Avoiding financial disaster when collecting patient debt

You’re sitting in an exam room with a patient who’s been with you for years. There have been a wide assortment of maladies addressed over that time. And, to the delight of both you and your patient, the outcome has always been successful. From all outward appearances this looks to be a superb relationship. You understand him. He trusts you; even recommends you to folks he knows.

But now this patient asks you how much something will cost as he recently switched to a high deductible plan and the initial dollars are now coming out of his own pocket. Your conversations have evolved from discussing just clinical issues to costs. I strongly suspect most providers can’t answer cost questions as well as they can clinical issues and, more importantly, don’t want to answer since they see it as the job of administrative staff.

The Kaiser Family Foundation reports in its 2016 Employer Health Benefits Survey that the average insurance premium for a family covered by health plans offered by employers rose just 3% this year. This is actually a slowing of the rise of premiums for such insurance coverage, which is the biggest source of health coverage in the United States.

However, Kaiser also found that the average deductible for such plans rose 12 % in 2016. The survey also found that the average deductible is now above $2,000. It noted that deductibles are rising much faster than premiums, almost six times faster than wages.

The Foundation’s study suggests that Americans are seeing a shift from “what is comprehensive coverage to what is skimpier coverage, with more skin in the game for workers.” It adds that despite all the arguments about the ACA, there is no evidence that the healthcare reform law is pushing up premiums in the employer-based insurance market.

The world you’ve lived in is fading quickly. Gone are the days when all you concerned yourself with was making sure your front desk collected the co-pay and deposited checks from the insurer that covered 90% of your charges.

Today 30 to 50% of the financial obligation -- the money owed you -- sits with the patient. And when he has a deductible than can easily be as much as $6,000, there’s a high likelihood collecting money owed will take lots of time and cost you lots of money to get it.

Unlike insurance companies and Medicare, who process and pay promptly, healthcare consumers are far more reticent to pay quickly. It has little, if anything, to do with you as a medical professional or person. Your patients have other obligations they’re more inclined to act on more quickly. If they don’t pay the electric utility, the lights get shut off. You don’t have that sort of leverage.

To be fair, though, how people pay is also a reflection of how they are billed. The power company, like most organizations, presents customers with bills online. It’s the preferred way as more and more consumers manage much of their lives online. Interestingly,Deloitte’s Survey of US Healthcare Consumers found that 70% of respondents would prefer to get their healthcare bills in digital form. Remarkably, 87% of all healthcare bills are sent to patients in paper form. More than being of another era, paper bills are at odds with consumer behavior. The once or twice a month bill paying exercise has been replaced by online bills that, once opened and understood, get paid immediately.

A key point to dwell on is the aspect of understandability. Most medical bills are as easy to comprehend as the hieroglyphics on the walls of tombs of the Egyptian kings. Fold into that the confusion created by the lack of alignment between the bill and an Explanation of Benefits and it’s no wonder open balances grow and age.

Evidence of this can be found in a detailed analysis done by ACA International, a credit and collections industry association, its Top Collection Markets Survey. Drilling into average recovery rates -- what was collected -- in the healthcare industry, findings show non-hospitals, that being largely medical practices, have a 21.8% collection success rate among patients. Stated bluntly, if that’s your practice, you’re getting about 20 cents on every dollar billed. That’s not a formula for continued success. And, as deductibles rise, the ability for you to avoid financial disaster gets to be tougher if you don’t take patient balances seriously. So what to do?

Institute a time of service collection process. Get some portion of the expected balance before a patient even steps into an exam room. This will help with cash flow and keep a lid on the size of outstanding balances.

The Medical Group Management Association notes that as many as 3.4 paper statements must be issued before any payment is received. Given that, evolve toward a faster, more efficient and effective mode of billing. Look to ditch the paper and go paperless. The payment cycle can be cut to as little as one-tenth the time you’re experiencing with paper bills. Plus savings per payment can be as much as $4.00 per statement. Along with electronic billing, look for a solution that aligns charges with an EOB and makes it utterly clear what’s been charged, what’s been paid and who owes whatever remains. Eliminate confusion and the willingness to pay spikes.

Lastly, ask your business office or outside billing service or revenue cycle management firm, if you’re using such outfits, whether these moves can boost your practice’s collection rate.

If they say yes, good. Then ask if a 50% collection level is attainable. Let me assure you, by taking the actions I suggest above, the answer can be yes.