Bad debt used to be a seemingly insignificant piece of the revenue cycle years ago. But during the past 14 years, thanks to the highly favored high deductible healthcare plans offered by many employers, out-of-pocket healthcare costs have skyrocketed by nearly 230%, according to a survey by the Kaiser Family Foundation. Just trying to pay for $500 in emergency care costs would be extremely challenging for a majority of households. This has left hospitals and healthcare systems to focus more timed resources on collecting bad debt, which is becoming a more important piece of the revenue pie to help facilities keep their doors open. This dynamic has been exacerbated by the decrease in patient volume and postponed care due to COVID-19.
If copays and deductibles are not collected before or at the point of service, there is a high likelihood that more than 60% of the money owed will turn into bad debt. The likelihood of recovery gets lower as the account ages and many hospitals and providers do nothing more than send statements by mail without following up on accounts because the facilities have limited resources. The accounts are often placed with a collections company, which results in higher costs to the provider. However, the agency has dedicated resources and specific tools it can use to engage patients in a conversation about their financial obligation or leverage credit-reporting or litigation, if permitted, to recover the money owed.
“Years ago, there was very little expectation, from the patient’s point-of-view, to pay before services were rendered even when they were asked for payment,” said Matt Kiefer, Chief Officer of Information, Compliance & Development for Preferred Collection and Management Services. “This was especially true in the ER as a result of the Emergency Medical Treatment and Labor Act (EMTALA) which guarantees treatment in the ER regardless of a patient’s ability to pay.”
Kiefer said that the highest priority for providers was being reimbursed by insurance companies because those amounts were much higher compared to the reimbursements being sent to providers today. The primary focus was ensuring that the patient’s insurance information was correct and billable and all requirements were met to obtain reimbursement. Today, the patient responsibility portion for medical care has greatly increased so the focus needs to be on both accurate insurance and patient information and obtaining payment information in the quickest and most efficient manner possible.
Patient responsibility was left to a series of statements sent by mail on a cycle of every 30 days and eventually wound up with the hospital’s collection agency vendor partners.
That all needs to change. Collecting on bad debt is a necessity for any healthcare provider. Engage with a collection agency to better understand the best practices and decide whether you have the resources to do it on your own or if you need a trusted partner to help you.