Outstanding patient collections are a common problem among healthcare practitioners, hospitals, and other medical facilities. Over one-third of the U.S. adult population carries medical debt, and of the individuals with outstanding medical bills, nearly half owe more than $2,000.

The rise of unpaid medical debt may be partially attributed to high-deductible health plans (HDHPs). Under such plans, insurers shift more of the payment burden for medical services to individuals. The median deductible for an HDHP is $2,500, meaning insured individuals must meet that deductible before their insurance fully kicks in. In contrast, the median deductible under traditional plans is just $750.

The trend toward high-deductible health plans puts pressure on medical facilities stuck with lingering patient collections. Patients who don’t pay their bills hurt the provider’s bottom line. In the worst case, providers must send the account to collections. Over 70% of providers do so once the debt is outstanding for over 90 days.

In recent years, however, government agencies — including the Consumer Financial Protection Bureau, Treasury Department, and Department of Health and Human Services — have worked to prevent outstanding medical debt from impacting an individual’s credit. This change will undoubtedly limit the ability of collection agencies to recover such debts, which means that sending accounts to collections may soon be ineffective. These shifting regulations underscore the need for teams to enact solid, proactive collection strategies.

What can medical facilities do to improve patient collections moving forward? Revenue cycle teams can start by measuring current outstanding patient collections to learn whether there is an issue. After all, teams can’t improve what they don’t measure. Here are a few metrics that can help.

1. Patient Days in A/R

The Patient Days in A/R metric calculates the average time it takes to collect an outstanding patient balance from insurers and patients. It tells how quickly a facility can expect to receive full payment from a patient following a visit. 

The lower the Patient Days in A/R metric, the better. Ideally, providers want to aim for an A/R of less than 35 days. Anything higher signifies a potential issue. 

Here’s the formula for Patient Days in A/R:

(Total Receivables – Credit Balance) / Average Daily Gross Charge Amount (Gross Charges / 365 Days)

For example, say there are $90,000 in receivables over a 90-day period, a credit balance of $15,000, and gross charges of $700,000 for the year. 

[($90,000 – $15,000) / ($700,000 / 365 days)]  = 39.11 days

The average Patient Days in A/R in this example is 39.11, which is slightly high. To improve Patient Days in A/R, the provider should focus on improving communication between the billing team and patients.

2. Patient Collection Rate

The Patient Collection Rate represents the percentage of patient balances a medical facility collects. The higher the rate, the more efficiently a healthcare provider collects patient payments. Lower rates suggest a medical facility isn’t collecting all its outstanding bills, which may hurt cash flow. 

To calculate the Patient Collection Rate, use this formula:

(Total Patient Payments Collected / Total Patient Payments Due) x 100

For instance, say the facility collects $40,000 in patient payments, and $70,000 is due. The Patient Collection Rate is 57%, or ($40,000 / $70,000) x 100.

If the Patient Collection Rate is low, it’s possible to raise it by offering clients the option to pay using a payment plan. Another option is using additional collection techniques, like sending regular billing statements and calling customers with outstanding balances.

3. Patient Contact Rate

The Patient Contact Rate measures the percentage of clients with outstanding balances that the billing team has contacted regarding their debt. A higher Patient Contact Rate means the billing team is proactively reaching out to customers to collect their balances. Medical facilities with higher Patient Contact Rates may find it easier to collect patient balances, see a boost in cash flow, and have lower rates of bad debt. 

Patient Contact Rate is calculated using the below formula:

(Total Number of Patient Contacts / Total Number of Patient Accounts) x 100

For example, say the billing team contacts 100 clients of the 140 clients with outstanding balances. The Patient Contact Rate is 71.4%, or (100/140) x 100.

Healthcare providers can establish a transparent collections process to increase Patient Contact Rates. Such a process might include sending automated payment reminders after a specific date, providing monthly billing statements, and calling clients with outstanding debts after 30 days. 

4. Patient Balance After Insurance Ratio

The Patient Balance After Insurance Ratio tells healthcare facilities the percentage of clients responsible for paying for their medical services versus insurance companies. A higher percentage means patients share a more significant burden for paying for their care than insurers, which may make it harder to collect outstanding balances. This, in turn, could potentially hurt cash flow and increase bad debt. A lower ratio signifies insurers share a greater portion of the patient’s cost for medical services, which can shorten the time it takes to collect outstanding debts.

To calculate the Patient Balance After Insurance Ratio, use this formula:

(Total Patient Balances After Insurance / Total Patient Balances) x 100

Let’s say the outstanding patient balances after billing the insurance company are $15,000. The total patient balances, which reflect the amount billed before collecting insurance and patient payments, are $75,000. The Patient Balance After Insurance Ratio is 20%. For every $1 billed for medical services, clients pay 20¢, and the insurance company covers the rest.

To improve Patient Balance After Insurance Ratio, providers should keep a patient’s insurance information current. Doing so can reduce the chances of an insurer denying a claim. Improved customer communication can help patients understand what their insurance company will cover and what they’ll be responsible for paying.

5. Bad Debt Rate

Bad Debt Rate evaluates the percentage of customer accounts a medical facility writes off as bad debt over a period. Once the facility writes off the bad debt, it may sell it to a collection agency or stop further collection activities. The lower the rate, the more efficiently the billing team collects patient balances. A high rate can impact overall profitability and cash flow. 

To calculate the Bad Debt Rate, use this formula:

(Total Amount of Bad Debt / Total Amount of Gross Charges) x 100

For example, assume the practice writes off $15,000 in bad debt for the period, and gross charges are $200,000. The Bad Debt Rate is 7.5%, or ($15,000 / $200,000) x 100. 

Improving bad debt rates starts by confirming patient insurance information is up to date. Facilities may also implement payment plans for patients who need additional time to pay their bills and a collection policy that informs clients of their financial responsibilities. 

Patient Collection Metrics Are Key to the Receivable Process

Unpaid and overdue patient balances are a fast track to cash flow problems for healthcare facilities. Staying on top of the billing and collections process is as easy as monitoring key patient collection metrics. The five metrics discussed can alert providers to issues before they become major problems. 

AccessOne supports healthcare facilities in simplifying their collections processes and helping patients pay their bills on time.