Bad debt in healthcare is the amount of money owed to your practice or facility that is considered uncollectible. Writing off bad debt is not a new concept, yet the issue has become more pressing with increasing patient responsibility.

Over the last decade, providers’ patient revenue has jumped from less than 10% to over 30%. Correspondingly, bad debt has also increased. In 2022, almost 58% of write-offs came from patients paying out-of-pocket after insurance, up from just 18% in 2018. 

The best way to minimize bad debt is to stop it from happening in the first place. Being more proactive about payment collections and cutting down accounts receivable (AR) is crucial. This way, administrators and management can ensure timely reimbursement, optimize revenue cycles and improve their organization’s financial stability. Learn how to reduce bad debt in healthcare with an effective post-service follow-up strategy. 

Why Does Bad Debt Occur?

Approximately 41% of adult Americans have medical debt, owing around $195 billion. Healthcare’s bad debt problem results from patients being unable or unwilling to pay their portion of the bill. Some common reasons for unpaid balances are: 

• Misunderstanding of medical bills: Billing practices typically lack transparency. Patients don’t understand what they owe, increasing missed payments. 
• Confusion about insurance coverage: Many patients are unsure what their plan covers versus what they’re responsible for paying out-of-pocket, leading to surprise bills. With over three-quarters of Americans living paycheck to paycheck, sticker shock significantly contributes to late or missed payments. 
• Communication breakdowns: A one-size-fits-all approach to billing communication doesn’t work. Patients have diverse preferences — some want to receive their statements via email, whereas others prefer text. Using their unpreferred method means missed bills, hindering payment.
• Lack of timely follow-up: Billing delays make it tricky for patients to keep track of payments. This creates confusion around what they owe, another major driver of unpaid bills. 

As bad debt is considered unrecoverable, it directly impacts your bottom line — high amounts translate to lower overall revenue for your practice. Bad debt’s expense in healthcare is more than financial. Revenue loss can strain operations, resulting in layoffs and understaffed teams that lower employee morale. Ultimately, patient care suffers through longer waits, decreasing loyalty and satisfaction. 

Essential Elements of a Post-Service Follow-Up Strategy

Bad debt in healthcare is inevitable. Fortunately, administrators and management can reduce it as much as possible with a post-service follow-up strategy. Follow-ups create an opportunity to tackle outstanding payments, avoid billing confusion and offer payment solutions, boosting your collection rate and minimizing bad debt.

Here are five essential elements for an effective strategy.

1. Timely and Consistent Communication

Prompt follow-ups create the opportunity to address concerns and questions before they become roadblocks. Have trained support specialists to assist patients, whether via chat or email, helping them understand their bills to maximize collection. 

Aim to contact patients anywhere from 24 hours after their appointment to a week later, depending on what’s appropriate. For example, following up the day after a major surgery could be insensitive. 

Establish a post-service follow-up schedule to help patients stay on track with payments. Send reminders a week before the bill’s due date, three days after, 14 days after and so forth. 

2. Clear and Patient-Friendly Billing Statements

Ditch the confusing medical jargon. Instead, provide a simplified breakdown of charges, payments and the leftover balance. This way, patients will understand what they owe and what insurance has covered, encouraging payment by clarifying who is responsible for what. 

Make it easy for them to settle their bills. Include all available payment methods and contact information for those who want more personalized support. 

3. Multiple Communication Channels

Patients have different preferences for how they want to be contacted. Offer multiple channels, including phone, email, text and patient portals, to personalize engagement and communication. 

Millennia makes it easier to meet patients where they are via the channels they’re most responsive to. Our Patient Payment Solution incorporates engagement intelligence, using artificial intelligence (AI), real-time analytics and a propensity-to-pay algorithm to understand your patients’ payment behaviors.

The system identifies individual preferences, such as Patient A, who prefers receiving texts in the evening, versus Patient B, who is only reachable on weekends and wants to avoid phone calls. Engagement is then automated based on this data, notably increasing payment rates. If your patients have billing questions, they can use the integrated patient payment portal to access our personalized patient support team with flexible communication options, including email, phone and two-way chat. 

