Self-Pay Collections: Establish a System that Benefits Providers & Patients

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 “Paradigm shifts are a wrenching 25-30 year process followed by decades thereafter when a new set of rules and assumptions is dominant.”

• Josef Konvitz, Foundation for Political Innovation

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If the above is true, healthcare has years to go before it accepts that patients are significant payers now. Despite the headwinds of habit, self-pay collection upgrades are imperative now. 

Until just 10 years ago, insurers paid 90 percent of patient healthcare bills. If patients didn’t pay their 10 percent, well, no big deal. 

However, now that…

• the patient responsibility rate fell below 50 percent 47.6 percent for the first time ever. 
• the collection rate for claims between $1,000 and $5,000 was 41 percent, over $5,000 - 29 percent.

…healthcare organizations must accelerate this paradigm shift or face drastic revenue loss. 

Source: Kodiak RCA

A self-pay collections paradigm shift looks like this: 

• Front desk staff collecting more directly from patients before service. 
• Management putting standards, workflows, and supportive, even automated, technologies in place to support staff. 
• Patients getting out debit and credit cards as they check in. 

Your organization can start this shift today. Discover how, while initially bumpy, a rigorous self-pay collections plan can improve your revenue, but better yet, staff and patient satisfaction. With careful implementation, you can be one of the pioneers who hit the gas on this paradigm shift and reaped financial and operational rewards early. 

What are self-pay collections?

Self-pay collection is the process of collecting payments directly from patients for healthcare services not covered by insurance or for which the patient is responsible for a portion of the cost. The process involves front- and back-end strategies to encourage timely payment, such as clear communication of financial responsibilities, offering payment plans, providing cost estimates upfront, and implementing user-friendly billing and payment systems. Effective self-pay collection strategies aim to balance the financial needs of the healthcare organization with patient satisfaction and access to care.

Who are self-pay patients? 

Some confusion exists between self-pay patients and self-pay after insurance patients.  

"Self-pay after insurance" and "self-pay" are not considered exactly the same, but some overlap exists. Due to changes in insurance plans and increasing patient responsibilities, many "self-pay after insurance" patients are now facing similar financial burdens as traditional "self-pay" (uninsured) patients. 

While both groups involve patients paying out-of-pocket, "self-pay" typically refers to those without insurance, while "self-pay after insurance" refers to insured patients with high out-of-pocket costs. The term "full self-pay" is sometimes used to distinguish completely uninsured patients from those who have insurance but still face significant out-of-pocket expenses.

Given that the impact on healthcare revenue is similar with both populations, healthcare leaders now refer to the two camps as simply “self-pay.” 

Why is a self-pay collections upgrade important?

An updated self-pay collection system is unavoidable for healthcare providers for several reasons. First, it represents a significant and growing source of revenue, particularly as high-deductible health plans become more prevalent and patients shoulder a larger portion of their healthcare costs.

 Effective self-pay collections are essential for maintaining financial stability and solvency, as unpaid bills result in revenue loss and increased administrative costs. 

With self-pay now accounting for a substantial portion of a provider's revenue - up to 30 percent according to HFMA - having an efficient collection process is vital. Furthermore, as patient satisfaction becomes increasingly tied to reimbursement rates, a user-friendly and transparent self-pay system can improve patient experience and loyalty. By implementing effective self-pay strategies, providers can streamline their revenue cycle, reduce bad debt, and create a more sustainable financial model while still prioritizing patient care and satisfaction.

How self-pay collections and upfront payments are intertwined

Upfront payments are the most critical part of an updated self-pay collections program. Here’s are their similarities: 

• Proactive approach: Both self-pay collections and upfront payment plans are part of a proactive strategy to address patient financial responsibility before or at the time of service.
•  Financial clarity: Upfront payment plans often start with providing patients with clear cost estimates before their treatment. This transparency helps patients understand their financial obligations early in the process.
• Patient engagement: Both strategies involve engaging patients in financial discussions early, a step that drives successful self-pay collections, financial counseling, and exploration of payment options.
•  Reducing bad debt: By offering upfront payment plans, healthcare providers lower self-pay debt balances, reducing the risk of bad debt and write-offs. Having manageable accounts receivable (A/R) and optimized EBITDA is imperative for healthcare organizations seeking buyers or investors. 
• Technology integration: Self-pay collections and upfront collections programs are often run by integrated technology solutions that combine upfront cost estimation, payment plan options, and self-pay collection tools.
• Financial screening: The process of setting up upfront payment plans often involves financial screening, which can inform the approach to self-pay collections for each patient.
• Continuous process: Both upfront payment plans and self-pay collections are part of a continuous process that extends from pre-service to post-service, aiming to maximize revenue collection while maintaining patient satisfaction.

