Why Aren’t Patients Paying Their Medical Bills?

Hint: The reasons aren’t all financial.

August 23, 2021

Historically, private health insurance was utilized by patients to offset the cost of healthcare. Insurance providers typically paid for the majority of service fees, and patients paid small premiums, deductibles, and copays. Recent history, however, has seen insurance providers shift significantly more of the burden onto patients, a fact that can have a direct impact on the bottom line of medical practices that struggle to collect patient responsibility payments.

As doctors are now being asked to collect more of their payment directly from patients, it’s worth exploring the main reasons why patients don’t pay their bills. While many in healthcare reasonably assume that most people aren’t paying simply because they “can’t afford it,” research suggests this isn’t completely true–surveys have indicated that 74% of consumers proclaim to have the ability to pay their bills. If that is true, why is there currently $140 billion of medical debt in collections?

This article breaks down four of the most important reasons patients may not be paying their medical bills. As healthcare providers begin to understand the struggles standing in the way of payment, they can better develop a payment process that works for their patients. 

Reason #1: Patients forget about their medical bills.

Consumers have grown accustomed to paying for things at the point of service, usually immediately before or after the service is provided. For example, when you take your dog to the groomer, you pay when you pick them up. Or when you go to the car wash, you pay on your way in. But when you go to the doctor, you don’t usually see a bill until weeks or months after the appointment.

And when a bill is out of sight and out of mind, it often gets forgotten.

In total, 36% of patients reported having a hard time remembering to pay their bills. It gets even worse when you look only at millennials, as 54% admit to having a hard time remembering to pay. Even doctors recognize that this system isn’t working well, as 53% of providers recognize that patient forgetfulness leads to delayed payments.

Reason #2: The payment process is antiquated and complicated.

As of 2020, 93% of providers are still relying on manual and paper-based transactions (like mailed paper checks, point of service payments, payments over the phone, and mailed payment coupons with card information) to collect patient payments. Even as consumer preference for electronic payment options has grown to an overwhelming 85% of consumers, the most common method of payment reported by doctors was still mailing a check! 

But what’s the problem? Money is money, right?

Sort of.

Paying by check is the most hands-on way that you can ask your patients to pay, as paying by check requires an assortment of steps that, when listed in order, sound a bit like you’re reading the children’s book “If You Give A Mouse A Cookie.”

First, it requires patients to have a check. Then, it requires them to fill out the check correctly. Next, they have to have an envelope. Then they have to properly address that envelope. After that, they have to have a stamp to send that envelope. Finally, they have to place that envelope in the mailbox and hope it makes it to your office.

Oftentimes, that works out just fine. However, just because something “is working” doesn’t mean that it’s working well. It’s like that first car we all drove in high school that usually got us to school on time, but we were always a little stressed out about it breaking down on the way there–it’s just a little too risky.

Doctors shouldn’t have to count on such a complicated process to obtain payment. Too many things can go wrong in the current process. Accepting payment should be as frictionless as possible, and a $0.50 stamp should never stand in the way of you getting paid for a hard day’s work.

Reason #3: Patients need flexible financing options.

When a patient receives a medical bill in the mail, it typically requests payment in full by a specified date, usually 30 days later. This system of lump-sum payments is simply not feasible for many patients, as an unexpected $300 bill might not fit into their already tight budget. This difficulty is evidenced by the 52% of consumers who want patient financing

But for many patients, financing options are unavailable or unsuitable. These options, mainly CareCredit and LendingClub, have a myriad of problematic, predatory features. However, the largest problem for providers is that these financing "solutions" don't actually solve anything for the patients that need it most.

Typically, lower-income patients have the most difficulty paying for healthcare, but lower-income patients also typically have lower credit scores, as research has suggested that income and credit score are correlated. This presents a serious problem, as the financing solutions are all tied to credit scores, meaning that patients who can't afford to pay for healthcare and don't have a solid credit score likely won't be eligible to use these financing "solutions."

Thus, patients are left with few choices in deciding whether or not to pay their medical bills. When patients must choose between making rent and paying their medical bills, medical bills will often go unpaid. This is why patients should never have to choose between payment in full or non-payment. Instead, doctors should empower patients to pay with flexible, self-serve payment options so medical bills don’t end up pawned off on debt collectors who only recover 22% of medical bills on average.

Reason #4: Patients never see their medical bills.

The internet is full of stories about patients who’ve had medical bills sent to collections even though they never received a bill. This reality presents a final unfortunate reason why patients don’t pay their bills: it’s pretty hard for them to pay bills they don’t know exist... 

A driving factor in this reason seems to be doctors’ reliance on mailing paper statements as their main collection method, as 58% of providers list it as their primary means of collection. While sending bills via the mail is commonplace, that doesn’t mean it’s effective. When a bill is sent through the USPS, it’s fighting a losing battle for its recipient’s attention. On average, over 50% of mail received through the USPS is marketing mail, meaning that your very important bills will arrive amidst a cohort of junk mail destined for the trash can. It’s far too easy for a bill to end up hidden inside a coupon brochure or fast food flyer and then deposited into the nearest trash receptacle.

And this doesn’t even factor in the bills that altogether never reach your patients!  Many other reasons could lead to your patient never receiving their bill, namely, your patient changing their address, the postal service losing the bill, or the mail carrier delivering it to the wrong house. At the end of the day, this bill delivery method is far too risky for your practice, especially when every paper bill sent costs both time and money.

Peachy fills the gap.

Fortunately, all of these problems are solvable. Collecting patient payment doesn’t have to be painful, and Peachy makes sure it isn’t. Peachy helps your patients (1) actually receive their bills, (2) keep their bills top of mind, (3) pay their bills in seconds, and (4) set up payment plans that fit their financial circumstances. Using an SMS-based notification system, Peachy directs patients’ bills into their most intimate inbox: their text messages. Then, it allows frictionless payment or payment-plan set up with just a few clicks.

You deserve to get paid for your hard work. To learn more about how Peachy can help that happen, connect with us here.

Appendix
Published on: 
August 23, 2021

Note: This is not to be taken as tax, legal, benefits, health or financial advice. Since rules and regulations change over time and can vary by location, consult a lawyer or financial expert for specific guidance.

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