As anyone who’s been paying attention to discussions about the nation’s health care system will already know, there is much talk about a pervasive health care financial crisis. Much of the focus of this dialogue is centered on the perceived high cost of care, and difficulties with insurance. And, almost all of the discussion is patient and insured-centered. The financial impact of unpaid medical bills for providers is often left out of the mix, but growing medical debt is indeed a crisis for the healthcare profession as well.
And, if you look at some of the figures reported by health care providers, the problem is a dire one that can threaten the health care system in the country. Separate reports by the “American Hospital Association” and “The Hamilton Project”, part of the Brookings Institution show unpaid medical bills totaling between $40 and $57 billion dollars. These figures are shockingly huge and can represent up to 10% of a hospital or medical provider’s annual costs. Not only do unpaid bills cause a drain in a provider’s cash flow, but the collection process can be complicated and costly in itself.
The Source of the Debt
While the cost of health care has risen due to innovation and new life-saving technologies, the culprit in increased unpaid medical bills is a shift in the amount that insurance providers cover. In the past, insurance covered close to 90 percent of medical costs for those insured. Research now points to that figure sliding to 70 percent. The combination of increased cost and decreased coverage has landed both patients and providers in a sticky situation with a little sigh of relief.
So, how can hospitals and health care providers proceed if this trend persists or even gets worse? The key is not so much in reducing costs or creating an organization that can absorb receivables. Rather, the solution exists in patient relationships.
Creating a Customer Experience that is Ever-Aware of Financial Responsibility
There will always be situations where patients cannot pay for their care. Indigent patients are already accounted for by many hospitals and providers through charity care, or the practice of writing off medical bills for those who truly cannot afford coverage. Providers should include these provisions in their operations, as it recognizes ethical and moral duties to provide care that are closely associated with the tradition of medical practice. A charity care program also recognizes this inevitable truth that some simply cannot afford care for a variety of reasons, and a hospital will never be able to eliminate this source of financial drain. For example, a patient could very likely be facing a financial struggle related to their injury or condition. Even the most financially stable person can have their lives upended by unexpected medical needs.
However, many of the unpaid medical bills plaguing hospitals and providers are owed by those who have the ability to pay. This ability to pay may be uncomfortable, and the patients may not want to pay, especially if they feel that insurance should cover the expenses. For these patients, hospitals can take steps to include billing discussions in the patient onboarding and pre-procedure process.
Billing should be an openly discussed topic. That way, financial problems can be addressed at the outset. It’s not a matter of denying care, but rather shining light on cost and setting expectations about the billing process.
Decreasing Debt Through Persistency and Politeness
The keys to billing success are persistence and politeness. The collection process is an important and inevitable process for some patients, but from some patient perspectives, the collection agency is removed from their care provider, so they are more likely to simply walk away from a debt they do not want to pay. So, try avoiding the collection process from the outset. Medical debts can hit the credit report of a patient only after 180 days and have less impact than other types of debts.
Providers that fully explain a patient’s financial responsibility and encourage payment plans are more likely to see unpaid bills diminish. With a user-friendly billing practice, payment can simultaneously be in mind and also out of the way so it doesn’t become a burden to either party.
For example, Duke University Health System makes billing a priority — not through aggressive collection practices, but through strategy with the patient. Payment plans are discussed in advance, and financial problems are identified in an open and positive relationship that keeps the focus on overall care. The result? Lower unpaid bills than the national average.
This is not to say that collection is to be avoided. In fact, aggressive collections practices are necessary when patients who are able and aware of their costs refuse to pay. Hospitals should try avoiding collections when possible, but also keep in mind that collections is a key component of revenue cycle management and better cash flow. Hospitals must also be keenly aware of the complexities of insurance and train employees to analyze benefits so that there is clear communication between patients and providers. With a balance of optimized billing practices and frank and open billing discussions, providers and patients can minimize financial distress related to care.