Coming Changes in the Way Medical Debt is Reported

The three major credit reporting agencies have announced major changes in the way medical debt is reported. STAT News reports that about half of all bad debt on credit reports is related to medical bills. Starting in mid-September, Experian, Equifax and TransUnion will all initiate a 180 day waiting period before reporting medical debt on consumers’ credit reports.  This will allow six months for hospitals, clinics and doctors to work out medical bill payment disputes with insurers and patients.

Hospitals and doctors have never been very adept at billing patients directly and collecting from them. Unpaid medical bills are often sent to collection agencies or purchased for pennies on the dollar by collections agencies who hope to profit from anything paid. For example, my wife found a medical-related bad debt on her credit report quite by accident. The lab had never billed her for the services — at least that she was aware of. After comparing the charges, the lab location and the time the services supposedly took place, she concluded the charges were probably legitimate. She diligently called up the agency and paid the ~ $100 outstanding laboratory bill.

We didn’t really know whether she was enriching a firm that invested in her bad debt or paid a collection agency working for the lab the debt was originally owned. What was most annoying was not the bill; it was the way she found out she had an outstanding medical debt. She discovered it two years later with a mysterious negative report on her credit.

My wife could have possibly negotiated a discounted payment if she had been so inclined. However, she did not want to argue over ~ $50 she actually owed.  Yet I am much, much less sympathetic about outstanding medical bad debts when disparate providers (many you never met ahead of time) all send separate bills with outrageous fees for things you were never give a choice about. Or were told the prices for in advance or told you could shop elsewhere or decline.

My idea for improving bad debt collection is greater transparency. The current establishment will only change their business practices when it is in their best interest to do so. My solution is to require a meeting of the minds – the standard for n enforceable contract — before a debt becomes collectable. Only then will all parties have an incentive to sign actual agreements disclosing the cost of services patients are expected to pay for.

Comments (50)

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  1. Devon Herrick says:

    By the way, this blog’s future is uncertain at this point. Those wishing to follow me on Twitter can do so at @DevonHerrick

    • Mike Balfe says:

      Dear Devon,
      Have always appreciated your comments, and appreciate your willingness now to step forward.
      But I can’t be alone in my aversion to Twitter.
      Mike B.

      • Devon Herrick says:

        Thanks, I appreciate all who’ve commented and contributed to this blog. I realize Tritter is not the best for deep discussions. I will probably develop a blog at some point.

        • Allan says:

          I assume Devon that you have access to all the names and addresses so that should you start a blog you can notify people.

  2. Barry Carol says:

    How would you handle debt related to care that must be delivered under emergency conditions when there is, by definition, no opportunity to reach a meeting of the minds? Maybe the patient wasn’t even conscious.

    Presumably doctors and hospitals are entitled to reasonable compensation for their services. The question, of course, is what’s reasonable. It’s not chargemaster prices. That’s for sure. I would be willing to pay up to 125% of Medicare, not 10X-20X Medicare.

    • Devon Herrick says:

      I’m not sure if 125% of Medicare is the correct number, but it’s definitely a good start to the discussion. I would want to strike a delicate balance between not having price controls and not allowing providers to take undue advantage of an emergency situation.
      I would also put the hospital at risk for excessive fees. That way ER doctors fees would not be limited by government. But they could be negotiated by the firm providing the venue. That would force the doctor and hospital to negotiate in advance and strike a transparent deal. It could even lead to congestion pricing (ER coverage at 5:00am on weekday pays less than at 2:00am on Saturday)
      I don’t care for government regulation because it often goes wrong but I can see how ER prices need to have some well-thought out safeguards.

      • Allan says:

        “I would also put the hospital at risk for excessive fees. ”

        That is one way that I have suggested many times.

        What makes 125% a good figure. If a person doesn’t carry insurance that means that some will not pay their bills. Why not 200% Medicare or any other number? Price fixing is too dangerous.

        • Devon Herrick says:

          I agree that hospitals should negotiate compensation with the ER med staff. After all, it’s the hospital’s department. Hospitals with excessive fees could have pressure applied by government payers, who could use DHS funds as a stick if fees exceeds some algorithm. When I worked as a hospital accountant the ER was a money loser. At some point it became a profit center.

