In 2019 patient medical debt in the U.S. totaled at least $195 billion, according to an analysis by the Kaiser Family Foundation, a nonprofit organization focusing on national health issues. This is a massive figure and should be looked at as an opportunity for healthcare organizations. A survey conducted by Kaufman Hall in August 2020 displayed that more than 40% of healthcare organizations have seen increases in bad debt.
What is bad debt? Bad debt is a write-off that represent the amount a patient cannot pay or will not pay of their medical bill. Hospitals consider bad debt unrecoverable, because it directly decreases their revenue.
Bad Debt and Patient Responsibility
What does bad debt have to do with transparency and advocacy in patient responsibility? Transparency and patient advocacy have a direct correlation to bad debt figures for hospitals. Waystar surveyed 1,000 patients who have received a medical bill and did not pay it.
Reasons Why Medical Bills Went Unpaid
- 51% could not pay because of financial problems
- 37% assumed their insurance would pay for it
- 19% were unclear about how much money they owed
- 18% said it was because the bill was incorrect
- 16% just forgot
- 13% were not sure when the payment was due
The above reasons for a patient not paying their medical bill can be solved or mediated by the hospital. It starts with the hospital system being transparent and accurate with the patient’s responsibility, and ties together with being an advocate for the patient.
Transparency Between Hospitals and Patients
To be transparent with medical bills, healthcare organizations must be direct, concise, and willing to educate patients. According to InstaMed’s Healthcare Payment Report in 2019, 70% of patients were confused by their medical bill. This is the opposite of transparent. We know that patients are unwilling to pay for medical bills they do not understand.
This type of confusion and disfunction in a patient’s understanding of their bill, along with financial burden, can have a much greater negative impact on a healthcare organization than the patient just not paying their current outstanding balance. If patients do not understand their bill or know how they are going to pay, they are less likely to get the care they need. The patient may also seek care from another provider, resulting in decreased patient retention and potentially worse health outcomes.
Patients have a sense of helplessness when they are faced with a large medical bill. Stress and confusion will cause the patient’s probability of paying their bill to go down. How can this be solved?
In the same survey conducted by Waystar, these patients were directly asked what they needed to better understand their bills.
Patients stated that they needed:
- An upfront explanation from their provider’s office about what their insurance will cover (46%)
- A simpler bill that only includes essential information (40%)
- A more clearly written explanation of benefits (37%)
- Access to online resources to walk patients through their bill (33%)
- Having a medical professional explain it to me (27%)
See a common theme here? Lack of transparency, and a lack of advocacy.
Patient’s Points of Contact
There are on average two points of contact a patient has with the hospital. On the front end when arranging services and seeing the provider, and on the back end with patient financial services after they receive their bill.
According to research conducted by AccessOne in 2021, 65% of consumers surveyed said they want to discuss payment plan options with their doctors. Almost half (49%) said they want to understand their payment options before they get care. Having proper education available to patients to understand their options before receiving care is critical.
There are three key components to having a successful back-end operation:
- proper billing statements to provide clarity
- highly trained staff to support patients throughout the process
- proper available resources for patients
We have all had an unpleasant experience when calling patient financial services after receiving a surprising bill. This is where the hospital can set themselves apart from other competing organizations and help the patient both understand their bill, and advocate for the patient throughout their care pathway. Advocacy efforts may include explaining available payment plan options or offering financial assistance when necessary. This is highly achievable with proper education to the patient financial services team of any healthcare organization.
Investing in your organization’s patient financial services teams and processes and focusing on transparency and advocacy in patient responsibility will pay dividends. The opportunity cost of additional patient lives retained within your organization and patient service revenue collected by failing to provide a transparent, patient-centered experience as it relates to patient financial responsibility can be staggering.
At Blue & Co. LLC, we offer detailed solutions to train your organization’s patient financial services and front desk reception teams on best practices to provide a compassionate patient experience without the stress of avoiding treatment due to financial concerns.
If you or your organization may benefit from fine tuning your processes for patient financial estimates, advocacy, and bill collection, please contact Brent Meier your local Blue & Co. Advisor for more details.
Brent Meier, Revenue Cycle Consultant
Tony Javorka, Director