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.