Medical debt collection is a growing issue that is affecting millions of patients each year and there has been a recent uprise in complaints about how collections are being handled. A recent study from the Consumers Financial Protection Bureau reported that 63% of patients who complained about medical debt collections said that their debt was not owed or already paid.
These patient complaints could be a reflection of both a lack of understanding of insurance coverage and out-of-pocket responsibilities by patients, as well as the growing rate of billing errors made by healthcare providers. On top of that, collections agencies are also making mistakes and taking increasingly aggressive tactics to retrieve debt, which is adding more financial stress to both patients and providers.
It’s important that healthcare providers understand the major factors influencing the issue around collections and how to adjust their approach in order to reduce the issue.
Factor #1: Medical Billing is Complex and Confusing
There are many parties involved in the billing process, which leaves room for error, miscommunication and confusion.
A typical medical bill passes through a provider’s coding and billing departments, an insurance company and a payer before it reaches the patient. Then the patient has a set number of days to pay the bill before the healthcare provider sends it to a collections agency or sells the patient’s bad debt to creditors.
Additionally, about 61% of healthcare patients are confused by their medical payments. Sometimes medical billing statements come to patients at the time of service, in the mail, in their email, through the patient portal or through a combination of delivery methods. Patients will also often receive a statement of coverage from their insurance provider. With many different statements and complicated coding on their bills, it is difficult for patients to decipher and understand what is covered by their insurance and what their out-of-pocket costs are.
As a result, most patients will either try to figure out the bills on their own or ignore them out of frustration and eventually get sent to collections, where they are likely to file a complaint.
Factor #2: Patients Can’t Pay in Full
In addition to patients being confused about the billing and insurance process, a huge rise in out of pocket expenses has made paying medical bills more difficult for them to manage.
One-half of healthcare providers reported that it takes three or more months to collect medical payments in full. Because patients are taking longer to pay, it is subsequently hurting the providers’ bottom line or forcing them to send more cases to collections.
Factor #3: Some Collections Agencies Are Causing More Harm than Good
A Frontier Group and US PIRG Education Fund study shares patients’ financial collection complaints to uncover the common problems with collections agencies. Forty-eight percent of complaints said that the “debt was not owed”; 24% said the “debt was not mine”; 21% said the “debt was paid”; 15% said “there was not enough information to verify the debt was mine”; 8% claimed they “never received notice”; 7% reported the debt was the “wrong amount.”
Beyond making critical billing errors, collections agencies and credit bureaus are also failing to follow debt collection regulations—using aggressive and illegal tactics to collect. Debt collection regulations include 501R measures to make reasonable efforts to collect prior to initiating extraordinary collection actions (ECA). ECA includes actions such as reporting debts to credit bureaus, selling debt to a third party and pursuing liens, garnishments and other legal actions.
Working with the wrong collections agency that fails to follow regulations and 501R measures can have significant legal, financial and reputational repercussions for the healthcare provider.
There is a Better Way for Providers to Get Paid
There is another solution to collecting medical debt that helps eliminate the factors at hand.
A medical payment plan (MPP) allows healthcare providers to avoid collections and enhances the billing experience for both patients and providers. An MPP provides patients with an affordable way to pay uninsured medical expenses over time and also shortens the revenue cycle for providers.
Working with a payment plan company, like Budco Financial, that delivers an MPP with fully-integrated marketing, call center, finance, technology, account and billing management services, bridges the gap between patient care and collections.
The process gets simplified. The provider gets paid faster. The overall patient experience and satisfaction is enhanced and collections is avoided all together.