In healthcare, financial viability is often linked to a strong and effective Revenue Cycle Management (RCM) process. Whether you have a primary or specialty care practice or provide rehabilitative or therapeutic services, your bottom-line revenue is subject to a third-party payer system that makes every patient encounter a potential collections’ headache.
With more and more healthcare costs being passed through to the patient as high-deductible healthcare plan premiums, co-pays, deductibles, and co-insurances, aging A/R and collections are becoming a critical aspect of the RCM process. Most patients pay their outstanding balances over time, but it’s estimated that over 16% took longer than a year to pay their medical bills with another eight percent not paying at all.
Hidden Healthcare Collection Costs
Amounts still owing following the completion of the billing cycle, whether from rejected services or patient portions still outstanding, are at risk of being written off and reducing bottom-line revenue. Here are the five ways that collections eat away at your bottom line:
- Administrative Costs—Every uncollected charge must be followed up by team members through telephone calls, emails, and letters, as well as the required recordkeeping and manual follow up. Each of these functions uses time and resources through staff salaries, office supplies, forms, and postage.
- Financing Costs—With today’s cash flow restrictions, your practice may have to borrow money from a bank or line of credit to finance day-to-day operations, including salaries and taxes. The corresponding interest rates can be up to 13% or higher, depending on the type of loan and the practice’s creditworthiness.
- Bad Debt Costs—The longer debt ages, the less likely you are to collect it. It literally becomes worth less money the longer a debt sits in your A/R. Once it rolls to >120 days, it is worth less than a third of current charges.
- Opportunity Costs—The money that is tied up in A/R and not being collected is also not available for funding growth opportunities for the practice, including marketing, practice expansion, new equipment or hiring new providers or staff members.
- Collection Agency Services—Collection agencies usually work on a fee contingency basis with charges ranging from 30 to 60% of the amount collected. While it is better to get something for the hard work rather than nothing, this high rate stings.
How to Reduce Healthcare Collection Costs
There is a silver lining in this discussion. Through implementing strong business practices, these costs can be reduced significantly if not virtually eliminated. Whether considering self-implemented changes or engaging an outsourced RCM partner, improving these areas will reap significant improvements in bottom-line revenue:
- Ensure insurance verification is done for every patient at every visit
- Pre-collect estimated amounts due, based on patient portions derived from eligibility and benefits information and the projected procedures to be performed
- Manage prior authorizations using an automated system
- Make sure that documentation is completed by providers and corresponding superbills are turned in daily
- Safeguard that precise and accurate coding is completed in a timely manner
- Proactively manage proper and timely claims submissions
- After claims have been submitted, be sure that timely follow-up on all outstanding claims, denials, and rejections are being performed
If current trends continue, value-based care and the consumerization of healthcare will continue to reshape the way care is delivered and how reimbursement is managed. Engaging an outsourced partner like Enhanced Revenue Solutions by Infinx can help you capture reimbursement that’s due to your practice.
Schedule a call today to request a Health Check to uncover where you are leaving money on the table.