by Priscilla Holland, Senior Director of Healthcare Payments, NACHA – The Electronic Payments Association
Collections of patients’ outstanding bills, those charges not covered by health insurance plans, are set to challenge medical practices across the country, if they haven’t already. Consequently, physicians will need to migrate toward other methods to collect patient payments, including offering online payment portals and accessibility for patients to make a single or series of electronic funds transfer (EFT) payments via ACH.
The Affordable Care Act has compelled many companies to change the health care plans they offer to employees in order to reduce their rising costs associated with plan implementation. Consequently, many employers have shifted to high deductible health care plans being offered by health insurance companies. But these plans require employees to satisfy a significantly higher level of medical costs up front, before any insurance will kick in. Today, many health care plans sport annual individual employee deductibles of $5,000 or even more – a high hurdle for many insured individuals.
Patient pain by the numbers
According to the 2015 health care report from the Kaiser Family Foundation, the average plan deductible is now $1,318—up from $917 in 2010. Adding to that financial burden for employees, premiums for single health care coverage have risen 27 percent during the past five years to more than $6,200 per year (and to more than $17,500 in annual premiums for family coverage). Notably, wages have only increased an average of 10 percent over that same period (2010 to 2015).
Doctors feeling the strain
While high deductible plans can make business sense for insurance companies seeking to reign in costs, these can pose challenges for well-intentioned medical doctors running their own businesses.
2010 data from the Medical Group Management Association (MGMA), a trade association of medical practice administrators and executives representing 385,000 physicians, shows that 30 percent of patients walk out of their doctor’s office without paying. Medical practices were responsible for collecting $1 out of every $4 directly from patients. In July 2015, an MGMA survey found that collecting patient due balances is among the top 10 pain points for nearly 96 percent of doctors. Those numbers are expected to jump in tandem with patients having to pay for medical services against higher deductibles and higher out-of-pocket premiums.
It’s no longer just a matter of doctors’ offices collecting traditional co-payments from patients. Although not specific to collections of medical payments from patients, data from the Commercial Collection Agency Section Commercial Law League of America shows that the probability of collecting a debt generally drops to 73 percent after three months, and to 50 percent after six months. Debt that is one year past due only has a 25 percent chance of ever being collected.
Finding solutions: Developing an online payment portal
Providers should look to expand payment option capabilities to provide more solutions for their patients. While collecting payments at the time of service is the ideal, offering broader payment options can increase payment collection. Data from MGMA in 2010 indicates doctors collect a fractional $15.77 for every $100 in unpaid patient bills once a patient’s outstanding debt is turned over for collection. Physicians will need to not only retrain staff as to what to do in light of the changing landscape, but doctors will also need to consider other solutions.
Best practices for doctors can include having candid and detailed up front discussions with patients as to what any service or procedure will cost and what the out-of-pocket expenses will be for the patient. The faster a patient can get an estimated bill, the more likely he/she will be inclined to pay. Physicians who are already, or are open to, accepting the healthcare EFT standard can speed up the collections of funds from health plan providers, thereby enabling doctors to deliver an accurate bill to patients faster.
Doctors must also look at the problem more holistically and consider giving patients expanded options for paying their bills beyond using paper checks, whose usage has waned in the electronic age. This can include developing online payment portals.
For example, are credit cards currently accepted by the practice, and can patients log onto the practice’s website and pay by credit card right then and there, 24/7/365? Does the online payment portal allow for a single electronic funds transfer (via an easy and quick ACH payment) from a patient’s bank account? Patients have become quite accustomed to receiving ACH payments because that’s how many receive their pay – through Direct Deposit via ACH. In fact, more than 80 percent of U.S. workers receive their pay using direct deposit. Can patients who cannot pay the entire bill now set up to have a series of EFT via ACH payments periodically made to the doctor until the entire cost is paid? This option could be appealing and much less expensive to patients who may favor a direct payment series over credit card finance charges.
Moreover, ACH payments are much more cost-effective for doctors; costing an average of 31 cents per transaction as charged by financial institutions versus 3 percent fee for each credit card transaction. Credit card processing costs can quickly add up for medical practices, as can fees that must be paid to collections agencies to recoup unpaid money from patients. In addition, ACH payments can be just as easily executed for a one-person rural medical practice as for large multiple-doctor, multiple-office practices, making it practical for all.
Physicians who want to ensure collection of their patient revenue will want to consider alternative payment options that make sense for most patients and can cure their own collection headaches.