In the complex world of medical billing, dealing with bad debt is an inevitable challenge that healthcare providers often face.
According to a TSYS Annual Healthcare Survey Executive Report, 22% of physician practices said that at least 10 percent of their patient accounts have bad debt tied to them. In addition, most practices (54%) said between 3% and 9% of their accounts go to bad debt.
Unpaid bills, denied claims, and delayed payments can significantly impact the financial health of a medical practice. However, with a well-structured plan, medical billing companies can navigate the intricacies of bad debt and optimize revenue recovery.
Creating an effective plan for bad debt management in medical billing requires a multi-faceted approach that addresses both internal processes and external patient communication.
By proactively identifying potential issues, implementing streamlined processes, and transparently engaging patients, medical billing companies can navigate the challenges of bad debt and improve overall revenue recovery.
Strategies to improve bad debt management in medical billing
1. Assessment and analysis
Begin by conducting a comprehensive assessment of your current financial landscape. Analyze past data to identify patterns in unpaid claims, common reasons for denials, and any specific payer issues. This analysis will be the foundation for creating a targeted bad debt management plan.
Running a report to review your Accounts Receivables (AR) and see how much is sitting in the over 120-day bucket is essential. Also, discuss with your team how old is too old for your practice benchmarks and produce a cut-off DOS to begin purging old claims.
From that, set up a project for the AR team to adjust the old AR. Ensure you follow up on the progress and run reports at the end of the process to identify all adjusted claims that can be used in return when filing your taxes.
Learn some strategies to reduce your practice’s Days in AR (DAR) in our blog How to reduce your Days in AR.
2. Enhance patient communication
Improving communication with patients is crucial in preventing bad debt. Clear and transparent communication about financial responsibilities, insurance coverage, and available payment options can reduce the likelihood of unpaid bills.
According to the 2022 InstaMed Trends in Healthcare Payment Annual Report, 71% of consumers are confused by their medical bills.
Therefore, your staff must avoid using medical billing codes and other industry jargon to explain bills to patients. Clear and concise communication with your patients is essential to ensure they understand their bills, leading to more propensity to pay their balances.
Some strategies that can help are developing informative materials and utilizing various communication channels to educate patients on their financial obligations before and after receiving medical services.
3. Streamline the billing process
Streamlining the medical billing process involves adopting advanced billing software, electronic health records (EHR), and accurate coding practices to minimize errors and enhance efficiency.
Automation in claim submission and follow-up, as well as centralizing patient information contribute to a seamless workflow. Regular audits and staying informed about regulatory changes are essential for a proactive and adaptive billing approach.
Another essential aspect is effective payer contract management and clear communication between departments. This can further contribute to an optimized process, minimizing bad debt and maximizing revenue recovery.
Medical billing is complex. Outsourcing these functions to specialized professionals will alleviate the burden on in-house staff, ensuring a focus on core healthcare services while benefiting from the expertise and efficiency of dedicated billing experts.
Read more about the benefits of outsourcing your medical billing in our blog 5 reasons to outsource your medical billing.
4. Offer flexible payment options
Patients are less likely to pay if medical practices don’t offer multiple payment options. Each patient has different needs and a different set of circumstances. Therefore, provide them various options to pay their bills, including paying balances over the phone or setting up payments through their bank’s bill-pay portal.
According to the 2022 InstaMed Trends in Healthcare Payment Annual Report, patient payments through online banking bill pay portals increased by 437% from 2019 to 2022.
Digital payments offer consumers the convenience they value and help providers collect faster with fewer resources. Therefore, offering a range of payment choices can empower patients to fulfill their financial obligations while reducing the burden of a large upfront payment.
5. Train your staff
Equip your staff with the necessary skills to engage in effective financial counseling with patients. This includes:
- Explaining billing statements
- Verifying insurance coverage
- Discussing available assistance programs
As a physician, patient payment explanation is an important part of providing quality healthcare to your patients. Therefore, a well-informed and empathetic approach can foster a positive patient-provider relationship and enhance the likelihood of timely payments. Your staff is essential to achieve this in your practice.
Learn more about the importance of training your staff in our blog 4 reasons why you should train your staff to improve your practice.
6. Implement a predictive analytics system to monitor KPIs
Leverage technology to predict and identify potential bad debt scenarios. Implement a predictive analytics system that can analyze historical data to foresee patterns of non-payment or delayed payments. This proactive approach allows you to address potential issues before they escalate.
In your predictive analytics system, you’ll be able to regularly monitor and assess Key Performance Indicators (KPIs) related to bad debt. Track metrics such as days in accounts receivable (DAR), denial rates, and collection rates.
This data-driven approach will allow you to identify trends, measure the success of your bad debt management plan, and make informed adjustments when necessary.
Learn more about how to create a plan for bad debt in our blog Get your medical practice ready for 2022 Part 2: Create a plan for bad debt and keep your credit balances in check.
For more information on creating a plan for bad debt, contact us at Health Prime or email us at [email protected]. Our team will schedule a meeting to discuss how Health Prime can optimize your workflows by cutting costs and saving you time!
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