Medical Debt Disputes on the Rise
By Josh Shipman 8/9/16
There is no doubt that there has been a significant increase in the number of medical disputes. This increase seems to correlate with an increase in High Deductible Health Plans (HDHPs) where patients are now responsible for a greater percentage of their care. The fact that this variance should be a point of contention between patients and their insurance carriers makes it no less troublesome for the medical practice left holding bag – of growing A/R.
To illustrate this issue further, here is a recent quote from an article on The Huffington Post online:
“I received a bill from a medical facility that I felt was unreasonable and did not think it was even the correct amount, so I did not pay it.” (Katz, 2016)
It is obvious that this patient made no attempt communicating how she “felt” which resulted in the eventual placement with collections. To add insult to injury many online sources often recommend tactics for avoiding responsibility rather than seeking financial counseling. Historically, medical bills have least priority of all debt, and recent changes to FICO scoring models make medical debt less of an impact on one’s credit score. Then, there is the negative Yelp review which is difficult to retort without disclosing protected health information. So…how do you increase payment while balancing patient diplomacy?
The answer is early and frequent communication. Discuss coverage and offer financial counseling before services are rendered, and then implement solutions which help facilitate patient communication and payment once benefits have been paid. Keep in mind, past due balances don’t simply jump from current to 120 days overnight. This being the case, practices should consider solutions which help bridge this gap more effectively and diplomatically.
To increase post-service payment opportunity between the patient and the practice there are a couple solutions. First, most practices can significantly increase direct patient communication, and ultimately earlier payment by simply increasing the frequency of follow-up. Generally, this is too time consuming and cost prohibitive, however there are automated solutions which send reminders more frequently and at a lower cost. All contacts are created in the practice’s name, including return envelope, as well as phone contacts—which connect patients directly with the practice. Ask yourself which debt you would prioritize—the one where you receive a monthly statement or the one making multiple attempts? In this case, the majority of patients either pay or resolve payment disputes directly over the phone.
Next, should the initial statement and reminders remain unanswered, there are early-out solutions which provide third-party impact without the high cost of percentages. Practices may think of early-out solutions like they are leasing a third-party’s license to collect–for a flat-fee. The best solutions allow practices the ability to resolve disputes internally. This offers practices yet another opportunity to discuss patient responsibility including payment options, whereas with percentage agencies—it is simply out of your hands.
So… should our patient (at this point) have contacted the practice to plea how she “felt”, the practice would have had an opportunity to communicate how the balance was calculated and discuss agreeable terms— without additional collection charges. Keep in mind, many patients who reach this point may only require a single third party contact to motivate payment. These are accounts that traditional agencies often rely upon and what is referred to as “low-hanging fruit” which just cost you 30-50% —much less the ability to be diplomatic.
Estimates show up to 88% of all money that will be collected by an agency is collected through the mail. This is important as agencies (including early-out) are required to mail patients a statement of the debtor’s rights. In many cases, this may be the only notification that a percentage agency sends. It is within this notification which patients have 30 days to dispute the validity of a debt. Some practices may be unaware of these disputes because their percentage agency is not obligated to communicate them to the client and may have discontinued collection efforts—preferring to cut costs and work easier balances.
Percentage based agencies may respond to such reductions in their recovery rate by saying, “Well…it doesn’t cost anything unless we collect”. However, it is important to note, the true cost of collection is what is not collected. This is yet another reason why practices should consider flat-fee early-out solutions that automatically notify practices of such disputes, AND allow for the ability to securely upload proof of debt (such as a copy of the EOB) so they may continue working these balances. In this way, all accounts may received the same attention, thus avoiding skimming over accounts.
Since both percentage and flat-fee agencies both mail a statement of the debtor’s rights, AND the majority of patients respond to third-party contacts during this period, flat-fee agencies make for a better financial choice. For example, let’s say your average patient balance is $500. Your practice transfers 100 accounts to an agency for 30% of what is collected, and another 100 accounts to an agency charging $10.00 per account. If both agencies only recover 10%, the percentage agency would cost $1,500, whereas the flat-fee agency would cost $1,000. However, flat-fee agencies often realize 20% cash recovery rates because they don’t stop working accounts after the first demand letter. So for the sake of argument, let’s say both agencies recover 20%. The percentage agency cost would have gone up to $3,000 yet the flat fee cost would remain $1,000. Typically, because flat-fee solutions are more effective, the percentage agency would have realized the net back recovery of the first scenario ($3,500), while the flat-fee solution would realize the net back recovery of the second ($9,000), therefore netting the practice two-and-a-half times more.
Ultimately, no system recovers 100% and some balances will end up as cease and desist status. We can only assume that many of these disputes will be generated from deliberate debtors rather than distracted or simply disrespectful groups. If you are using a progressive approach, including financial counseling, automated first-party contacts, and early-out solutions, more of your A/R will end up as positive cash flow—and fewer bad Yelp reviews.
Josh Shipman is a patient A/R efficiency specialist with TSI. TSI achieves the nation’s highest net back recovery while maintaining patient diplomacy and the highest compliance standards. TSI has been vetted and peer reviewed by the Nation’s top medical associations and offers technology solutions uniquely compatible with the top EMR software –helping medical and dental groups significantly improve internal efficiency and effectiveness of patient collections. For more information or to request a demo of these solutions contact Mr. Shipman via email firstname.lastname@example.org
Nurse Katz. “Dealing with a Collection Agency and Medical Debt.” Web blog post. The Huffington Post, 18 April 2016 Web. 19 July 2016