Self-Pay Patient Collections Print

 

A recent entry in HFMA's Revenue Cycle Forum regarding patient collections discusses hospitals' challenges collecting payment from true self-pay patients. An interesting statistic was uncovered in a recent study by nTelagent who analyzed aged trial balance (ATB) reports from 40 healthcare providers around the country.

They found patients responsible for half of the accounts written off as bad debt showed a capacity to pay their bill, with 16 percent having a high household income and/or high net worth and 33 percent having moderate income/net worth.

To read the full article, click here.

The focus of the article was not as much about getting self-pay patients to pay, but how to handle self-pay accounts in aggregate. While the article does suggest considering simple extended payment plans as a solution, they also acknowledge the costs to the hospital in terms of additional resources make the option unworkable. I strongly disagree with this statement (see "A Realistic and Affordable Solution to Collecting Self-Pay Receivables" below).

Liquidating self-pay receivables to a third party is appealing to some (especially the financing agencies doing the buying), arguing that it's to the provider's advantage to get the receivable off the books and get cash into the revenue cycle as soon as possible. However, at what cost? After all of the fees have been deducted, the cost of selling receivables, as well as the time it takes to manage the sale and recourse procedures, getting the receivable off the books is more expensive than it's worth.

Consider the task of establishing the market value of a portfolio and coming to a mutual agreement with a financing agency of the portfolio's worth. Variables such as risk, costs to collect and relative discount based on the time value of money are all factors that are as much an art as a science in terms assessment. Will the purchasing organization have the same philosophy as the hospital concerning how patients are handled after the account is in their hands? In other words, will patients be treated with respect and be given the flexibility they need to fit the debt in their monthly budget? Or will it be "one size fits all?"


A Realistic and Affordable Solution to Collecting Self-Pay Receivables

Several challenges have been cited in the article, such as:

  • Giving uninsured patients or patients with a balance after insurance the opportunity to pay without being sent to collections;

  • The resources needed by hospitals to administer extended payment plans;

  • The need to determine th fair market price of a portfolio being sold;

  • The fees associated with selling receivables to a financing agency;

  • The uncertainty felt by hospitals regarding how their patients are being treated by agencies who finance receivables;

  • The need for hospitals to retain control of the accounts and the ability to recall accounts for whatever reason.

The Midland Payment Plan is the optimal solution for hospitals that want to give their patients a chance to resolve their debt in a friendly and respectable manner. Midland assumes all costs to administer the plan, relieving hospital business office staff of the burden. The hospital retains 100% of the principal collected and the hospital may recall an account at any time without penalty or fees. The best part about the plan is that within a short period of time after, a steady and predictable monthly cash flow is established that rivals the amount a hospital would receive under a purchase agreement.

The Midland Payment Plan is a simple, yet effective program suitable for hospitals of any size. For more information, click here.