Eight strategies to reduce bad debt in your medical practice
Forty-one percent of U.S. adults have some form of medical debt, and about 25% owe more than $5,000, according to recent data. A recent study found that 67% of all bankruptcy cases occur because people are drowning in medical bills. It’s not surprising that debt collectors contact people about medical debt more than any other type of debt. The message is clear: Americans are struggling to keep up with their medical bills—particularly in the wake o the pandemic. This struggle, in turn, affects today’s medical practices, many of which end up writing off these bills as ‘bad debt.’
What is bad debt in healthcare?
Bad debt refers to the difference between the amount you bill and the amount you receive. The goal is to incur as little of this debt as possible. Why? Simply put: Bad debt is bad for the financial health of your practice because it often leads to lower revenue. In fact, medical bad debt write offs can ultimately affect long-term financial sustainability. You’re basically doing the work and not getting paid.
What causes bad debt in healthcare finance?
Bad debt in healthcare occurs for a variety of reasons, including systemic medical coding or billing errors, high out-of-pocket healthcare costs, patient confusion (i.e., patients often miss payments because they don't understand how or when to pay), unexpected healthcare events, lack of awareness of charity care programs, and more. Although the reasons are somewhat universal, the specific ones that affect each medical practice most significantly will vary. Establishing a clear process for A/R follow up is critical.
How can medical practices reduce medical bad debt write offs?
Medical practices can take a variety of proactive steps to reduce bad debt in healthcare, such as:
1. Use a cost estimator tool. Nineteen percent of U.S. households cannot afford to pay for medical care right away. That’s why it’s important to let patients know how much they can expect to pay so there are no surprise medical bills and so patients can plan ahead financially.
2. Confirm eligibility, focus on point of service collections. Best practice is to confirm eligibility no more than three days prior to a visit. Call patients ahead of that visit if there is an outstanding balance so that you can arrange payment either prior to or day of service. Then collect all new copays and coinsurance before services are rendered. Be sure to accept all payment types, including credit cards on file, bank accounts, checks, FSA/HSA cards, Venmo, and PayPal. It all goes back to improving the patient financial experience, a step that can work wonders for your bad debt. For surgical procedures, consider collecting a down payment.
3. Create financial policies to educate patients about their payment options. Be sure to cover alternative payment methods for whatever insurance doesn’t cover, such as credit card payments, interest-free loan programs, and payment plans. While you’re at it, be sure to also create a bad debt policy for healthcare that addresses when you’ll write off and forgive balances.
4. Promote accurate documentation and medical coding throughout the practice. In some cases, working with a revenue cycle outsource partner may improve both quality and productivity.
5. Track and work payer claim denials regularly. Don’t let bad debt due to common medical coding and medical billing errors affect your bottom line.
6. Follow up with patients who have outstanding balances. You may need to outreach patients proactively regarding unpaid medical bills if they don’t come into the medical practice frequently. Answer any questions they may have and strive to eliminate confusion. This may require additional staff training for administrative, accounting, and registration staff to strengthen and refine communication skills. This training comes in a variety of forms, including observation and coaching, huddles, scripting, third-party resources, online training modules, or videos. Working with a revenue cycle outsource partner may also be an option.
7. Leverage the patient portal. Teach patients how to use your medical practice portal to receive cost estimates and pay bills. Promoting patient self-service can greatly reduce bad debt in healthcare.
8. Determine whether patients qualify for Medicaid or Marketplace health insurance. Understanding HHS poverty guidelines is the first step in determining eligibility for reduced-cost healthcare coverage. This simple step can have a big positive impact on bad debt in healthcare finance.
Conclusion
With the rising cost of healthcare, bad debt continues to plague medical practices nationwide. The good news is that providers can reduce bad debt using proactive strategies to engage patients and build trust. Learn how edgeMED can help and be sure to check the Healthy Snacks blog for more expert insights, best practices and industry trends.
