Technology that Improves Patient Payments beyond Existing Merchant Fees
It’s no secret that collecting on outstanding medical debt can be challenging, especially after the procedure is complete. Nine out of every 10 physician practices believe they should collect a patient’s financial responsibility before they leave the office or hospital.
Unfortunately, the complex nature of healthcare billing and the sensitive nature of medical services makes collecting on patient bills a challenge. Many practices must also give up a portion of their revenue to credit card processors and other merchant service providers.
While it might seem ill-advised to give away a larger percentage of revenue that’s difficult to collect in the first place, using a fee-based system for processing payment can be a wise choice. The slightly higher fees a provider will pay on patient transactions can be more than offset by a system that allows for the collection of a much larger portion of outstanding debt.
The Favorable Math Behind Higher Percentages
To understand why it may be worthwhile to pay a higher fee on patient healthcare costs, let’s compare two hypothetical medical businesses, Practice A and Practice B. Both practices bring in $10 million in annual revenue, with 20% of that ($2 million) representing patient dollars and co-pays.
- Practice A uses standard procedures like mailing statements and using a traditional billing company to collect patient revenue. Industry research tells us the average collection rate of patient dollars is 50% to 70%. If we assume a 60% rate of collection, this brings us to $1.2 million in collected revenue. From that number, we can subtract a 25% cost of collection to account for things like credit card fees, billing companies, and administrative staff. This puts Practice A’s net patient revenue at $900,000 from $2 million.
- Practice B, on the other hand, uses an innovative, efficient patient payment system that can collect 90% of patient revenue. Given our original $2 million in annual patient revenue, this puts Practice B at $1.8 million in collected revenue. Instead of paying 25% for traditional payment collection, Practice B pays 3% for credit card processing plus a 4% fee for its patient payment system. This means Practice B’s net patient revenue is $1.67 million from $2 million.
This example makes it easy to see which practice comes out ahead – it’s always better to pay a slightly higher fee on a much higher amount of revenue. Further, current trends in healthcare make it critical for providers to do a better job collecting patient dollars.
The Future of Medical Financial Responsibility
Research shows that annual out-of-pocket healthcare costs per U.S. employee went up almost 230% between 2006 and 2015. Correspondingly, between 2011 and 2014 consumer payments to medical providers rose 193%.
It is clear that the future of healthcare holds an increased financial burden on patients. For providers who are still collecting patient payments at the 50% to 70% industry standard, this could spell disaster – be sure your practice is equipped with the tools and processes needed to collect patient payments efficiently.
If you’d like to learn more about HealthiPASS and its unique feature set, download The 8 Ways HealthiPASS Improves the Patient Payment Process.