4. A Personalized and Empathetic Approach

Multiple payment options also help speed up the AR cycle and minimize bad debt. In addition to an online payment portal, offering text-to-pay, mobile pay and photo-capture bill pay gives patients control over how they settle their bills.

Beyond improving patient satisfaction through personalization, digital options help your organization get paid quicker. Providing patients with faster billing and simple payment options can help your organization reduce its days in accounts receivable (DAR).

Since healthcare costs burden 48% of Americans, offering payment plans is a practical and compassionate solution. Along with making your organization’s services more accessible, allowing patients to pay over time empowers them to fulfill their financial obligations. 

As one of its latest features, the Millenia Patient Payment Portal offers Self-Service Payment Plans. Patients can now set up payment plans directly in the portal without speaking to an agent. Based on your organization’s predefined guidelines and thresholds, the payment portal provides a clear overview of all available payment plan options, empowering patients to select the most suitable choice. Users can also set their plan’s start date and payment method, choose notification preferences and view the next payment date. 

5. Technology and Automation 

Bad debt can also result from human error, such as forgetting to collect payments or submit claims. A patient payment portal can automate essential post-service follow-up activities, helping eliminate these risks. By integrating with your organization’s electronic health records or practice management system, it streamlines the billing process by:

• Sending automated payment requests and reminders. 
• Ensuring accurate coding practices. 
• Automating claim submission and follow-ups. 

Automation technology is also vital for analytics and reporting to monitor the effectiveness of your post-service follow-up strategy. Before becoming uncollectible, debt usually ages in AR and collections. Data-driven analytics and automation can proactively manage debt by identifying potential bad debt early through tracking KPIs like: 

• Net DAR: The longer it takes to collect payments, the more revenue your organization stands to lose due to bad debt. 
• Missed charges: Monitoring missed charges reveals recurring patterns that hinder payer reimbursements, from unbilled claims to coding accuracy issues. 
• Net collection rate: This metric measures your organization’s revenue against total payer obligations, accounting for bad debt, taxes and discounts. 

Alongside the patient payment portal, Millennia’s solution includes a platform offering real-time analytics and reports on revenue cycle performance. These insights help you understand patient payment behaviors, pinpoint areas for improvement and make informed decisions to adjust processes that can increase revenue. The platform also features alert analytics, ensuring smooth processing and optimal revenue collection thanks to built-in trigger warnings for unusual performance.

The Benefits of a Strong Follow-Up Strategy

A strong post-service follow-up strategy is the best way to improve patient financial education. As bad debt is largely tied to misunderstandings, confusion, a lack of communication and the high cost of medical services, educating your patients and enhancing their payment experience is paramount in tackling the problem. 

Reducing your organization’s bad debt can directly increase its revenue. While payment leaders often focus on cost-saving strategies like layoffs or cutting overhead expenses, minimizing bad debt exposure offers a significant financial return. Even small reductions can have drastic results. For example, if a hospital with an annual revenue of $5 billion reduced bad debt by just 2%, it would save $1 million. That means an extra $1 million in revenue, strengthening the facility’s financial stability.  

With automated technology, a standardized follow-up workflow can also enhance operational efficiency. In addition to combating burnout in administrative roles, fast and convenient processes can improve patient satisfaction and loyalty. 

Schedule a Consultation to Transform Your Post-Service Follow-Up Strategy 

Millennia helps healthcare providers exceed financial goals while delighting their patients with a personalized payment experience. Transform your post-service follow-up strategy with our Patient Payment Solution, specifically designed to increase patient revenue collection rates.

Before implementing our solution, providers’ post-service collection rate typically sits between 25% and 30%. Once partnering with us, their collections climb to 60% or higher, depending on the facility and its specialty.

Ready to optimize your post-service follow-up and improve collections? Schedule a consultation today. 

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