Patient payments now make up a larger portion of a provider’s revenue and medical debt is making it more difficult to collect. According to an annual survey by Debt.com, 66% of adults in the U.S. have medical debt, representing a 46% increase in the past five years, and half have medical debt that has gone into collections.
“For patients, medical debt has become a leading cause of personal bankruptcy, with an estimated $88 billion of that debt in collections nationwide, according to the Consumer Financial Protection Bureau.” It’s not surprising that more than seven in ten consumers say that their healthcare needs are not being met, and the primary reason is cost.
The primary cause of increasing medical debt is the widespread adoption of high-deductible health plans (HDHPs), in which consumers choose smaller monthly premiums in exchange for taking on a larger percentage of their overall healthcare costs. Today, the minimum HDHP deductible is $3,200 for a family and $1,600 for an individual. The maximum out-of-pocket costs are $16,100 for a family and $8,050 for an individual.
Increasing medical debt and greater patient financial responsibility have weighed heavily on provider organizations as they continue struggling with sluggish margins. In a recent survey, close to half of healthcare leaders said “timely patient collections” were their biggest revenue cycle challenge. The average patient collection rate for patients with commercial insurance is now 47.8%, which represents less than 25% of total charges due. In 2023, 53% of bad debt write-offs came from insured patients.
Patients who carry medical debt are more likely to skip necessary care or put off having a prescription refilled, which can result in poorer outcomes and reduced reimbursement for providers participating in value-based care.
A comprehensive approach
The most effective way to improve patient collections is to make it easier for patients to pay. That means engaging them as early as possible, preferably before they arrive for their service. The following are proven methods that can help.
- Provide patient financial responsibility estimations. Now that patients owe more of their healthcare costs, they’re demanding greater financial transparency. Patient financial responsibility estimations give patients a good idea of what their final bill will be. Estimations typically include information on co-pays, deductibles, and other coverage information. Having this knowledge early in the engagement helps patients make more informed decisions about how to pay for their care.
- Offer financial guidance. Sending multiple statements and then turning the account over to collections is an ineffective process that returns only pennies on the dollar. A better approach is to leverage propensity-to-pay analytics to identify each patient’s unique financial situation using intelligent scoring and demographics. This helps providers determine which patients may be eligible for financial assistance. In the instance that a patient is eligible, providers should help the patient navigate the application process. Patients will appreciate their provider’s willingness to help them pay for the care they need.
- Implement omnichannel communications. Patients vary in their communication preferences. While some may prefer text reminders about their appointments and financial responsibility, others may prefer a phone call or email. It’s vital to give patients options, letting them choose which methods of communication they prefer. This helps improve the patient financial experience and improves the provider’s likelihood of getting paid.
- Use easy-to-understand billing statements. Many consumers find billing statements hard to read, and for good reason. Information about their services is often presented in a way that makes it difficult for them to understand individual costs. Another important factor in making statements easier to read is ensuring payment options are easy to find. For instance, the URL for a payment portal shouldn’t be hidden at the bottom in the fine print; it should be printed in bold and clearly visible.
- Offer digital tools and self-service options. J.P. Morgan’s most recent Trends in Healthcare Payments annual report found that “71% of providers collect from patients with paper and manual processes most often.” However, the report also found that three out of four consumers prefer to pay their medical bills the same way they pay their other bills: online. The best digital options include payment portals where credit card information can be stored for future payments, as well as mobile payments and IVR (Interactive Voice Response) technology for automated phone payments. Each of these solutions reduces phone calls to the billing department while making it easier for patients to pay when, where, and how it’s most convenient for them.
The journey forward
Medical debt will continue to play a significant role in a provider’s ability to collect. Offering better financial transparency, financial guidance, customized communications, simplified statements, and digital tools can help by making it easier for patients to pay and for providers to collect.
