Reducing Bad Debt: New Timing and New Strategies for Upfront Payment and Post-Treatment Collections

In the last decade, medical reimbursement and payment models have changed at the same rapid pace as clinical care paths. Patient copays and plan deductibles now play a larger role in practice cash flow and sustainability. Everyone is feeling the effects. How and when to collect non-reimbursed charges is becoming an ongoing focus, often diverting resources and time away from clinical patient care.

How and when to collect continues to matter

The challenge goes back a number of years. A study by the Medical Group Management Association (MGMA) turned up some telling facts about healthcare payments. The study found that as early as 2010, when copays and deductibles were lower, 30 percent of patients were leaving the medical practice without paying for services they received. The study also revealed that, on average, at least three billing statements were required before a patient’s outstanding balance was paid in full.

Since then, more patients have been getting coverage under high-deductible health plans (HDHP), which have the potential to put more pressure on patient payments. According to employee benefits consulting firm Towers Watson, “86 percent of employers … offer high deductible plans as an option, up from 54 percent five years ago,” and the firm says 43 percent of employees now enroll in them, because they offer lower monthly premiums. The growth in the number of patients enrolled in HDHPs makes medical practices increasingly responsible for collecting a larger percentage of provider revenue directly from patients.

In this environment, leaving payment to be collected after treatment is provided can lead to problems for healthcare providers. Outstanding accounts receivables can turn into bad debts, which take time and cost money to service. The time spent chasing delinquent accounts could be better spent on the primary medical mission of the practice.

Upfront payment

Collecting money for co-insurance and deductibles at the time of service has emerged as a popular alternative for many healthcare providers. By collecting a payment or a commitment to pay (in the form of a payment plan) from patients up front, providers are less likely to end up in a collections scenario.

Upfront payments are on the rise. A 2015 survey by The Advisory Board Company found that “hospitals doubled their median point-of-service (POS) collections over the last four years.” The firm’s managing director, Christopher Kerns, says upfront collection is “the single-best lever that providers have to improve their bad debt performance.”

Providers that struggle with revenue cycle management (RCM) might want to consider upfront collections. But because requiring payment up front is a new way of doing business, medical offices need to walk patients through the process and educate them as to the implications of upfront payment. That puts the responsibility on providers to develop supportive policy documents and staff training before making the leap to a new payment process.

It’s more than simply getting money up front

One new skill that may require staff training is assisting patients in making financial arrangements, which is increasingly becoming a necessity for medical practices. Trained staff can help patients find government or community resources to help with their bills, or even provide more comprehensive counseling to help get patients into public assistance or charity care programs. Practices may also find it useful to develop a financial assistance program for uninsured or underinsured patients, providing assistance to those most in need.

An MGMA study found several ways that better-performing practices make patients’ bills easier to pay:

  • Assisted patients in making financial arrangements
  • Provided online billing and payment capabilities
  • Provided counseling with onsite billing staff for patients
  • Maintained convenient billing office hours
  • Provided bilingual statements
  • Provided face-to-face contact with accounting staff for patients

Anytime a new payment process is considered, healthcare providers would be wise to develop or acquire expertise in the new service area before implementation. For providers whose staff already struggle with too many tasks and too few resources, hiring an RCM specialist can be a cost-effective expenditure. RCM outsourcers are experienced in recovering at-risk accounts receivables and working with organizations to improve their debt collection without harming their relationships with customers and patients.

Post-treatment collections still play an important role

Though upfront payments and helping customers find financing may help reduce the amount of outstanding receivables, they won’t eliminate it. Organizations of all sizes are still going to have to maintain a post-treatment collections program. Yet chasing patients for payments is an uncomfortable process for everyone involved, and often results in poor recovery rates.

The services of an RCM outsourcer can be valuable. An experienced RCM services provider can not only recover delinquent receivables more successfully than most providers can do themselves, but also can help navigate emerging regulations. The stronger, more reputable partners will also provide solid and forward-thinking technology, be skilled at safeguarding the patient relationship, and work to minimize write-offs. Their staffs have the experience and training to recover funds owed by delinquent accounts while maintaining positive patient relationships.

Adding upfront payments to your collections strategy may be a little disruptive, but it can be worth the investment of time and training. Having the ability to collect pre- and post-treatment provides greater overall coverage for your patient receivables and ultimately helps to minimize write-offs.  And having an expert RCM partner can make the whole process easier.

Gary Dorman, Director of Operations at Waypoint Resource Group, is an industry leader in compliance-oriented, performance-driven loan management. Gary has 25 years of experience working in the ARM industry, specifically in third party collections encompassing a variety of market verticals: bank cards, retail, auto deficiency, first party and early stage recovery. He designs collections strategies and policies that include a compliance infrastructure focused on educating consumers about their financial obligations. Gary’s emphasis on collaborative problem-solving and providing a positive customer experience makes Gary a trusted advisor to customers.

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