          • Barry Carol says:

            I’m told that many hospitals get 50% or more of their inpatient admissions through the ER. Suppose hospital A wants to negotiate a maximum fee that ER docs can charge uninsured or out-of-network patients but hospital B across town won’t do the same. How many ER docs will take call at hospital A? Probably not too many.

            • Allan says:

              Barry, you seem very fearful of the free marketplace which you don’t seem to understand on an intellectual basis. Socialism, with price fixing, makes you feel cradled and loved which seems to be what you desire. You have to think a couple of steps deeper.

              • Devon Herrick says:

                ER docs probably relish the thought that Hospital A has to compete for their services against Hospital B.

                • Allan says:

                  Devon, I believe many ER doctors are privately contracted so the question of how and how much they are paid is already being negotiated along with working conditions. There are probably multiple ways the contracts are written and some are probably owned by the hospitals directly.

                  I am not sure of all of this, but I thought you should know that there is a degree of competition.

  3. Jimbino says:

    I don’t quite understand the present discussion regarding bad medical debt. Our law already recognizes that contracts entered into under fraud or duress can be successfully challenged or even nullified.

    Furthermore, where there’s no meeting of the minds, a contract can be declared invalid. There is clearly no meeting of the minds if one of the parties is unconscious or uninformed as to the cost or other terms of the contract, particularly if the other party negligently or actively withholds relevant information.

    Where there is no meeting of the minds, the medical provider can rely on the doctrine of quantum meruit [cf. that might authorize compensation on the basis of “customary” charges for the procedure or service. Evidence of what’s customary would definitely include what the provider has charged others for the same procedure, such as bills to Medicare and Medicaid as well as an insurer.

    Determining what is owed under quantum meruit should be a simple process since Medicare, Medicaid and insurers pay according to CPT or other standardized code, and what Medicare and Medicaid pay is public knowledge.

    (though in one case I had to threaten non-payment in the absence of CPT code and file a FOIA to get the Medicare allowance info.)

    Of course, medical providers and insurers maintain a policy of obfuscating or refusing to provide the relevant information, in which case justice would require that they forfeit compensation altogether.

    We definitely need more lawsuits and more jury decisions in this matter.

    • Z Woof says:

      Correct Jimbino. I don’t care if everybody is always against our common sense that doesn’t make them right.

      We need class action lawsuits bigly. My son had an Iranian surgeon charge $35,000 for coming into his surgery on an emergency and he was out-of-network. Medicare wouldn’t pay this camel herder $35,000 for a couple of hours work.

      We need class a action lawsuit against Billionaire Warren Buffett dumping his bald headed cancerous employees onto Individual Insurance and making us self-employed peoples’ premium shoot to the moon while Billionaire Buffett laughs all the way to the bank.

      Buffett has a big heart.

      Buffett told his investors that if the House’s Obamacare replacement was already enacted, “Guys like me would save with lower taxes. I would have saved $700K this year. So, somebody has too pay those taxes.” See how nice Buffett is? He wants Obamacare so we all can keep low taxation. What a guy. He supported Hillary to beat President Trump.

      If Warren Buffett was alive 200 years ago off the coast of Florida and had a woman with ovarian cancer he would have said, “Gather-round Maties. The sick lass won’t work 30 hours a week. She be walking the plank!”

      Buffett shedding the liability of one employee with cancer is possibly worth millions in savings for him, all thanks to Obamacare.

    • Allan says:

      “I don’t quite understand the present discussion regarding bad medical debt. ”

      Jimbino, you are quite correct.

  4. Z Woof says:

    NCPA Newsflash: I think the Senate is inserting in their bill that premiums become a Qualified Medical Expense (QME) for tax-free HSAs.

    If they are going to do that then enhanced HSAs have to be larger that the current enhancement of $13,300 for a family in 2018. Anybody with me?

    • Devon Herrick says:

      I think HSAs should be flexible enough to allow insurers (or employer plans) to decide what is covered before the statutory deductible and what requires cost sharing. Drug for example. Many health plans would love to give beta blocker away free but cannot do so before the HSA’s deductible limit has been met.

      • Z Woof says:

        Devon, that’s a different question.

        • Devon Herrick says:

          Yes but both are good ideas. Make HSAs flexible and allow their use under more conditions. It’s not like Americans are saving TOO much towards their retirement and retiree medical needs.

