Plummeting Patient Collection Rates Call for a New Approach to Hospital Payment

Hospital revenue cycle departments faced a sharp decline in out-of-pocket collections this year, with the patient collection rate falling to nearly 48%, a Kodiak Solutions analysis shows. The same analysis reveals hospitals collect just 69 cents on the dollar for medical bills of $100 or less. That proportion falls as the amount of the bill rises.

For community hospitals, it’s a sign of the need for a different approach to patient financial communication and payment — one that meets patients where they are and protects their dignity while avoiding undue stress on the organization’s bottom line. 

Being sensitive to patient preferences

One of the things that distinguishes community hospitals from larger systems, like seeing a familiar face when seeking care or running into a hospital employee at the grocery store, is also what makes a conscientious patient financial experience so important.

It takes trust for patients to feel comfortable sharing their financial situation with a hospital employee they may know outside the healthcare setting. Similarly, patient financial services staff may be uncomfortable initiating these conversations or digging deeper for more detail when the person in front of them is someone they know. 

Yet at a time when nearly one out of four people who have employer coverage are underinsured, according to a Commonwealth Fund survey — and when over half of write-offs stem from patients with some type of insurance, including commercial insurance — understanding consumers’ ability to pay for their care is vital. So is presenting options for payment that help patients feel in control of their medical expenses while protecting privacy.

Taking the lead for a consumer-sensitive patient financial experience also puts community members in a better position to seek the care they need. A recent analysis indicates that as healthcare costs rise, nearly 3 out of 10 consumers with employer coverage put off needed care or delayed filling a prescription. So do about 4 out of 10 adults with Medicare or Medicaid coverage.

Crafting the right approach for small communities

How well does your community hospital address patients’ needs at each point in the patient financial journey — and what steps could it take to strengthen the financial experience? Here are three considerations.

1. Take a close look at your model for price estimate communication and response. With the growth in medical costs expected to reach its highest rate in 13 years in 2025, tightening up processes for price transparency is an important first step toward building patient financial engagement. Make certain price estimates focus on the cost that consumers care about most: their out-of-pocket cost for care. Deliver preservice treatment estimates and plans where it makes sense to increase clarity. Then, empower and educate registration staff to initiate conversations about payment once estimates have been delivered. This positions staff to identify patients who may qualify for financial assistance or charity care early in the patient financial journey, giving patients the confidence to pursue needed care. It also establishes a basis for asking for payment before care takes place. Patients are more likely to pay their bills on time and even early when they know what they owe and why.

2. Strengthen post-service patient financial engagement. Certainly, tools like propensity-to-pay scoring and predictive analytics can assist patient financial services in determining where to focus patient financial engagement efforts. However, most community hospitals struggle with how to deploy engagement efforts in ways that resonate with patients. One increasingly popular method is to lean into text-based tools for communication and payment. By engaging patients with the device they use most — their smartphone — patients gain a convenient, easy-to-navigate tool for understanding what they owe, why, and their options for payment. It’s a tool patients can leverage from the privacy of their home, avoiding the awkwardness of having a sensitive financial conversation with someone they know — and it gives patients a feeling of greater control over their medical expenses. 

3. Incorporate a blend of modern and traditional techniques for facilitating payment. For hospitals, text-to-pay tools typically are much more effective in converting payments than paper-based statements. However, there will always be patients who prefer paper-based statements. The key is to incorporate patients’ preferences into communications. Ask patients how they’d like to be notified about their balance after insurance during the registration process. If digital payment communications are preferred, be sure to give these messages time to breathe. One community hospital waits seven days after delivering an electronic communication before sending a second text to allow patients time to respond.

By taking a fresh look at patient financial engagement with their community’s needs in mind, community hospitals can more effectively close gaps in out-of-pocket payment while providing the type of experience consumers crave.

Photo: sorbetto, Getty Images

This post appears through the MedCity Influencers program. Anyone can publish their perspective on business and innovation in healthcare on MedCity News through MedCity Influencers. Click here to find out how.