9 Ways Healthcare Providers Can Improve Co-Pay Collection
Co-payments account for about one-fifth of a private practice's funds, but collecting them can be tricky. These strategies and tools help practices get a handle on unpaid bills.
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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.
Practices that use appointment reminder software can also use it to notify patients of unpaid debts. The programs can also update administrative staff when patients with outstanding bills have upcoming appointments, so they can contact the patients and remind them to bring payment.
Rather than simply meeting Meaningful Use requirements by implementing a bare-bones patient portal, practices can seize the opportunity to expand patients' payment options -- which in turn will decrease the number of overdue invoices. Adding credit card and other online payment options can boost payments and improve customer service. As a result, providers send fewer bills to collections, improve cash flow, speed up bill delivery, and reduce resources to track down delinquent bills.
Billing code errors can result in thousands of dollars in unpaid revenue and put practices at risk of violating liability or compliance rules, cautions MGMA. Since ICD-10 is chock-full of even more specific codes, the risk of coding error may increase as employees get up to speed on the new system. So preparation is critical. The good news: Once it's implemented in the United States, ICD-10 will give providers and insurers more precise information about conditions and treatments, which should ultimately clarify medical charges and reduce contested invoices.
Analytics software gives office managers and accountants valuable insight into the source of a practice's monies. Some medical practitioners ignore small overdue bills, for example, but analytics can show the long-term repercussions this habit might have on a provider's financial health if it happens too frequently. Analytics can also help office managers recognize which patients tend to delay payments, so they can proactively create a payment plan before balances become unmanageable. Practices can learn when outstanding bills are likely to accumulate, successful collection strategies, and other information to improve cash flow as well.
Offices should use their billing software or other tools to organize collections by dollar amount, contacting patients who owe the most first rather than alphabetically, advises Michelle Weiss, president of Weiss Oncology Consulting. Practices that track denial management -- for everything from a patient's lack of funds to error codes in insurance billing -- find this data valuable for training, staff audits, and annual performance reviews.
When patients don't pay on time, billing software automatically adds late fees and tracks the number of days the bill is past due. Whether standalone or part of an electronic medical record or practice management application, billing software also can track partial payments for larger debts, determine a practice's outstanding fees, and highlight which patients owe the most money. Third-party medical billing firms, which use sophisticated billing software, increase collections an average of 10%, according to the Profitable Practice.
Software that automatically prints a receipt and links payment details to the patient's account also serves to reassure patients about the system's accuracy, according to the Medical Group Management Association.
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