As hospitals contend with slower reimbursement increases and continuing cost growth, it is critical that they tightly manage bad debt write-offs. One opportunity to reduce bad debt is collecting from patients that present for care with unpaid balances from prior visits. To address this issue, some hospitals have begun to include outstanding balances in their point-of-service (POS) collection efforts.
According to a 2010 Financial Leadership Council Point-of-Service Collection survey, 34% of hospitals were collecting prior balances, while 47% were not collecting prior balances, but planned to in the next 12 months. Hospitals engaging in this practice have found it can reduce accounts headed for bad debt while also improving POS collections.
Incorporate outstanding patient balances into point-of-service workflow
Harrison Health System, a pseudonym for a four-hospital health system in the Midwest, achieved significant financial results after focusing on outstanding patient balances in the front-office.
In early 2008, faced with a negative operating margin, Harrison launched a revenue cycle turnaround effort. The health system found that write-offs due to bad debt and charity care contributed to their financial problems and, as part of the turnaround effort, emphasized collection of prior balances at the point of service.
Harrison used a combination of technology, training, staff incentives, and accountability tools to focus its front-office staff on collecting open balances. For example, automated patient statements specifying patient insurance information, prior episodes of care, discounts and payments received, and outstanding balances were integral in ensuring staff were informed and able to effectively communicate the patient’s full responsibility upon presentation for care.
The financial impact from this focused initiative was considerable. In 2008 and 2009, the system directly reduced bad debt by $900,000. Even more impressive is that 46% of those collections were balances more than 100 days old. All in all, the incremental POS collections helped Harrison increase annual collections by 470% over two years.
For more on the practices pursued by Harrison Health System to improve collections of outstanding balances, members may access Optimizing Front Office Performance.
To speak with a Financial Leadership Council expert about your hospital’s POS collection effort or for more information, please email Josh Gray at GrayJ@advisory.com.