Collecting on Patient Balances
In an ideal world, patients would always provide their correct, updated insurance information at point of service. In an ideal world, carriers would always process and respond to claims filed within 45 days. In an ideal world, patients would always pay their balances within 30 days of receiving their first bill. Unfortunately, our world is far from ideal and when these perfect scenarios aren’t met, there are costs involved, both tangible and intangible. How your practice manages its receivables and follow up has a huge impact on profitability.
Obviously, when money owed from carriers and patients is outstanding and not in your bank account, you have the opportunity cost of lost interest income. Additionally, the impediment on your cash flow may cause you to borrow money to use for working capital in your practice or to finance the purchase of equipment. Now your unpaid receivables are costing you the finance charges your creditor is charging you.
Now, what about the cost of your staff’s time to follow up on both unresolved insurance claims and unpaid patient balances? If you have 1 billing clerk earning $15/hour and following up on just 6 claims per day at 20 minutes of waiting time on hold per claim, then you are spending $3750 per year for their time spent on hold.
Then, after spending all that time on hold, your staff is typically told by the carrier to re-file the claim. This uses up more staff time, it means waiting another 45 days, further delaying payment, costing you still more and now risking the collectability of any patient responsibility as the time between the office visit and patient’s first bill increases. And, even after re-filing, many claims still go unpaid.
When you look at your own insurance A/R, if it doesn’t look too bad, find out whether your billing software re-ages claims to 0 days when they’re re-filed. Many do, and therefore the age of insurance receivables is artificially reduced.
Some practices, having recognized the total cost of managing receivables, set a threshold of what size claims they will continue to work on and which are too small to be worth the effort. This results in a further cost of small balances never getting paid.
Patient receivables can cause a drain on your practice’s profitability when you consider the use of staff time to continue to send additional bills, not to mention the cost of paper, ink, envelopes, and postage. Most practices will eventually send unpaid patient balances to a collection agency or an attorney, but by the time they send them, the majority is uncollectible. There is usually a delay in assigning the debts to a third party caused by a provider who wants to “review” the collection files before they’re sent (not a good use of a provider’s time) and can’t find the time to do it, resulting in a delay of several months before the accounts are assigned to a third party. Patient receivables depreciate in recoverability at a rate of 15% per month after 90 days, so this additional delay is more costly than practices realize. Additionally, most agencies or attorneys won’t accept small balances (or they charge a much higher commission to collect them) and many small amounts are written off and their aggregated value can be quite a lot of money.
So, what are some solutions to decreasing the cost of carrying receivables? Some practices have outsourced their A/R management to billing services and pay a percentage on every dollar brought in. Hopefully, the cost is less than the overhead the doctor’s office would spend to keep this function internal. But while a billing service can allocate resources that a practice may not have and have some impact on improving cash flow, they still can not entirely control whether carriers and patients pay more promptly and there will still be unpaid claims and patient balances remaining.
Many practices have taken steps to educate the front desk staff to be more diligent in collecting patients’ data so at least they are filing correct information with the correct carriers. This is an inexpensive and important measure to take. There are also techniques that can be used to insure copays are made within days when patients claim not to have their wallets with them at point of service.
Many practices have switched to using a diplomatic flat fee agency for 60-90 day AR rather than a harsh high commission agency on balances 120+ days. This results in increased collections at a lower cost and without the loss of doctor/patient relationships.
Karen Cooper, MBA is a Senior Account Executive at Transworld Systems Inc, a national company specializing in improving cash flow for healthcare organizations of all sizes and specialties. Karen.Cooper@transworldsystems.com