Benefits of upgrading your self-pay collections system

Upgrading a self-pay collections system offers several benefits for healthcare providers:

• Increased revenue: An improved system that includes upfront payments can boost collection rates, reduce bad debt, and increase overall revenue from self-pay patients. Upgraded systems typically offer more diverse payment methods, including online portals, mobile payments, and payment plans, accommodating patient preferences. Patients have come to expect simple, online payment capabilities. Most are online 
• Enhanced patient experience: User-friendly payment options and clear communication can improve patient satisfaction and loyalty. A 2024 study of 1,130 American adults reveals that 94 percent support true healthcare price transparency.
• Reduced administrative costs: Streamlined processes can lower the cost to collect and decrease staff time spent on manual tasks. Effective systems boost upfront collections at the time of service, reducing the need for time-consuming follow-up billing.
• Faster cash flow: Again, an updated self-pay collections system involving upfront payments, a digital portal, and a payment plan leads to bills spending less time in A/R and improves cash flow for the organization. Many healthcare leaders back up this claim, including the California Healthcare Foundation. 
• Better compliance: Updated systems can help ensure adherence to regulations and best practices in patient billing and collections because when staff inputs a state and federal regulation change, the system applies it to all bills without forgetting or tiring. 
• Improved data analytics: Modern self-pay collection systems access the data and derive insights into collection trends and patient payment behaviors, allowing for more informed decision-making. Analytics can handle far more data than human staff. 
•  Enhanced communication capabilities: Modern systems often include features for automated reminders and personalized communication, improving patient engagement in the payment process.

When implemented effectively, an upgraded self-pay collections system can enhance the patient's financial experience by providing clarity, options, and control over healthcare costs. 

Barriers to a self-pay collections upgrade

As promising as these advantages are, updating your self-pay collections approach can make some in your organization uncomfortable, slowing your advance. 

Medical professionals didn’t go into their field to be debt collectors. They chose a compassionate field where the patient-doctor relationship influences outcomes. Leave the transactional stuff to service providers like mechanics and accountants. In a caring context, introducing financial discussions can feel like a breach of trust. When insurance companies managed most payments, healthcare providers could position themselves as patient advocates, attributing financial issues to insurers.   

Further, front office staff and clinicians are acutely aware of the financial challenges patients face. According to a report from Revenue Cycle Intelligence, 60 percent of patients with high-deductible health plans struggle to pay their medical bills, and 15 percent of American families include a member with outstanding medical debt. Moreover, providers recognize that 66.5 percent of American bankruptcies are linked to medical expenses.

 We cover this and other all the barriers to upfront collections in a recent post. 

Key Components of an Effective Self-Pay Collection System

Buy-in from staff

To get staff buy-in for upfront payments and improved self-pay collections, managers should focus on education, empowerment, and positive reinforcement. 

Start by clearly communicating the importance of self-pay collections to the organization's financial health and ability to provide quality care. Provide comprehensive training that not only covers the technical aspects of collecting payments but also addresses the emotional challenges staff may face when asking for money. 

Role-playing exercises can help build confidence in handling various patient scenarios. Give staff the tools and authority to offer flexible payment options, such as payment plans or discounts for prompt payment. Implement a supportive environment where staff can share their experiences and best practices. Recognize and reward employees who excel in patient collections, perhaps through incentive programs or organization acknowledgment. Finally, regularly share success stories and data showing how improved collections positively impact the organization, reinforcing the importance of their efforts. By creating a culture that values and supports effective self-pay collections, managers can help staff overcome their hesitations and embrace this critical aspect of their role. 

Standardized processes

When implementing a new self-pay collections program, establishing standardized processes is crucial for success. This step involves creating clear, consistent protocols that all staff members can follow. 

Start by forming a multidisciplinary team including representatives from front-office, billing, and customer service departments to develop comprehensive guidelines. These should cover every step of the collections process, from initial patient contact to final payment. 

Create detailed scripts for staff to use when discussing financial responsibilities with patients, ensuring a uniform approach. Develop standardized workflows for tasks like verifying insurance, providing cost estimates, and offering payment options. Implement a robust training program to educate all staff on these new processes, emphasizing the importance of consistency. 

Utilize technology solutions to automate and streamline processes where possible, reducing variability in execution. Finally, establish key performance indicators (KPIs) to measure adherence to these standardized processes and identify areas for improvement. Regular audits and feedback sessions can help refine the processes over time, ensuring they remain effective and aligned with organizational goals.

Offer patient cost or “good faith” estimates

Recent research highlights a growing demand for healthcare price transparency among patients. A 2024 study conducted by Patient Rights Advocate, Inc. and Marist, surveying 1,130 American adults, found that 94 percent of respondents support true healthcare price transparency. This aligns with the increasing trend of consumerism in healthcare, as 91 percent of those surveyed indicated that having access to upfront pricing would allow them to shop for the highest quality care at the most competitive rates. These findings are consistent with numerous other studies in the field, underscoring the importance of pre-service cost estimates to modern patients.

