There are ways to improve collections without exhausting your workforce.
Hospitals have historically treated their 3rd party payer, low balance Accounts Receivable (AR) like toothpaste tubes.
They think about squeezing out that final bit, but decide the effort is too great to get these small reimbursements from commercial insurance, Medicare, or Medicaid.
Frequently this means AR gets tossed aside, either ignored until the occasional, laborious cleanup or simply written off. Organizations consciously de-emphasize small balances - usually claims under $2,500, though occasionally up to $5,000 or $10,000 - as each “low balance” claim holds minimal revenue and is costly to collect.
However, the volume of untouched insurance claims often adds up to 1% (or more!) of a hospital’s Net Patient Revenue (NPR). To get collections out of this AR - without exhausting your workforce - it is vital to understand the barriers to resolving this tranche of potential revenue.
Value in the tube vs. Cost-to-collect
Rule of thumb: 15% of the active volume contains 96% of the AR balance. Hospitals focus their finite resources on this 15%. Absolutely logical!
But getting to the other outstanding accounts later means finding time when workforce capacity is greater than workload demands. As people and finances are strained across healthcare (driving scrutiny of each employee’s productivity), few organizations have enough staff to even stay current with the 15% of higher value receivables.
Staffing challenges or not, the idea of working twenty $500 claims (in the 85% of low balance) at the expense of one $10,000 claim (in the 15% of high value)? Too absurd to even consider!
Compounding this is that approximately every other small insurance claim turns out to be no longer collectable.
Cleanup campaigns have low-to-negative ROI and leave staff frustrated from wasting time on claims that have relatively “insignificant” value – only to find 2-out-of-5 have expired. With extraordinary burnout rates in our industry, anything that further lowers morale is ill-advised, reinforcing the idea that, “working low balances isn’t worth it.”
However, this remaining 85% of volume creates a bubble of small, aging claims … and the bubble keeps growing larger. Pressured by leadership about AR volume, managers may require staff to resolve this backlog. When campaigns are run, they tend to be brief so employees can get back to work that “really matters.” Consequently, this segment of AR worsens as the ratio of collectable v. uncollectable becomes less favorable each day it goes unworked.
Feeling they have no good options, many hospitals resort to mass AR write-offs. Thousands of small claims are thrown out without review – including significant numbers of viable, collectable revenue opportunities, alongside numerous uncollectable claims.
Losing revenue on a few small claims won’t make or break anyone’s P&L…but tossing thousands away means likely 1% or more of NRP goes into the bin as well.
Investing in people though automation and process
Few efforts show 1%+ improvement in margin, so it’s important to purposefully finish the toothpaste tube while relieving some of the pressure on your staff.
Resolving small balance claims is a great place to start revenue improvement, especially by introducing analytics and automation.
With (or without) the benefits of automation, increasing the productivity of your team begins process improvement.
Using strategies to minimize staff exertion and maximize collections, you can squeeze another 1%+ in revenue out of that toothpaste tube! Your CFO - and your dentist - will thank you.
Jeff Means, CEO and co-founder of Colburn Hill Group, a Tegria Company, has deep operational expertise in healthcare revenue cycle management.