The True Cost of Processing a Patient Bill

With the growth of patient out-of-pocket bills, it is becoming more important for Revenue Cycle Management (RCM) companies and medical groups to evaluate the true cost of processing a patient bill and how reducing these costs can impact profitability and efficiency. Often times while evaluating cost, RCM and medical groups will only look at the cost to send a traditional paper statement, overlooking all of the other cost drivers that hamper profitability.

With traditional paper-based medical billing, the same patient statement usually gets “stuffed and stamped” anywhere from three to seven times before it gets paid.  However, the real cost is not just sending out paper statements but instead the processing required once mailed back to the business office, a lock box or called in by the patient.  Most RCM and medical groups have a team of people in the back office that open envelopes or files, process payments via check or credit card, and post the payment data in their system.  Recent third party data shows that collecting an out-of-pocket bill from patients can cost anywhere from $7.00 to $15.00 per bill if a call center is used to collect payment.  By examining both the direct and indirect costs, the inefficiency starts to become clear.

Electronic billing for patients streamlines the entire collections process by reducing old-fashioned, costly paper-based traditional methods that demand an increasing amount of time and resources.. Sending patient bills electronically allows patients to receive bills quickly and conveniently pay online, which accelerates the payment collection time. In addition,  by integrating electronic payments into your back-end billing system, the payment information can automatically upload and reconcile, eliminating the need for manual entry.  Electronic posting not only saves time and money, it also reduces manual error.

While there is value in reducing paper statements, postage, and back-end processing costs, there is also an opportunity to address the need for patient engagement demands.  If you are interested in true patient engagement, I would encourage you to send a bill via electronic text message or email to your patients and see how they respond.  What we find is patients normally engage within the first twelve hours after sending a text message and twenty-four hours after sending an email.. In the end, empowering a patient to pay their bill electronically reduces costs and leads to more efficient operations, which results in more true patient engagement.

Don’t Let Patient Accounts Receivable Impact Your Cash Flow

Accounts receivable (A/R) has a direct correlation to a medical group’s cash flow. Without prompt, positive cash flow, a medical group will go into the business equivalent of cardiac arrest.  For those who know the outstanding A/R to the penny, who know within a couple of days the average age of their accounts, get ready: Your world is changing. 

More and more of your patients have High Deductible Health Plans or HDHPs, and the number is growing.  According to William Blair ‘s recent report titled, Patient Engagement – The New “IT” in HCIT, “HDHP plans likely accounted for about 30% of the commercially insured population in 2018—up from only 5% as recently as a decade ago.  In 2010, about 25.3 million persons were covered under some form of HDHP; however, this number rose by about 70% through the beginning of 2017, to a record 42.9 million.”  

Most medical groups look to insurance companies for the bulk of their revenue; generally speaking, as much as 85 to 90 percent historically.  It comes in with mostly reliable and consistent cycles.  The time between submission of a claim to an insurance company and your receipt of the payment for that claim is typically a couple of weeks.

However, with HDHPs much more of your A/R will sit in patient balances.  You can expect to see, if not already, insurance payments shift to between 70 and 80 percent from prior levels.  The remaining payments for a typical medical group will need to be secured from your patients. 

Granted, the insurance company will continue to pay in a consistent time but no such speed or certainty can be expected from your patients, especially at the start of a plan year when just about everything will “contribute to the deductible;” a nice way of saying everything is owed by the patient.  More troubling, you don’t even know if or how much a patient owes your medical group until the insurance company has adjudicated the claim, which can take a couple of weeks after the procedure or office visit.  Add in the increased delay (not to mention the cost per my last blog) to send paper statements via the USPS, and suddenly A/R aging goes from an average of 30 days to two or three times as long … and cash flow has slowed to a trickle. 

A solution for medical groups to help with the shifting landscape is to work with a payment company that issues electronic bills to patients as a first touch point for patient engagement, sends an easy-to-understand bill that lets them understand what’s due assuming it aligns with their explanation of benefits (EOB), provides flexible payment options and allows for it to be paid online to settle their obligations easily and quickly.  Among the advantages:

  • An electronic billing and payment solution allows for higher collection rates and cuts in half the time and cost to collect patient payments;

  • It automates the arduous reconciliation process eliminating errors once patient payments have been received;

  • It provides the capability to produce patient payment A/R reports by office location, by specialty area, by provider in whatever manner you wish gives you meaningful insight into your patient balances.

Market Shift and the Plight of Paper Billing

Paper billing for medical offices and United States Postal Service have a lot in common.  Just like every approach has its heyday, sending physical bills to patients is soon going to be only used by a few stalwarts.  The Post Office, Netscape and even Kodak didn’t do anything wrong with their product, it’s just that the market shifted and they did not react.  As the healthcare market shifts toward electronic billing, those who don’t react or react too late will get left behind.

