Healthcare Self-Pay Collection - Recover from Those Who Can Pay

Collection activities in the healthcare context need to address revenue cycle inefficiencies while remaining respectful of patients’ life situations. By doing this, healthcare organizations can fulfill their missions and preserve their reputations with their communities and regulators.

With the rising costs of healthcare, patients are required to pay more themselves. Often they must come up with co-pays and deductibles at a minimum. While the receivable obligations are increasing, hospitals are not receiving payment.

Hospitals provided $31.2 billion in uncompensated care in 2006, representing nearly 6% of all costs, according to the American Hospital Association. Of those costs half were charity care and half were uncollected bad debt. Hospital bad debt, the fastest growing portion of healthcare receivables, will increase as much as 17% in 2008 compared to 2007 according to a Lehman Brothers report.

Recovering from those who can pay allows healthcare providers to improve facilities and care to better serve all patients and their communities. Yet, receiving payments from patients has never been as difficult.

The recovery of self-pay receivables is the next frontier for providers and their collection partners. According to one study by Healthcare Finance News and Connance, improving collections on patient payments is among the top three revenue cycle priorities for healthcare organizations.

An effective self-pay collection model should leverage a legal remedy, and in turn offer additional leverage points to existing collection efforts. Jumpstarting productive dialogue with patients can result in an increase in voluntary payments. Revenue cycle partners, collection agencies, and the providers they work for can quickly become familiar with the potential benefits brought by incorporating a “legal lift” into self-pay billing and collection processes.

What is a “Legal Lift”?

A “legal lift”, most simply stated, is the increase in collection realized when a legal remedy is leveraged throughout the collection process. The receivables recovery rate significantly increases with the use of a legal remedy in both legal and non-legal accounts, a 10% spread on average. However, a greater lift is seen in legal accounts, defined as delinquent accounts where present intent and ability to commence legal action exists. For healthcare organizations, the traditional legal action, court litigation, is often unacceptable from a patient and community relations standpoint and impractical because of the expense and delay involved.

Integrating an alternative legal remedy, in particular arbitration is fast, easy, and inexpensive. On the front end, arbitration is integrated into the patient intake process. The integration should be explained to patients both in person and in writing (brochures, contracts, etc.) to help them understand and comply with their obligations to pay. Throughout the billing and collections process, this integration provides unique leverage points that increase voluntary payment. If those efforts are exhausted, providers, or their partners, can activate the arbitration process. At that time both parties submit information to a legal professional who will hear the claim and issue a court enforceable decision. This patient-friendly solution is more efficient than litigation, and unlike court, allows providers the ability to pursue large volumes of claims.

This solution protects a provider’s reputation and mission while providing the same results as court. Implementing a legal remedy into your collection efforts jumpstarts dialogue with patients and leaves them satisfied with their billing and payment experience.

Which Accounts are Best-Suited for this Solution?

Most hospitals and health systems have begun to implement steps at both the front and back ends of the revenue cycle to segment accounts by ability and likelihood to pay. Charity care patients, for instance, are not appropriate to target as part of this solution. A self-pay collection model with legal remedy is best leveraged with accounts that typically go unresolved under traditional collection efforts or require more intensive efforts to eventually resolve.

There is a better way to think about recovering self-pay debts. Incorporate a legal remedy on the front end. That way, providers and collection partners can drive increased results on the back end and transform the entire revenue cycle to provide a measurable lift in recovery of self-pay receivables.

Keith Maurer, Esq. is Director of Healthcare Solutions at Forthright, Minneapolis. He can be reached at 952-516-6426 or kmaurer@forthrightsolutions.com.