Many practices are experiencing higher levels of bad debt than they have in the past—partially due to the proliferation of high-deductible health plans that place greater financial responsibility on patients. And when patients don’t pay the full amount they are responsible for—and practices fail to collect past-due amounts—the go-to solution often is writing off those totals as bad debt. But financially, that is not an ideal course of action. So, let’s talk about how to optimize your revenue cycle management (RCM) to prevent and eliminate as much bad debt as possible.

1. Be prepared to help your patients.

According to this Physicians Practice article, “patient obligations account for 25-30% of provider revenue—and the amount owed by commercially insured patients continues to rise.” So, in order to minimize debt, providers must have a solid strategy in place for collecting payment from patients. And that starts with making sure your patients fully understand their financial responsibility prior to receiving services. After all, as I mentioned here, most patients want to pay their healthcare bills. Sometimes they just need a little help to do so.

Whether that help takes the shape of providing educational materials about the complicated healthcare system and individual insurance plans, offering payment plans, keeping credit cards on file, or ensuring you accept multiple forms of payment—including cash, cards, and checks—is completely up to you. Just remember that it’s ultimately in your best interest to ensure patients have everything they need to pay you. Jordan Rosenfeld—the author of this Medical Economics article—actually recommends performing a “financial biopsy” on each patient. As a non-provider, that phrase seems a little harsh to me, but ultimately, the point is to evaluate the patient’s “propensity to pay, and what alternate sponsors are there to cover that…”

2. Collect payment at the time of service.

It’s always been a good idea to collect payment at the time of service, but now it’s imperative. Not only is it important to get your patients into the habit of paying you at every appointment, but it also saves you both from surprises down the line. As we’ve reported previously, only 21% of patient balances that aren’t collected at the point of service are ever collected. And that can be a serious drain on your bottom line—not to mention a whole lot of bad debt to write off. Thus, you’ll want to ensure that everyone responsible for collecting patient payments can confidently do so. That means making sure they are able to answer any questions about the amount due.

3. Involve your entire staff.

You’ll also want to involve your entire staff in the RCM process. As Joe Sawyer—chief marketing and communications officer at Integra—explained in the above-cited Medical Economics article, “RCM management used to be ‘a back office function.’” However, “the practices that will thrive under [the value-based care model] will be those where the lead practice administrators are ‘very much on the front lines alongside their clinical counterparts, because they have to look together at how they’re performing against various measures,’” Sawyer said.

4. Create a payment policy, communicate it, and then enforce it.

For consistency’s sake, it’s always a good idea to put your payment policies on paper—and then communicate and enforce them (and that includes everything from cancellation fees to how you handle unpaid balances). That way, everyone—your staff and your patients—is on the same page regarding expectations from day one. Plus, you’ll have an official game plan for handling overdue balances. As we discussed here, the ACA International found that healthcare practices “recover less than $13 for every $100 owed once they turn bad debt over to third-party collection agencies.” Thus, to keep more of your hard-earned money, you’ll want keep the collection process in-house for as long as possible. That means sending out your own collection letters.

5. Prioritize clean claims.

While patient payments are making up an even greater percentage of most practices’ revenue pie, third-party reimbursements are still important. Thus, you’ll want to continue prioritizing clean claims and a high first-pass acceptance rate. You’ll also want to be sure you’re remedying any denials as soon as you receive them to ensure you’re not leaving money on the table with your payers. As we discussed here, it’s also a good idea to keep a denial log, so you can identify operational trends that may be causing a higher-than-normal number of unpaid claims. After all, that can most definitely contribute to your bad debt.

6. Adopt the right software.

And, because the most common reason for claim denials is incorrect information, adopting the right software solution (read: EMR plus billing software or RCM service) can make all the difference in getting paid in-full the first time around. In the above-cited Physicians Practice article, the author recommends that providers adopt technology solutions that:

  • are always up to date with government and private payer mandates, and
  • streamline workflows to help providers capture quality measures in the moment of care.

If you’re doubting your current technology solution, ask yourself whether it:

  • “Reduces your operating costs or adds to them.”
  • “Helps you grow your patient population.”
  • “Helps you work more efficiently or slows you down.”
  • “Improves your collection rate.”

If the answers aren’t favorable, it’s time to switch to a better solution.

There you have it: six strategies for keeping your clinic out of the red—and collecting the money you deserve. How does your clinic avoid the bad debt blues? Tell us in the comment section below.