  5. Allan says:

    Jimbino writes: “I don’t quite understand the present discussion regarding bad medical debt. Our law already recognizes that contracts entered into under fraud or duress can be successfully challenged or even nullified.”

    I want to share a bill I just received.

    Total charges: $10,790.40
    Insurance payments: $ 466.43
    co-insurance payments $ 151.04

    If an uninsured person were to be billed the entire $10,790.40 and that person refuses to pay, what does anyone think would or should happen?

    It goes to collection. If the entire amount is requested the patient then objects to the bill.

    What happens next?

    It goes to court. Does anyone think the judge will grant the $10,790.40 and order the patient to pay?

    The judges decision will lead to what is legally owed. If one thinks that amount is too much then go to the source, the judges and train them to better assess costs.

    Let’s assume the judges are able to learn. That should be expected since they are judges. With time it will become obvious to both parties what the bill is going to be and neither will wish to waste time, energy and money. Like most business deals the disagreement will mostly be settled out of court.

    If there is a financial problem, what does anyone think will happen? An out of court settlement will be made so that the bill can be paid or the patient will be sent to collection and have his credit affected. A lot of people don’t pay reasonable bills for reasonable services. Price fixing doesn’t help.

    • Barry Carol says:

      This comment seems to imply that most people have as much money as you do to hire a lawyer to protect their interest in court. People who are uninsured lack insurance because they can’t afford to pay the premium or they are young and healthy and don’t think they need health insurance. Most of the people in the latter group can’t afford to hire a lawyer either to fight an unreasonable bill either since seasoned lawyer usually charge $300-$500 per hour or more. This largely explains why I favor a legislated limit on the fees that can be charged to uninsured or out-of-network patients. Insured, in-network patients don’t need such protection.

      • Jimbino says:

        Right, court and lawyer fees make suing to enforce your right not to be overcharged impractical. The best alternative is to use Small Claims court, which I have done successfully about 3 times.

        Even better would be a law that made it a criminal offense to bill a cash-paying customer more than an insurance company, Medicare or Medicaid is billed for the same procedure or to fail to identify the service billed for by proper CPT code.

        Failing that, there should be a law making court costs and lawyer’s fees recoverable in the successful patient lawsuit.

        • Barry Carol says:

          Jimbino — Current law requires medical providers to bill everyone at the same price, namely their full charges (list price). Medicare and Medicaid then actually pay their administered or dictated price and commercial insurers pay their contract rate or “allowed” amount. The uninsured person doesn’t have a dictated price or a contract rate so he is stuck owing the full list price.

          If providers were allowed to bill Medicare, Medicaid and private insurers with whom they have contracts the actual rate they know these payers will pay, then it will look obscene and ludicrous to bill the uninsured 10-20 times more than what providers routinely accept as full payment from other payers. It would take a change in the law to make that happen though.

          Separately, the $10K list price in Allan’s bill would probably exceed the limit for most small claims court disputes.

          • Allan says:

            Barry, things do not remain static when even a little competition is added to the mix.

      • Allan says:

        “This comment seems to imply that most people have as much money as you do to hire a lawyer to protect their interest in court.”

        You must think I pay lawyers all the time to handle my affairs. The fact is that in my most important disputes I don’t use an attorney at all. Most of the times parties are willing to settle.

        Jimbino has interesting ideas that most of us at one time or another probably ascribe to.

        Small claims court
        loser pays court fees.

        Early on while the judicial system finds its way along with the parties involved there could be a slight change in small claims court to accommodate healthcare costs. Very quickly the costs will become known and large bills will be carefully explained in advance. Disputes will end up being settled out of court.

        Whenever a problem arises you favor price controls, mandates and all things that steal rent from businesses or freedom from the individual. Your type of justice works best in a dictatorship.

        • Bart I says:

          Meaning it would be better to have a judge dictate the terms of a settlement on the spot than to have an elected legislature publish ground rules ahead of time? Not sure I understand that last statement.

        • Bart I says:

          I don’t necessarily agree with Barry’s 125% of Medicare, but some sort of legislation in this area seems at least defensible.

  6. Z Woof says:

    Debt can be a big problem. It’s too late for Illinois.

