The balance between tending to your cash flow needs and nurturing the patient is a delicate one, but one that can be managed with very intentional steps and the latest in financial technology.
Healthcare providers have faced unique challenges over the past three years, with more than half of U.S. hospitals projected to have negative margins through 2022. There is no single cause, but when elevated hospital expenses (nearly $135 billion more than in 2021) meet an inefficient patient billing system, there is sure to be an impact on cash flow.
Cash acceleration affects everyone; revenue cycle managers at both rural hospitals and major institutions look for ways to free up funds without reducing patient quality or accessibility of care. With interest rates rising and the cost of doing business reaching skyward, providers who don’t prioritize cash acceleration may struggle even more.
Still, it’s not enough to simply double down on collection efforts, as patients struggle with the same inflation numbers as providers. Aggressive attempts to collect consumer payments risk the relationship built over the years and may even discourage them from accessing healthcare when they need it most.
This often leads to a costly disconnect at a time when cash is more important than ever. Patient accounts must be handled promptly and before they reach a point of no return. Data shows that higher patient balances have lower collection rates, and once a patient account balance reaches $7,500, the chances of ever collecting go down significantly. However, patient balances of this size have tripled since 2018, making it essential to tackle them before they lead to large, unpaid debts on the books.
To make matters worse, it’s not solely uninsured patients adding to the revenue slump. While 80% of patient revenue comes from insurance, self-pay after insurance accounts for almost 58% of bad debt – an increase from just 11.1% in 2018. Any CFO that states it’s an insurance problem or that it can be handled when the economy recovers is setting themselves up for trouble. They just aren’t aware of how much patient accounts have changed in four short years, and that will spell trouble for provider collection teams that have done nothing to keep up with the times.
If cash isn’t your top priority, it should be. Between the growing numbers of self-pay after insurance balances, a large, retiring workforce relying on pension payouts, and increasing costs on the everyday items consumers use most, trouble is coming for anyone who isn’t taking a hard look at cash acceleration. Thankfully, it can be managed without compromising patient relationships if you follow these very intentional steps and use the latest in financial technology.
Here’s what to prioritize first.
Priority 1: Assess your current patient financing options
You may have a documented accounts receivable and collections process, but are you following it closely? Set aside your original plan for handling patient payments and assess how these accounts are being addressed in real life. It’s likely that you follow one or more of these three strategies (or some variation):
- Handle patient billing yourself, including multiple paper statements with the full amount due, until they gradually reach a status of “uncollectable.”
- Assign accounts, on day one, to early-out vendors who take over collection (and the patient relationship) on their own terms with their own branding.
- Give the patient up to 90 days to pay the amount in full, when it goes to an outside collection agency.
- Wait until the customer calls with payment concerns, then set up a monthly payment amount based on the total amount due, not the patient’s ability to pay.
If you do offer payment plans, examine this process. It may have been some time since you last reviewed the “hows” and “whys” of payment amounts, methods of payment, and patient account communication. Ask yourself:
- Are payment plans subject to interest or fees for the patient? Is this additional amount added to the balance up front? Does the customer connect this additional charge with the cost of care?
- Are the payment plans recourse or nonrecourse? How does this affect your financial position and planning? Your collection communications with the patient?
- Can the patient continue to receive care from your organization while they pay down balances? At what amount is their balance “capped” to where they can no longer incur additional charges?
- If your healthcare system absorbs the cost of payments, how does it affect the overall cost of accounts receivables? What could you be doing with that money instead?
Priority 2: Analyze your curve
With collection processes newly documented, you’re better positioned to look at your performance based on the patient experience. Information to use in your analysis should include the following:
Propensity to pay – Using patient-provided information, past payment history, and other factors to help you sort patients into categories of “likely to pay,” “not likely to pay” and “possibly may pay.”
Payment and usage patterns – Information that may cue you into how often and at what point patient accounts go into “non-payment status” or characteristics common for on-time payors.
Perceived patient experience – Measurable data, including both quantitative and qualitative categories of metrics. Net promoter scores, asking “how likely are you to recommend to a friend?” may back up any anecdotal evidence of satisfaction.
Don’t discount what patients have said to you or your teams directly. Whether it’s a strongly worded letter, a comment in passing or how conversations with front-desk and billing departments have evolved over time, these contain patterns of your overall performance.
As an example, questions from patients can be a key indicator of how seamless your patient billing process really is. If you hear the same questions over and over, such as how to apply for payment plans or how payment amounts are established, you might have an opportunity to clarify billing practices and put customers at ease. Any feedback–however unique–should become part of your curve analysis.
How this plays into the larger risk reduction strategy
These two steps of assessing current A/R methods and painting the patient satisfaction picture will take some time, but they are necessary to truly capture all the factors contributing to cash flow from patient balances. In a time when cash acceleration isn’t just desirable but also a lifeline, it’s important to identify every opportunity to improve, especially when looking at the current available technology as a possible solution for your accounts receivable ills.
In the next article, we’ll outline how to identify opportunities for improvement in your patient payment process through new patient financing alternatives. The result could be the answer to delighting patients, while addressing your own cash needs as well. With PayZen’s patient financing platform, you can balance an increase in cash flow with continuing your mission of providing accessible care to the patients who need it most. Request a demo today.