced‑price treatment to patients whose bills would be unaffordable. Most U.S. hospitals have such programs for low‑income or heavily indebted patients.

Access to this aid can be difficult, however. Surveys show that many patients are unaware of the programs, and the application process is often cumbersome, leaving some patients stuck with bills they should not have to pay.

To qualify, patients are typically required to submit extensive documentation—such as bank statements, pay stubs, tax returns, or divorce decrees—and to file their applications in person, by mail, or by fax.

“The process is not user‑friendly,” said Neale Mahoney, a Stanford University economist who studies medical debt.

These obstacles leave many patients with unpaid bills that should never have been required. In a single year, hospitals billed patients for at least $2 billion that they likely did not owe, according to one analysis.

To address this, states and hospitals are testing an emerging solution known as “presumptive eligibility,” which automatically screens patients for assistance and cancels debt when they qualify.

With presumptive eligibility, patients can have their care costs eliminated before any bill arrives—though the practice is applied inconsistently, depending on the hospital and the patient.

What You Need to Know About Auto‑Enrollment

What Is Hospital Financial Assistance?

Hospitals establish their own rules for financial aid, usually tying eligibility to a household’s income. The closer a patient’s income is to the poverty line, the less they are expected to pay. Even middle‑income patients with insurance can qualify for discounts when a bill would consume a substantial portion of their earnings.

At least 11 states require hospitals to cancel bills for low‑income patients, though the income limits differ. In Georgia, for instance, anyone earning just above the federal poverty level must receive free care. Other states, such as Oregon, North Carolina, and Maryland, allow households to earn up to twice the poverty threshold and still qualify for full relief.

In most states, however, patients must still complete an application to receive assistance.

Several states have enacted investigations and legislation to simplify the process, yet research on medical debt continues to reveal persistent gaps.

How Many Hospitals Use Automatic Enrollment?

Nearly all nonprofit hospitals report that they screen patients and automatically reduce bills for those who qualify.

Under the Affordable Care Act, nonprofit hospitals are required to make reasonable efforts to identify eligible patients before pursuing legal action, selling debt, or damaging credit scores. This rule, effective in 2016, can be satisfied through presumptive eligibility.

In the first year of implementation, roughly 70% of tax‑exempt hospitals nationwide reported screening patients and reducing bills proactively, according to an RTI International analysis of federal data. By 2022, that proportion had risen to nearly 90%.

The federal requirement does not extend to for‑profit or public hospitals, which are not obligated to disclose their pre‑collection practices.

Six states—California, Delaware, Illinois, Maryland, North Carolina, and Oregon—mandate that hospitals employ presumptive eligibility and waive applications for eligible patients.

Who Qualifies for Automatic Enrollment?

In most jurisdictions, hospitals determine which patients may bypass the application process.

Typical automatically screened groups include homeless individuals, deceased patients, and those already enrolled in government assistance programs for housing, food, or prescriptions. Some hospitals, such as Christus Health, extend relief to members of religious orders who have taken a vow of poverty.

Eligibility rules are frequently hidden in dense policy documents, making them difficult for patients to locate or understand. Certain hospitals, including thirteen facilities owned by Ascension—a major Catholic health system—provide minimal guidance, stating only that they may screen patients “with a sufficient unpaid balance.”

Across the six states with presumptive eligibility mandates, the specifics of eligibility differ. Maryland, for instance, limits proactive bill cancellation to patients receiving government aid for food or utilities who are not eligible for Medicaid. Illinois distinguishes between rural and urban hospitals, imposing fewer requirements on rural facilities.

Oregon mandated in 2024 that hospitals screen any patient with a balance exceeding $500, as well as all Medicaid enrollees and uninsured individuals. By 2025, about 80% of Oregon patients receiving assistance had not submitted an application, according to public data from the first 26 participating hospitals. The state legislature raised the screening threshold to $1,500 for a single encounter.

How Do Hospitals Identify Eligible Patients Without Applications?

Hospitals employ several methods to identify patients who qualify for assistance without a formal application.

They commonly rely on public records, patient‑provided information, or third‑party credit‑scoring tools to gauge eligibility and decide whether to reduce or eliminate bills.

For instance, a patient living in a high‑poverty ZIP code or lacking a listed address may be automatically deemed eligible. Many hospitals contract with payment‑processing companies that conduct employment and credit checks to determine free‑care qualification.

Some hospitals also assess a patient’s “propensity to pay,” which measures likelihood of settling a bill irrespective of income. California and Oregon have banned this practice, fearing it could lead hospitals to pursue collection from patients who, despite qualifying for aid, consistently meet their financial obligations.

When Do Hospitals Initiate Financial‑Aid Screening?

Timing varies.

Illinois, North Carolina, and Oregon mandate that certain patients be screened before any bill is generated. California will adopt this requirement in 2027.

Some institutions voluntarily screen patients prior to billing, while others attempt collection first. Federal law only requires screening before legal action for delinquent accounts, which has encouraged many hospitals to adopt presumptive eligibility.

Christus Health, for example, states that it screens patients only “after all other eligibility and payment sources have been exhausted.”

Anna Stelter, vice president of policy for the Texas Hospital Association, explained that hospitals prefer to explore alternative payment avenues—such as Medicaid or local safety‑net programs—before granting financial assistance.

“We aim to confirm that the responsible party pays for the care,” Stelter noted. “Charity care serves as the final safety net.”

Public hospital policies can be vague about timing. Cook Children’s Health Care System in Fort Worth, Texas, for instance, states that it strives to determine eligibility “as soon as sufficient information is available.”

Who Ultimately Covers the Cost of Free Care?

Ultimately, the burden falls on the public. Taxpayers subsidize a portion—or all—of the financial assistance provided by hospitals, though the extent varies.

Approximately half of U.S. hospitals are nonprofit and receive tax exemptions. The Kaiser Family Foundation estimates that these institutions retained $24 billion in 2020 that would otherwise have been collected as income, sales, or property taxes.

Government‑owned and for‑profit hospitals also enjoy tax benefits that help offset assistance costs. Public hospitals frequently receive extra taxpayer funding, while for‑profit entities obtain smaller subsidies, such as added payments for treating large numbers of uninsured and Medicaid patients.

The extent to which public funds cover assistance costs depends on the level of government support—often undisclosed—and on the number of patients who need help, qualify under hospital criteria, and successfully navigate the application process. Studies indicate that hospitals allocate widely varying portions of their budgets to financial assistance, ranging from under 1% to over 7% annually.

Any remaining gap is typically filled by philanthropy and the hospitals’ own revenue streams.

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