Under the Affordable Care Act, more consumers have access to health insurance. But many also face higher deductibles and co-payments, which providers must collect directly from patients.
According to a July 2014 report by E&Y for the Association of Credit and Collection Agencies, healthcare-related debt represents 38% of all debt amassed by third-party collectors. Hospital debt accounts for 26.6%, outstanding invoices to physicians represents 7.1%, and clinics make up 4.2%, according to the study. Student loans take second place, representing about one-fourth of invoices collected by agencies.
In 2012, US hospitals delivered $45.9 billion of unpaid health services, the American Hospital Association determined -- that's 6.1% of all services.
Physician practices collect only 60% of patient co-payments; these co-pays account for about one-fifth of a doctor office's revenue, according to an older report by Medical Group Management Association. By delaying -- or not receiving -- payments, practices are cutting themselves and their patients short.
The top tier of all private-practice physicians have a collection rate of 85%, while one-fourth get paid for 90% of their invoices, according to Michelle Weiss, president of Weiss Oncology Consulting. Other estimates put collection rates lower. In fact, according to at least one study, it's not uncommon for medical practices to report a gross collection rate of 60% or less [of co-payments. That means for every $1 of services billed, the physician receives only 60 cents, according to the Medical Group Management Association.
A 30-day-old invoice has an average recovery rate of 97%; once an invoice reaches 120 days, there's an 80% average recovery rate, Abo and Co. reports. Once a debt is one year old, payment rates drop to an average of 47%. Since the average family in the United States now pays $1,000 annually in out-of-pocket medical expenses, physicians' share of personally funded invoices is growing, making it even more critical to collect what's owed.
Fortunately, technology can help improve collection rates. Starting with practice management software, which often includes automated features that streamline billing, medical practices can invest in tools designed to reduce outstanding co-pay and out-of-pocket invoices.
With more patients visiting portals to interact with healthcare providers, it's important to include online payment options to help them keep their accounts current. Kiosks have also improved collections for some healthcare providers. And automated reminders, typically used to confirm appointments, can play a valuable role as well.
Some practices use analytics to determine payment trends, proactively pursuing consistently late payers with payment plans to help them avoid fees or collection agency calls.
Prioritizing co-payment collection will become increasingly important as patients spend more on healthcare. By using all available tools, healthcare professionals can spend less time chasing down payments and more time tending to patients.