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Best Practices for Self Pay Collections
By Tina Eller, Client Executive, SearchAmerica
The self pay financial class is not as simple as it once was. It contains numerous types of patients in addition to the traditional indigent or charity patients found in self pay. Unfortunately, most hospital collection processes continue to treat all self pay patients the same, and miss opportunities to collect from willing individuals or age accounts unnecessarily.
One indicator that your self pay collections need attention is if you are mailing the exact same letter to all self pay collections, regardless of their balance or ability to pay. This process may be easy, but certainly it isn’t effective or in the best interest of the organization.
Fortunately, best practices for segmenting self pays are emerging.
The first step towards a smarter self pay process is to have Accounts Receivable (A/R) managers segment their self pay patient population based on two variables: Expected Collection Rate and Original Balance.
Using these variables, hospitals quickly find that their patients fit into one of the following segments:
Segment A. The patients in this segment have low original balances (often from labs, X-rays, etc.) and based on their income levels or history, they have a high likelihood of payment. These accounts are highly collectable with minimal effort, in other words they are the ‘cream of the crop’. Most will respond to a simple letter reminding them of their payment obligation. This may look effective, but an even better solution is to keep these accounts from even reaching a collection stage in the first place. To do so, many hospitals are now having their registrars simply ask for payment prior care whenever possible, thus eliminating any collections or aging.
Segment B. These patients have a high original balance, and based on factors such as a high medical credit score, good historical collectability or employment status, they are highly likely to pay. Your objective with this group is to minimize account aging. While they may require more effort to collect than Segment A due to a higher balance, the financial benefit offsets most collection activities. Hospitals should be more aggressive with this segment to prevent account aging, and quickly resort to outbound call campaigns. The financial reward is well worth the investment.
Segment C. Large balances from emergency admits or underinsured individuals will be representative of those patients in this segment. Their original balance is high, but the expected collection rate is low. A/R managers should spend time evaluating the cost to collect these accounts and be smart about the resources they apply. For example, if much of the original balance has already been paid by insurance, are extensive collections efforts going to cost more than recovering the remaining 20% of the bill? Consider your efforts, especially those using costly human resources, very carefully.
Segment D. The last segment is those with low balances and low expected collection rates. First the account should be screened to see if it qualifies for your charity care program or state or federal government programs. If not, the account should be immediately sent to a third party collection agency. No internal resources should be spent on non-charity accounts in this segment, or if they are, they must be highly automated. Just as in Segment A, the better solution is for the registrar at the point-of-service (POS) to request payment before care is given, if possible.
Once segmentation has been performed, only then should hospitals develop strategies to streamline and improve self pay, starting with their communications.
The Next Step: Your Hospital’s Opportunity to Excel
Improved Communications. Too often, collection letters or bills are printed in mass and include confusing language, acronyms or codes for medical procedures, and superfluous information. If a bill cannot be easily understood (what service is it for, has their insurance paid its portion, current balance due, etc), it will not be paid. All communications via mail, email or phone need to use clear, concise information – it sounds easy, but too often hospitals fail on this simple step.
New Payment Options. Plastic surgery centers, lasik providers and dentists have relied on payment plans or financing options for their patients for years. Most often, this option is managed by a third party who offers credit cards or payment plans that can only be used to pay for medical or dental services. Many hospitals are considering implementing these plans to alleviate many payment and collection activities.
Show Appreciation. Repeat patients are used to hearing from you when bills are not paid, but what about those patients who are responsible and pay their bills on time? Hospitals can, and should, show them some appreciation even in simple ways. For example, when a registrar checks in the patient and sees a history of on-time payments, they could simply say ‘Thank you Mr. Smith for paying your hospital bills so promptly, we really appreciate it.’ In today’s world, it is amazing what a simple ‘thank you’ can do.
Tina Eller is a client executive at SearchAmerica, and has worked in healthcare, both physician and provider spaces, for 15 years. Ms. Eller’s expertise is in helping organizations drive initiatives within the Revenue Cycle focusing on the self pay population and Consumer Driven Healthcare. She is a frequent speaker at healthcare forums as well as contributor to a number of healthcare publications on the topics of Revenue Cycle best practice, challenges in the industry, etc.
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