    Martin from Tampa explains: To comprehend what is happening, all we need do is understand that socialism has really been about government helping themselves to other people’s money for their personal benefit. Their constitution says that government pensions come before everything else. That is helping the poor in paying their debts. The greed of the employees of Illinois has pushed the state to beyond the point of no return.”

    John Kass of the Chicago Tribune has come out with a blunt article, yet it is the only possible solution since the government is effectively just bankrupt with no hope of recovery. He writes:

    “Illinois is like Venezuela now, a fiscally broken state that has lost its will to live, although for the moment, we still have enough toilet paper.

    But before we run out of the essentials, let’s finally admit that after decade upon decade of taxing and spending and borrowing, Illinois has finally run out of other people’s money.”

    Martin says, “The constitution can only be amended to deny future employees pension. It cannot be altered to deal with the quarter-trillion owed to state employee pension funds. There really is no way out of it because it is questionable if Illinois can even simply go bankrupt when it is constitutionally owed. So Kass’ solution may sound insane, but it is probably the only way to deal with the crisis – tear-up the state as a state and dissolve it entirely.”

    Krass wrote: “Dissolve Illinois. Decommission the state, tear up the charter, whatever the legal mumbo-jumbo, just end the whole dang thing. We just disappear. With no pain. That’s right. You heard me.

    The best thing to do is to break Illinois into pieces right now. Just wipe us off the map. Cut us out of America’s heartland and let neighboring states carve us up and take the best chunks for themselves.

    The group that will scream the loudest is the state’s political class, who did this to us, and the big bond creditors, who are whispering talk of bankruptcy and asset forfeiture to save their own skins.”

    Z Woof – the party is over.

    • Barry Carol says:

      When there is a real and perceived crisis, actions that were unthinkable or out of the question during normal times are suddenly not only doable but imperative. Unfortunately, it often takes a crisis to make difficult changes in government. That’s probably because a crisis gives politicians cover to cast a difficult vote and not be penalized at the voting booth like they would be if it were cast during normal times. Once you have a crisis, as Rahm Emanuel says, you don’t want to waste it.

      • Allan says:

        That is why we should support as little government activity as possible. That prevents small things from developing into big crisis’s. The problem is that people say its just a few dollars or there is one person out of 300 million that fell through a crack. We have to change everything.

      • Z Woof says:

        Barry, you say, “Once you have a crisis, as Rahm Emanuel says, you don’t want to waste it.” YOU are so correct. Blue Cross Association and AHIP came out against the Cruz Amendment because they support Guaranteed Issue. Odd, Blue Cross is not selling in Iowa. Anthem left their home state of Indiana. They won’t sell Individual Medical (IM) but they insist that those who do must operate under Guaranteed Issue.

        Senator Grassley (R-IA) said the same thing as Blue Cross on Friday to Iowa Public Radio. Blue Cross has purchased politicians of both political parties.

        The country is in CRISIS with Obamacare and we talk about Don Jr and Russia as a distraction. Every sick employee coming off employer-group plans get an Obamacare magic SEP and switch off Blue Cross liability and onto a different insurance company. Barry, this is not insurance this is a scam.

        I think it might be large enough to create additional change when the public becomes aware. It’s not a tough concept and prices are EXPLODING in a couple of months. Buckle your seat belt.

  7. Allan says:

    Z, all is not over for Illinois just yet. The governor is smart even though those running the legislature are self serving and don’t want to deal. Supposedly a state cannot go bankrupt, but as we have already seen over and over again what is true today might not be true tomorrow. I am not saying that the solution would necessarily be good, just that I believe things will change once the state starts going over the cliff.

    In the meantime some of the governors ideas are heading towards the Supreme Court.

  8. Bob Hertz says:

    Let’s get back on the medical debt and emergency room issue.

    (by the way this is a good discussion, I will miss this blog if it does not resurface.)


    At the core of our problem is that hospitals occupy a complex and not always clearly-defined place in American life.

    If they act like profit-seeking independent businesses, we are repulsed (since so many of their ‘customers’ have no choices, no exit power.)

    But other than in New York city and a few other places, they have not been municipally owned and funded like the police or fire departments.

    So maybe the closest definition is that of a publicly regulated monopoly.

    On that basis, Allan, I could live with some broad limits on charges to the uninsured. That would no more be socialism than the regulation of power companies is socialism in many American cities.

