The revenue evolution

Addressing the rise in health care consumer financial accountability

​Provider executives should be efficient and effective in the way that they collect payment for the services they provide to patients. This piece explores back-end tactics providers can take to improve collections after patients have received care.

The effect of rising patient payment obligations and how providers may reduce its growth

This article is the second of two insights about how rising patient payment obligations affect hospital bad debt and what informed providers are doing to reduce its growth.

Shifts toward higher patient financial obligations require innovative ways to manage collections. The first of two insights on patient payment optimization initiatives explores the rise in patient responsibility after insurance at the start of a new benefit year–the January effect–and front-end tactics to address the subsequent impact on collections. 

This second insight on patient payment optimization initiatives examines the back-end effect of total margin loss from uncollected patient revenue and offers ways to increase cash collections post-service. It should be a priority of health care provider executives to be efficient and effective in the way that they collect cash and revenue for the services they provide, recognizing that caring about compensation is essential to the ability to continue to care for patients. Since patient responsibility after insurance is a sizeable asset, closely managing this throughout the year is key to countering the effects of the new benefit year and sustaining or growing margin.

Insights and analytics

​A sample of patient accounts with dates of service from November 2013 through August 2015 was aggregated across five large health systems to track total margin loss from uncollected patient revenue for commercially insured patients. By mapping payments with dates of service, a clearer picture was created to show margin impact. This methodology differs from traditional measurement based on posting dates.

The analytics show that:

  • In 2014 uncollected patient responsibility for commercially insured patients adversely impacted net margin monthly ranging from 2.2 to 3.2 percent—this represents an annual loss between $22 and $32 million per every billion in net revenue.
  • Early indications for 2015 point to a potential additional margin loss of $2.5 to $5 million for every billion dollars of net revenue.
  • If this trend continues at its current pace, by 2020 uncollected patient responsibility for commercially insured patients could represent a net revenue loss of 5 to 6 percent.

Total margin loss from uncollected patient responsibility

Total margin loss from uncollected patient responsibility

Key considerations

​Health care providers can improve collections after patients have received services through tactics including:

  • Putting in place targeted communications and tactics for specific patient segments, e.g. a reminder via text message for a millennial
  • Prioritizing outbound patient contact with consideration to underlying account value
  • Implementing creative payment options including prompt pay discounts and automatic electronic fund transfers
  • Aligning business office resources to be focused on the highest value activities
  • Outsourcing accounts to third party vendors based on complex algorithms to value the accounts
  • Utilizing predictive analytics to help drive down cost and boost collection rates

About the Sustaining Success series

The demand to derive greater value from health care is urgent and pervasive. Leading hospitals and health systems are identifying performance improvement strategies which transcend traditional cost reduction and respond to new payment models. Providers that increase value will be the most competitive. Organizations that fail to improve value and protect future margins are likely to encounter growing pressure.

This digest of articles shares examples of how health care providers are pursuing value through both short- and long-term initiatives within the dimension of performance improvement. Providing a view beyond traditional cost cutting methods, the series places a data-driven lens focusing upon how providers can utilize data analytics to identify and implement innovative solutions.

Visit the Sustaining Success series archive to explore the current digest of analytics-based perspectives on performance improvement in health care.

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