It’s not the most efficient, biggest or those who boast the greatest success collecting that will survive.  It’s the businesses that react to their customers’ wants and needs, those that shift with the market so that they don’t become obsolete.  When email became ubiquitous, the Post Office didn’t change to meet the demands of its customers and that’s why they couldn’t weather the market shift even though they are increasing rates on January 27, 2019 for a product that is loosing traditional clients faster than Kodak film for pictures. Consumers now expect things instantly and don’t want to wait for a truck to get across the country to bring information, they want it fast and they want it now.

Electronic billing gives healthcare consumers what they want, information fast and the ability to transact at their convenience via any device.  By sending bills electronically, patients receive them much faster and can conveniently pay them online.  In addition, electronic billing takes away the overhead costs of a large backroom operation and it enables immediate payment postings.  Billing firms that work with hospitals or medical groups will either have to adapt soon or see their customers move to new, more innovative Revenue Cycle Management (RCM) companies.

With the rapid uptake in electronic billing, firms who maintain the status quo of traditional paper billing are overlooking a huge opportunity to stay relevant to their clients.  Customers want their bills electronically and if they’re not getting it from you, they’ll move to someone who will provide it for them.  And, as they say…the customer is always right.

A Happy New Year Gift from the USPS.....

On January 27, 2019, the US Postal Service raises the cost of a first class stamp to $0.55 from $0.50, a 10% increase.  In addition, bulk paper costs are expected to rise 2.5-6% over the next year and I can promise you that your vendors are not going to absorb those costs.  So if you are a revenue cycle management (RCM) company responsible for collecting payments from patients on behalf of hospitals and medical groups it is a stone cold fact that you are going to see your costs rise next year.  I wish I had better news for you but unless you change something soon you are going to have some very hard choices to make.

One choice you can make now is to look at shifting to an online communication strategy for patients that allows you to present their statements in an easy to understand manner via a mobile phone, tablet or computer to collect payments without the cost of paper statements and postage.  It’s not just what you need it’s what patients want.  I was talking to one of our clients last week and they explained that they adopted PatientPay’s solution because that’s how they prefer to pay all bills.  “When I talk to CFOs or the head of RCM at our hospitals and medical groups I ask them, ‘How do you pay your bills’”, our client said.  “The funny thing is they all sort of laugh when they think about it.  It seems so obvious when you step back from it.” 

When the USPS admits that today more than 60% of Americans are paying their bills online and their response is to raise rates, what else do you need to start looking at alternate solutions to traditional billing and payments?  The question is do you want to go for a ride to the bottom with them?  I know I don’t, and assume you don’t either.

So the cost of postage is going up, the cost of paper is going up and consumers want to pay their bills online…how many more reasons do you need?

Why Does Healthcare Post Patient Payments to the Oldest Balance Due????

There has been a lot of discussion in the news lately about how automation and “robots” are going to make our life easier by doing jobs that we don’t want to do. This is for everything from driverless cars to tax filing. While there are certainly some great things that can come from this I certainly hope that the trajectory of our current automation path takes hold quickly in the healthcare space as well.

In healthcare, there is automation in billing and the auto-posting of payments that dates back many years.  For a quick historical perspective the government designed the systems used today to automate the billing and auto-posting for insurance payments.  This system created a standard format for sending billing requests and then returned payment information.  In most cases that I have found, there is nothing "automatic" about the way patient billing is processed today.  There are still lots of manual steps that need to be taken to reconcile the money collected from the patients’ account. Without going into all the boring details there are still a significant number of processes that need to be completed in order to ensure that every patient payment is applied not only to the right account, but also to the specific service that was provided just like for insurance payments.

At the heart of the process, the patient is paying down a balance that they agree they owe and the practice or hospital has to manually figure out how to post the money collected.  Once the payment arrives then it is up to the billing person to determine where to apply these funds.  In the hospital’s instance it may be applied to a facility fee when the patient was really paying for their provider(s).  Then when a new bill is sent out to the patient stating they still owe for their providers things gets very confusing since they thought this bill had already been paid.  In a practice’s case funds might be applied to an older balance so the bill the patient thought was paid is now being billed again.  While this sounds like not a big deal it is magnified when a billing manager has to explain to the patient what they have and have not paid for.

Healthcare providers need automation that truly auto-posts payments back down to the line of service, date of service, and provider just like an insurance payment with the single click of a button not manual intervention. Why? Because not only will the billing group save a lot of time and money, but more importantly they will have more credibility when dealing with calls from their confused patients.

A recent report shows that 71 percent of patients whose bill aligns with their EOB from their insurance company will pay their bill right away.  Patients want to pay their healthcare bills while healthcare providers want to reduce costs, increase profitability and have a better patient experience.

Let’s make sure everybody gets what they want.