Providing cost estimates is becoming increasingly important in healthcare. Some healthcare organizations are proactively offering pre-service or good faith estimates to all patients, even when not mandated by the federal government. This convenience for patients can translate into profit for you. 

For instance, when Health First, a four-hospital system in Florida, implemented a "100 percent estimate" protocol, they saw a 27 percent increase in upfront collections. Patient satisfaction is also positively impacted by cost transparency, with an Experian and PYMNTS study showing that patients who received estimates reported higher satisfaction rates (88 percent) compared to those who didn't (78 percent).

Patient Portals

Online patient portals have proven valuable tools for both patients and providers. A comprehensive review of 3,456 records by the Journal of Internet Medical Research highlighted numerous advantages of these portals. Patients appreciate the flexibility to access their records and payment options at their convenience, which can lead to a better understanding of their health conditions and better adherence to treatment plans. The Salucro Healthcare study found that 62 percent of respondents preferred patient portals for paying medical bills. Furthermore, the 2023 State of Patient Access Survey by Experian suggests that user-friendly self-service portals can enhance patient loyalty and potentially lead to peer recommendations.

Mobile payment platform

To cater to today's mobile workforce, healthcare providers should consider offering payment options through text messages and emails. These methods can provide direct links to payment portals, capitalizing on the high open rate of text messages (98 percent). Additionally, standardizing billing designs and payment procedures across departments is crucial for avoiding patient confusion and frustration. A consistent brand experience throughout the patient's healthcare journey can help streamline the billing process and improve overall patient satisfaction.

Flexible payment options

Just because healthcare providers are collecting upfront, it doesn’t mean they have to collect ALL in PATIENT CASH.

Healthcare providers can partner with financial firms or third-party vendors that specialize in patient financing to offer a range of payment solutions. These partnerships allow providers to offer options such as:

• interest-free payment plans
• longer-term financing with interest
• medical credit cards. 

To determine what to offer, providers analyze their patient demographics, average bill sizes, and collection rates. They may also conduct patient surveys to understand preferences. 

Healthcare providers must offer a mix of options that cater to different financial situations, from short-term interest-free plans for smaller balances to longer-term financing for larger bills. Staff should be thoroughly trained on these options and equipped with tools to quickly assess a patient's eligibility for different programs. 

Many providers use software that integrates with their billing systems to streamline the process of offering and managing alternative payment options. The goal is to provide flexibility that encourages patients to pay while minimizing the provider's financial risk.

Research by U.S. Bank reveals a strong patient preference for flexible payment options in healthcare. Over 80 percent of patients indicated they would likely opt for recurring payment plans if offered by their provider. Even more striking, more than 90% stated they would pay their bill in full if presented with a lump-sum discount option. These findings underscore a significant opportunity for healthcare providers. By shifting payments to the front end of the care process and setting clear expectations for patients, organizations can increase their revenue streams while simultaneously reducing bad debt. Moreover, providers who offer such flexible payment methods are well-positioned to enhance patient loyalty, a crucial factor in the growing landscape of healthcare consumerism. This approach not only addresses immediate financial concerns but also aligns with the evolving expectations of patients who increasingly view healthcare through a consumer-oriented lens.

Upgrade self-pay collections with a powerful estimate solution

The healthcare landscape is evolving, with an increasing number of patients facing financial challenges due to lack of insurance, inadequate coverage, or high-deductible plans. This shift poses significant challenges to healthcare providers' financial stability. 

However, effective strategies can simultaneously enhance the patient's financial experience and boost self-pay collection rates. By implementing these approaches, you can provide compassionate patient care while maintaining fiscal health.

MD Clarity's Clarity Flow offers a streamlined approach to patient payment estimates. This user-friendly system accurately calculates patient financial responsibility and generates precise estimates without requiring staff intervention for 99 percent of cases. The estimates are then automatically sent to patients. Our customer service team collaborates with your staff to customize the system, allowing estimates to be triggered automatically upon appointment scheduling or at another predetermined point in the process. In addition to estimate generation, Clarity Flow has the functionality to send estimates automatically as well, a feature not offered by other solutions and much appreciated by clients. This automation significantly reduces the administrative burden while ensuring patients receive timely and accurate financial information.

If you would like to automate your good faith and patient estimates, as well as pre-verify your insured patients, contact us at https://www.mdclarity.com/request-a-demo.

“MD Clarity enabled our organization to be fully compliant with the No Surprises Act without having to build a solution.”

-Emily L, Director of Business Services, Women’s Healthcare Organization

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