By Bird Blitch, Patientco
Collection agencies are commonplace in the healthcare industry. In fact, if you’re reading this, your organization probably contracts with at least one early-out vendor or collection agency for delinquent patient payments.
Reports show that healthcare bills are the number one source of collection calls in the U.S., so the magnitude of healthcare’s reliance on collection agencies should come as no surprise to anyone. After all, nearly 68 percent of all negative collections tradelines involve unpaid healthcare bills and collection agencies provide a low cost, low risk option for healthcare organizations – right?
Maybe not. Perhaps it’s time to start evaluating the cost and risk of collection agency usage through the lens of patient financial experience as a payment driver.
High Cost, High Risk
The use of collection agencies has both seen and unseen risks with associated costs. Most agencies operate on a contingency basis, so risk is minimized, but costs are still higher than you might expect. Health Systems often pay as much as 20 – 25 percent of what’s collected, and costs may increase as debt ages. With the median hospital operating margin at just 2.6 percent, those figures alone bear scrutiny. But what about the unseen risk of a negative patient experience – what is the cost? Patientco analysis reveals the lifetime value of a patient is +$650,000 – representing a much higher long-term risk to the health system.
According to the Consumer Financial Protection Bureau, consumers are more likely to complain about their confusion around medical collections than any other type of debt. In other words, patients are being sent to collections for bills they do not understand.
Consider a patient with a single episode of care. After completing her appointment, she leaves without clear billing instructions detailing what to expect. In the days that follow she receives the first statement, but she thinks her insurance will cover the cost. A few days later, she receives a separate bill for her lab work. After her third mailed statement for the same episode of care, she’s confused by all the bills, as well as the cumulative price tag.
When she tries to pay online, each bill has its own payment portal without details about the other charges – resulting in confusion as to whether there’s overlap. To ensure accuracy, and due to her busy work schedule, she defers paying until she can obtain more information.
More bills come the following months, compounding the confusion and sticker shock. By the time the collection agency calls – with the inevitable ding to her credit score – her positive clinical healthcare experience has been completely wiped out.
This scenario is all too common and illustrates the high risk of the traditional collections approach. If you deliver a poor patient financial experience, you are not just missing out on current collected dollars. You’re also more likely to be missing out on future business through patient loyalty and referrals. Balancing the risk of losing a lifetime’s worth of payments with the need for short-term collections should give any business leader cause for concern and re-evaluation.
Pivot Toward Technology To Reduce Reliance On Collection Agencies
Technology now has the ability to offer patients what they need (and want) to make the financial experience one that is understandable, friendly and accessible. Unlike the patient example above, providers now have the opportunity to communicate with patients based on their preferences and offer tailored payment options to ease the payment experience. By reducing confusion and improving patient financial access, we believe next-generation billing and payment technology can largely eliminate the industry’s reliance on collection agencies.
That’s because technology offers features that collection agencies typically don’t. Leveraging data and machine learning, it’s possible to understand each patient’s unique preferences, which allows technology to serve as a patient financial engagement engine that benefits everyone; patient satisfaction increases, organizational cashflow improves and overall net collection rates are enhanced.
Here’s how patient-first technology can help:
When is the last time you answered your personal phone for an unknown number? People today are wary of unsolicited numbers, yet collection agencies still rely heavily on phone calls. And phone calls. And more phone calls. Yet with smart technology, hospitals and health systems can send tailored patient communications that reach patients based on their preferences, when and where they are most likely to engage.
By measuring engagement along the path to payment, technology can automatically trigger additional communication methods until the patient is reached. If your patient prefers a text message, she’ll get a quick reminder straight to her phone. If she doesn’t respond within a predefined time, she’ll get an email, and so on. Automated workflows ensure each patient moves along a line of personalized communications.
Technology also can alleviate statement anxiety by automatically translating complex medical terms and billing codes to plain language more patients will understand. A clearly communicated bill, coupled with simple payment tools, makes it easier for patients to both understand and act on their financial responsibilities from the beginning.
Tailored payment options
Many times, collection agencies end up creating payment plans for patients. So why not offer patients a self-service payment plan up-front to save time and money while creating a better patient experience?
Intuitive payment technology can proactively deliver payment options in an automated and self-service way. Similar to intelligent communication workflows, health systems can automatically tailor payment options based on bill balance or custom segmentation based on business rules. These offers are more likely to fit the patient’s budget, because the technology knows enough to predict what their budget may be.
With friendly payment options available from the start, health systems can reduce reliance on — and the cost of — collections agencies and get paid sooner. Patient-centered payment technology can shift cash receivables forward, so you’re collecting the dollars without paying as much for them while improving the patient payment experience.
Using Patient Experience To Drive Loyalty
Hospitals and health systems focus on every patient dollar – understandably. With tight operating margins, it makes sense that short-term patient collections are often prioritized without thought of long-term implications. Unfortunately, this point of view comes with its own costs: Lower patient satisfaction, less net collections and missed future revenue opportunities through referrals and return visits.
Technology gives health systems a way to improve the bottom line by identifying and optimizing the communication and payment options with the highest probability of improvement. With easily understood, preference-based patient communications and tailored payment options, it’s possible to create a superior billing experience that creates more dollars and increases patient loyalty. Patients who feel they have true partners in both their clinical and financial care will be more likely to return to the same health system for future care.
With advances in patient payment technology, collection agencies could be used as an exception, not common practice. While they may not disappear in the near future, their utilization can be dramatically reduced to everyone’s benefit. By leading with smart patient payment technology, revenue cycle leaders can care for their patients both physically and financially, while increasing net collections. No collection agency needed.
About The Author
Bird Blitch is the cofounder and chief executive officer at Patientco.