New On-line Payment Service Aims to Speed Small Balance Collections

In the world of health care collections, trying to collect small balance receivables can quickly become more costly than lucrative if recoveries aren’t handled efficiently. GlobeFunder Receivable Solution, LLC, a new technology solutions firm targeting the accounts receivable management industry, has developed a web-based service it believes will increase recoveries and drive down costs by incentivizing consumers with delinquent bills to pay up.

The online tool called IOUSOS works on the premise that debtors will get the best discount if they act quickly, allowing health care providers to recover debt they might otherwise have written off against their taxes or sold to a debt buyer.   

GlobeFunder Chief Executive Brian Mullally told insideARM that IOUSOS’ focus is delinquent medical debt balances under $500. The service, however, can be used by other industries, including ARM professionals, to reach and conduct business with consumers in a way that is comfortable for them.  

“There is a void in the marketplace and collectors and creditors are struggling with how to efficiently work those accounts,” Mullally said. “We think with smaller accounts, the technology we utilize can reach a new segment of the market not getting the appropriate attention from a recovery perspective.”

The Billing Tree of Phoenix, Ariz., also provides on-demand payment solutions for health care billing and receivables.   Debt balances, however, aren’t limited and debtors may not be offered immediate discounts to settle their debt, said Justin Gray, a spokesman for Billing Tree, formerly Electronic Payment Providers.

After a debtor is contacted by GlobeFunder on the creditor’s behalf, he is invited to visit IOUSOS.com to learn how much he owes and how much the creditor is willing to accept to settle the account if paid immediately.  After logging onto the network to see the bill, the debtor is presented with three offers to settle the debt for less than the original balance. The first offer provides the greatest savings if paid within the 24 hours, Mullally said.   

“We have seen discounts up to 85 or 90 percent on our platform.  It’s the creditors or agencies call,” he said.  

Mullally said payment can be made by check, debit or credit card, or the debtor may contact an IOUSOS representative to arrange a payment plan.  If the debtor misses the deadlines to accept any of the offers, the discounts are rescinded and the full balance will be pursued.

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GlobeFunder launched IOUSOS in April and began loading consumer accounts in June.   Mullally said about 30 creditors have registered with the service, representing close to 40,000 consumer accounts.  Mullally said most of the accounts are 180 days or older, but the company is beginning to see some balances that are younger and interest from debt buyers considering integrating the service into their collections business.   

Mullally said GlobeFunder uses advanced analytics to determine a consumer’s ability and propensity to pay their bills in helping health care providers determine what type of discount to offer. Future plans call for use of electronic communications such as emails and text messages to remind debtors registered with IOUSOS that a payment is due.

Gina McNaughton of the McNaughton Group, an Orange County, Calif.-based boutique consulting firm specializing in health care receivables, said small balance medical debt receivables are the sector’s most lucrative for creditors and collection agencies.  A monthly analysis of health care receivables by the firm shows that approximately 30% to 40% of health care debt placements have balances between $100 to $500 with an average bill of about $261 in that balance range.  Approximately 35% of all health care payments are on balances of $50 and below, McNaughton said.   

Given how lucrative small balance debt collections are, McNaughton questioned the rationale of offering debtors a settlement at the beginning of the collections process — as it may impact bottom line performance.

"Payment in full or payment arrangements should be the first option provided to the patient on small balance accounts. In my opinion, settlements should be used as a collection leverage tool not as an overall methodology for collecting," she said.  

McNaughton, a former regional vice president for NCO Financial Systems’ health care division, added that there may be a downside for health care providers if the service leaves patients with the impression that they can get similar discounts on other existing accounts with the same provider.

"The hospital may have a patient with potentially more than one account, and to treat one account differently may have unintended adverse consequences for the hospital," she said.

Mullally said IOUSOS’s platform allows consumers to have multiple accounts with one creditor.  He added that the patients being targeted are not paying their bills now, and their future decisions to pay debt will not be influenced by their ability to get a discount.

“We’re trying to convert those people who are not paying their bills to someone who will pay their bills,” he said.  “The goal is to increase the volume of transactions to get more revenue and cash flow.”