Healthcare organizations are seeing their margins shrink; and when margins are tight, a high-performing revenue cycle becomes evermore vital. After all, failing to collect the dollars associated with performed services can quickly turn a profitable organization into a floundering one. When it comes to collecting these dollars, self-pay balances are becoming an increasingly important variable that must be factored into revenue cycle equations.
The Changing Payor Landscape
Both employer- and individual-sponsored health insurance plans are beginning to transfer the cost of care onto consumers, making patients more financially responsible for their healthcare utilization than ever before.
Employers, who are responsible for insuring about 60% of Americans, are cutting costs by utilizing cost-sharing measures – such as co-pays, deductibles, and co-insurance – and by decreasing overall benefit coverage. Exchange-based plans are expanding coverage to the uninsured; however, these plans have limited coverage and often pass the majority of costs onto the newly insured.
Thus, patient contributions are quickly becoming a meaningful source of income, and it’s time for organizations to design and implement a thoughtful self-pay receivables management strategy.
Protecting Your Revenue Stream
Billing offices tend to treat self-pay balances identically to payor balances (i.e., staff send invoices and make phone calls to follow up with a patient when there is nonpayment). Because self-pay invoices are generally high in number and low in dollars, it takes significant effort to successfully generate a positive return on investment. Therefore, self-pay balances are often ignored or written off. But in the changing market, these invoices are becoming more valuable.
The illustration below shows that providers have multiple opportunities to collect payment from patients, both before and after services are rendered. Best practice self-pay strategies are able to leverage all these opportunities to streamline collection efforts – decreasing the overall cost to collect.
Making it Easy
At a high level, patients need to know what to pay and how to pay it. Making a patient statement simple and easy to understand can be a great opportunity to reduce call volumes and dramatically improve self-pay collections.
Offering financing options and establishing payment plans also can be a successful strategy for collecting patient balances. Similarly, we know that the likelihood of collecting payment decreases over time, so providing the patient with financial incentives, such as a prompt-pay discount, can improve overall collections.
Providers are often hesitant to utilize front-end staff as part of their collection strategy out of fear that discussing money prior to or directly after the rendering of services will make patients uncomfortable.
However, patients are demanding cost transparency, particularly for specialty care services. Patient balance estimation tools have been extremely successful in promoting this cost transparency while also estimating self-pay balances when the patient is still in the office. These tools range from the simple to the complex, but they are designed to analyze historical charges, payor contract terms, and patient benefit levels in order to predict a patient’s financial responsibility.
Additionally, research suggests that when given a good faith estimate, most patients are willing and able to pay up front for their medical care.
Your self-pay receivables management strategy doesn’t need to be complicated. Ask a few questions to shed light on your office’s current self-pay and self-pay after-insurance work flows. Remember that small changes can have significant impacts, especially as patients become more and more responsible for the cost of their care. The industry is changing, and it’s important for your revenue cycle to keep up.
This post is adapted from a column that originally appeared in the November 2014 issue of CardioSource WorldNews, a publication of the American College of Cardiology.