Bad Debt? Blame a Low-Tech Payment System

Karen Minich-Pourshadi, November 7, 2011

Got bad debt? Your payment system may be to blame. Out-of-pocket consumer spending on healthcare is increasing every year, which means healthcare systems and physician offices have many individual small payers to keep track of, as opposed to a few governmental contacts paying large amounts.

Some of these small payers will inevitably turn into bad debts. As more businesses shift employees onto high-deductible, consumer-directed health plans, healthcare organizations may see even more bad debt. Some portion of the bad debt is preventable, however, by investing in eligibility verification technology and utilizing electronic fund transfers.

"Healthcare collection rates are abysmal. This is easy money just left on the table," says John Reynolds, president of FIS Healthcare, a banking and payment technology firm. "When we look at hospitals, healthcare systems, and physician practices, they are all falling way behind in their ability to collect on the consumer side."

Although some healthcare systems employ payment technology for patient collections, the majority of healthcare organizations still use a largely manual process, Reynolds says.

"Manual processes and error play a big role in the inefficiency of the collections processes. If healthcare started using the electronic exchange of information, many organizations could increase collections, and they might be able to reduce staff. This is an area of enormous opportunity for improvement in healthcare," he says.

The first step is verification. It's estimated that three-quarters of hospitals and health systems collect less than 30% of their payments at the time of service, according to a poll by TransUnion Healthcare. Collecting what you can up front is essential, but to do so you need to accurately verify a patient's insurance eligibility.

For most organizations, the verification process is done manually by the front office. A staff member either calls the insurance company or checks eligibility through the payer's website. The process can take several minutes, which is why it's usually done only once. However, eligibility verification software and web-based programs can swiftly handle this step and determine the patient's financial responsibility.

Additionally, some programs can create payment plans, find alternative sources of payment for the patient, or point a patient to a financial assistance program.

Ensuring that the patient's insurance coverage hasn't changed is important, Reynolds says, and it requires multiple verifications from preregistration through discharge. Organizations using a manual process are highly unlikely to have the time and personnel to do the verification more than once for all patients.

Karen Minich-Pourshadi Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media. Twitter
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