Most physicians understand that some portion of their billings gets sent to collection agencies. Still, the sheer amount of medical debt currently in those agencies’ hands indicates that most physicians don’t quite understand the ramifications of this situation. Because sending a medical bill to collections doesn’t just mean that a patient didn’t pay, it also means that physicians are losing money.
Frankly, unpaid medical debt is a massive problem for healthcare providers. It’s not just some unfortunate part of a physician’s business–it’s a problem that has a direct impact on each and every practice’s bottom line. For some doctors working in private practice, it could also be the difference between staying in business and heading back to corporate practice. However, innovation is just around the corner. And as doctors begin to realize the impact of their reliance on collection agencies, real change will start to take hold.
Just how big of a problem is medical debt in collections?
Well, that depends on how big of a problem you consider $140 BILLION. Yes, you read that right. $81 billion (with a B) of medical debt is currently in collections!
We now live in a world where almost 20% of people have medical debt in collections. That means that every time six patients walk into your clinic, it is likely that one of them won’t be able to pay their bill on time, if ever!
Why is this happening?
Can it really be that over one-sixth of Americans can’t afford their medical bills? The answer to that question is a bit more nuanced than it appears, as the problem seems to be comprised of a few main issues—the first of which is the rising cost of healthcare for consumers.
Over the past decade, the semi-symbiotic relationship between patients, insurance companies, and healthcare providers has grown increasingly tenuous, and recently it has begun to crumble altogether.
Between 2012 and 2017, patients’ responsibility for medical bills increased substantially. In just five short years, patient responsibility nearly doubled, increasing by 88%. Translating that to the physician’s perspective, a patient who in 2012 was responsible for $100 of the bill for a routine appointment is now responsible for $188 of that same bill. That simply isn’t feasible for many patients, especially when considering that the total average annual out-of-pocket medical expense exceeds $6,000 per family.
While this is unfortunate for patients, it also impacts physicians, as they’re now asked to collect significantly more directly from their patients. Physicians have every right to be irked by this fact, as insurance providers have essentially offloaded a significant portion of their responsibility onto patients, in turn making doctors’ jobs far more difficult.
When we combine this with the realities of day-to-day life, it is easy to see that collecting medical debt is not an easy feat for healthcare providers. Patients move, and mail gets lost. Other patients forget to pay or might not have the stamps or checks necessary to mail in their payment, and as mentioned above, many patients simply can’t afford the higher bills. It’s a frustrating situation that, unfortunately, pushes physicians to utilize collection agencies.
What’s the problem with collection agencies?
It may seem to doctors that collection agencies are an enormous asset to their practice. That sentiment, however, overlooks the reality of the situation. Collection agencies are not simply a helpful friend that is better at collecting payment. Instead, collection agencies make a profit at the expense of doctors.
Many collection agencies work on contingency fees. This means that for every dollar that they collect, they take a percentage. That percentage ranges from 25% on the lower end to 50+% on the higher end. And that is if they even collect at all, as the reported average collection rate by collection agencies is less than 22%!
Meanwhile, other agencies use a different payment structure, requiring doctors to pay $10-$15 per account and then sometimes charging a smaller contingent fee on top of that. These agencies are essentially asking for $10 for a 22% chance of collecting payment. It’s an outrageous proposition that sets doctors up to lose a significant amount of money.
If collection agencies aren’t particularly successful at collecting your patients’ payment, what should you do instead?
A new payment collection solution is emerging, and it’s one that helps physicians take back control of the collection process: online and mobile bill payment. Research has shown that 85% of patients prefer electronic payment methods for medical bills.
But here we are in 2021, and 93% of providers are still relying on manual and paper-based transactions to collect. It’s not much better on the patient side, as a 2019 survey revealed that 81% of patients are still paying by check. In a world where 9 out of 10 Americans are online, 8 out of 10 own a smartphone, and 7 out of 10 use social media, healthcare’s inability to make the shift away from paper is astounding.
Patients are ready to make the jump to online and mobile bill payment, and physicians should be chomping at the bit for any opportunity to quit handing over a significant amount of income to collection agencies. It’s time for doctors to join the electronic payment revolution and start implementing online and mobile payment options.
Peachy is here to help. Peachy offers easy, SMS-based mobile payment and simple payment plan set-up to help doctors collect more, faster. You shouldn’t have to give a significant portion of your hard-earned revenue to collection agencies just to get paid. Peachy is ready to help you avoid collection agencies altogether. Schedule a demo to find out how.