    So perhaps the closest definit

    • Allan says:

      Take note that you are communicating to this list and to me, something that might not have occurred in this time frame if the regulated monopoly AT&T were not broken up.

      When young I worked at one of NYC’s municipal hospitals. It was quite a shock to see such a horrid building that was overcrowded with curtains removed and beds moved closer together to accommodate everyone. Not only were the walls filled with beds but the center of these huge wards were as well and the beds extended out into the hallway even around the corner. Chronic shortages of equipment. Nursing personal that didn’t even know when a patient was dead in the bathroom for more than one day. Marks on the clipboard documenting BP, P, meals and everything for every shift even though the patient was dead two shifts earlier. Laboratory work thrown in the garbage around lunchtime and urine tests coming back with so many bacteria, so many white cells and so many red cells despite the fact that the urine containers were filled with tea.

      The training was excellent so from a medical viewpoint the patients actually got fairly good care despite the conditions. But should one of the Interns or Residents get into the elevator and push the button himself to go up many floors for a cardiac arrest the unions placed pressure on the administration to fire that doctor. The elevators had been converted to manual, but still had to be operated by the elevator man who refused to stop his lunch to do so which is why that house staff’s job ended up being threatened. I was not that house staff member but suffered a similar fate due to a cardiac arrest where the nurse decided her lunch started at 12Noon and packed up the medications. I didn’t need her, but I did need the medication. That led to an off color comment which led to my own problem that the chief of medicine had to manage. That was just one problem I faced out of many.had of many. That type of environment led to very strong doctors that could face tremendous adversity.

  9. Bob Hertz says:

    I have read similar horror stories about government run hospitals in England, Canada, and our own VA system. About 12 years ago France had a terrible heat wave, and some of the medical staff refused to interrupt their holidays to care for patients in need.

    Maybe there is something toxic about unions and hospitals — although I would not make that conclusion without studying nations like Germany and Sweden also.

    However it happened, American doctors and nurses have a much better work ethic. As individuals they are as charitable as it comes.

    I think we can restrict the ugliness of chargemaster billing without losing this invaluable feature of our system.

    • Allan says:

      Sweden is in trouble. When you consider Germany, consider the fact that until recently there was only one ethnicity in a country that has had a different ethos than the American ethos. In Germany they seem to be more unified in their approach to things than Americans. I remember some of the training about WW2 and what differentiated the American soldier from the German soldier. This was the army’s contention at the time, kill the German leaders and their units will fall apart. Kill an American leader and the next in line will take over the responsibility. I can’t vouch for that opinion, but it seems to be a reasonable assumption.

      I believe the German system is FFS and tiered so those willing to pay can get care outside of the public system.

      My “horror stories” occurred in the municipal hospital which had some features of a public regulated monopoly that you talked about in a previous reply.

      You are correct about the French that I have written about more than once. If the population ratio of France were adjusted to that of the US then during those very few weeks the numbers died were near the numbers of Americans that died during the entire Vietnam War.

    • Devon Herrick says:

      A Swedish physician told us their system had developed too much bureaucracy over the past 20 years. He has to collect so much data on each patient and check the required boxes that he is only able to see two patients a day and keep up with his paperwork. He also said the construction of hospitals is so bureaucratic that cost-overruns balloon the cost and slow the pace of construction (probably not unlike the VA Health System).

  10. Jimbino says:

    The best thing about the German health insurance is that I qualified to opt out of their health insurance altogether, since I earned over DM 3,500 per month.

    I had earlier opted out of their 1% of wages church tax system, as could anyone who declared himself a non-believer, except for those who were baptized Roman Catholic and had to pay some DM 75 to get themselves de-listed.

    The irony is that those who declared themselves Baptist had to pay the tax, in spite of the long-standing Baptist Church promotion of church-state separation in the USSA.

    • Z Woof says:

      In Colorado a bus full of Germans was crushed by a boulder and guess who has no health insurance in the USA when they travel? You guessed right – Germans.

      No world wide coverage there.

      My sister-in-law is German and spent most of her life in Berlin because of medical problems but the USA has no problem paying for her Medicare so she is in TN now.

      Those German docs were the 1st on board with the NAZI Party.

