Hidden Costs of Collections That Are Often Overlooked
One of the most important and overlooked aspects in healthcare, is that financial viability is often linked to a strong and effective Revenue Cycle Management (RCM) process. Whether you have a primary or specialty care practice, your bottom-line revenue is subject to a third-party payer system that makes every patient encounter a potential collections’ headache.
With ongoing 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 Revenue Cycle Management process. Most patients pay their outstanding balances over time, but it’s estimated that over 17% took longer than a year to pay their medical bills with another eight percent not paying at all.
Hidden Healthcare Collection Costs
Following the completion of the billing cycle, many times amounts are still owed, whether from rejected services or patient portions still outstanding, which naturally will reduce your bottom-line revenue. Here are the some ways that collections eat away at your bottom line:
1. Financing Costs - With many of 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 14% or higher, depending on the type of loan and the practice’s creditworthiness.
2. Administrative Costs - Every uncollected charge must be followed up by staff members through emails, telephone calls, 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.
3. 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 practice expansion, new equipment, marketing, or hiring new providers or staff members.
4. Bad Debt Costs - The longer debt go unpaid, 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.
5. 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
Through implementing strong business practices, these costs can be reduced significantly if not virtually eliminated. Whether considering in-house 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.
- Manage prior authorizations using an automated system.
- Pre-collect estimated amounts due, based on patient portions derived from eligibility and benefits information and the projected procedures to be performed.
- Make sure that documentation is completed by providers and corresponding superbills are turned in daily.
- Take every precaution that precise and accurate coding is completed in a timely manner.
- After claims have been submitted, be sure that timely follow-up on all outstanding claims, denials, and rejections are being performed.
To learn more about how RevPro Healthcare Solutions medical billing services can help you make more money, limit overhead expenses, and make your practice more efficient, contact us below or call us at 561-578-8400.