Bad Debt: Are There New Options to Collect Patient Payments & Increase Revenues?
Bad debt can be a problem for anyone, but especially for healthcare organizations. As I was researching a potential new client, I noticed their articles of incorporation listed 12% of its revenue as bad debt or allowance for doubtful accounts. For an organization that has billions of dollars in revenue, 12% is a lot!
While this is just one particular case study, there are many others out there like it. Even if your organization has a smaller market share, or if your bad debt percentage is less than 12%, there are still ways that you can decrease debt — meaning increased revenue for you.
There are several things that go into debt calculations, such as charitable care. But a large portion of bad debt is made up of uncollected patient self-payments. Whether this comes in the form of co-payments and/or coinsurance, much of that debt is made up of past due (or way past due) balances.
It can be easy to think “well, let’s just go get those past due balances.” While that sounds like a good idea, if you look at patient balances that are 90 or 120 days past due, many of them are small (less than $10). As an organization, you might have determined that the cost to collect is too great for a number so small. Maybe someone in your organization decided to suppress your effort if an account is below a certain threshold. You figure the cost outweighs the effort.
Understanding Your Options
If you decide you are going to try to go after and recoup that bad debt you’re owed, there are many approaches you can take. From phone calls to paper statements to outsourcing it, you can choose your method — but it won’t be cheap.
In today’s market, you can have your own employees calling and following up with patients who have overdue accounts, but that cost is usually between $9 and $11 every time they pick up the phone. About 80% of those phone calls are non-contact (meaning that no one answers or they are sent to voicemail), which means it’s not exactly efficient. But hey, it works.
Another option is to do paper statements. This is a fairly popular method that many healthcare organizations use, and that may cost up to $0.55 to $1.50 to send. Typically, though, these are sent multiple times in order to get a response. Many organizations are looking to get away from paper statements for the sake of both efficiency and environmental sustainability.
There’s also the option to send the balances out to a collection agency. They might charge between 8% to 20% for every dollar they collect, but you would have been writing off those bad debts anyway.
Is There Another Way?
While these methods have their advantages, they range in cost and involve a lot of manpower, either on your end or through outsourcing. There’s also a high chance that the people you’re trying to collect from will be contacted in a way they don’t want — and, therefore, won't respond.
This is where a company like PatientBond can make a big difference. We aren’t a typical healthcare collections agency, but we can help you collect patient payments. We use a well-tested psychographic segmentation model to understand patients’ motivations and communicate with them in the best way possible for them.
Psychographic segmentation places healthcare consumers into one of five categories based on their behaviors, motivations and preferences. This model thus identifies what makes patients tick. For example, we know which individuals like digital communications over paper statements and at what frequency to contact patients regarding a balance that is past due, based on their segment. Patients even have different preferences regarding balances due for hospitals, physician practices and urgent care centers. They also prioritize each of these bills differently.
PatientBond can help you more effectively communicate with patients across the five psychographic segments. Our patient engagement platform offers segmented, HIPAA-compliant digital channels to handle these past-due communications in the way your patients want to receive them, resulting in a significant, measurable ROI. Within 10 days of activation, PatientBond led to collections of up to 20% of past-due balances from 90 to 120 days for some of our customers. Because these communications are handled digitally, the cost to collect overdue payments was also low — meaning you can easily reach out about those $10 payments now.
If you’re ready to give the digital, psychographic method a try, give us a call. We’re happy to talk with you about making the PatientBond platform work for your facility to amplify engagement and improve your patient payment process. For more on how psychographic segmentation maximizes payment collections, download our case study.