      • Jimbino says:

        Amerikans on Medicare, Medicaid or Obamacare get no healthcare insurance coverage while traveling or even residing as a non-permanent resident anywhere overseas, including when they are at base camp preparing to climb Everest or in the process of sailing around the world. That doesn’t keep the Obamacare thieves from charging them the Obamacare tax penalty, of course, or the IRS thieves from charging them income and FICA tax on any occasional income they might earn on Easter Island!

        • Z Woof says:

          Amerikans are a bunch of tax slaves down on the knees of our heart begging a government politician for a handout.

          The USA was born to get away from this crap. Yet, here we are again. Plus, we have the Constitution now, the law of the land. How does this UNCONSTITUTIONAL crap happen?

          These politicians take an oath.

        • Allan says:

          Why should the taxpayer fund foreign travel? If it is personal why not have the individual person fund it. If it is business related, why not the business?

          On the one hand it appears you are interested in not forcibly being charged to carry insurance, yet on the other hand you are looking for insurance coverage when you are out of the country.

          If you were saying that you wanted to be free to buy a policy created by an insurer that they wished to sell and you wanted insurance for foreign travel included I would understand.

          • Barry Carol says:

            Travel insurance policies that include healthcare coverage are widely available but, of course, they’re not cheap, especially for older people.

            • Allan says:

              Don’t travel if the cost of insurance is too great. Getting home by private jet when commercial airlines can’t take you is expensive as well. Carry a policy that covers the cost. Private jets from Europe are very expensive for a one way trip, but I wouldn’t consider asking the government to pay for it.

  11. Barry Carol says:

    Even if we had a single payer Medicare for all or Medicare Advantage for all health insurance system that paid Medicare reimbursement rates, including drug pricing more closely in line with what prevails in other developed countries, I would bet a lot of money that we would still have the most expensive healthcare system in the world by a considerable margin.

    The two main reasons for this are that established physician practice patterns reflect the reality of the litigiousness of our society compared to others. That means more testing which means more defensive medicine is baked into our system even if liberals refuse to recognize it as such. The second is that we provide significantly more futile and marginally useful care at the end of life than patients in other developed countries. To this day, only about one-third of adults have a living will or advance directive which exacerbates the problem in my opinion.

    If we ever got a single payer system that eliminated patient financial responsibility at the point of service and covered long term custodial care as well for those who can no longer perform at least two of the normal activities of daily living, Katy bar the door. Costs will explode or we will get explicit rationing or both. It also has the potential to cause a significant adverse impact on medical innovation. We might save some money on administrative costs but it’s at least an even bet that more fraud would offset those savings and then some.

    Let California try this crazy (for the U.S.) idea first and figure out how to pay for it before inflicting it on the other 280 million people in our country.

    • Devon Herrick says:

      My fear is that we will ultimately adopt a public plan option but not have the political will to ration care in a system that has no other rationing system. Maybe Medicare coverage will be expanded to those 50 and above, while Medicaid will be for everyone below the median income. Basically government payment for all but high-income workers.

      Without some mechanism it will consume the economy. Earlier today I read about a child in California on MediCal who supposedly cost $21 million one year. Sorry to say I’m not convinced $21 million on one person during one year is a good way to spend societies scarce resources.

  12. Bob Hertz says:

    Nearly all the million dollar claims that I read about involve one or more drugs with grotesque overpricing.

    If a single payer system does not have a pharmacy price review board, it is doomed to insolvency,

    • Barry Carol says:

      So-called orphan drugs which serve populations of 200,000 or fewer in the U.S. need to be expensive to make the economics work given the cost of development. Cerezyme for Gaucher’s disease, for example, has a potential served population of only 6,000 in the U.S. It’s very different from a drug that can potentially benefit millions of patients.

      That said, however, there have to be some limits. We can’t just let drug companies charge whatever they want and expect payers to pay just because the drug won FDA approval by proving that it’s more effective than a placebo. If the benefit is marginal at best, payers should be able to just decline to pay.

    • Allan says:

      We make limits on all types of services we refuse to give no matter how necessary it is for the individual. It’s tough to say, but maybe if there is a super expensive orphan drug that exceeds the normal limits for government then government shouldn’t be willing to pay the price.

      Barry might think that unfair, but Barry is not being stopped from opening his own check book.

  13. Z Woof says:

    Nobody has ever seen a tax-free HSA commercial so it is fitting that the NCPA show mine because the HSA was born here.

    Any feedback?