Patient "out-Of-Pocket" Healthcare Costs Are Rising: Medical Practices Feel The Pinch
Most of us never see the "back office" of a medical practice, except when we catch a glimpse behind the glass window as we are signing in. If we were allowed to go behind the glass, we would see a less comfortable work space, messier desks, and probably a less friendly staff than we usually see when we visit our doctors' office.
Many of us are also unaware of the difficulties and the extra effort the medical back office faces just to get paid for their services today. These difficulties contribute to higher costs for the practice and less cash flow. Why is this happening?
There are two primary reasons...
- insurance companies (both private and Medicare)
- patient responsible balances
Patients are often surprised to hear they may be responsible for something we thought our insurance policies covered fully. However, some have recently received a correspondence resembling one of these following:
- An unexpected bill from the medical office for a recent visit
- A stern "reminder to pay" letter from the office for a previous visit, months ago
- A letter from a collections agency for medical charges that we thought were fully paid by the insurance company
The scenario above has become more common over the past 5 years as rising healthcare costs; rising insurance premium costs; and employer and employee cost cutting programs have caused the patient responsible portion of medical costs to rise to 30% to 35% of the cost of the services on average. Years ago, this average was around 10% to 15%.
As an example, when the annual enrollment period rolls around for most employees, the insurance plans offered are more expensive, or offer less coverage, or both. This induces the employer and employees to choose plans with lower premiums and therefore higher deductibles, higher co-pays, and lower "maximum allowable" reimbursements. That is the reason the patient gets that unexpected bill, or letter. When deductibles are not met, and a lower reimbursement is paid to the doctor, the practice bills the patient the difference, sometimes long after the actual visit (depending on when the insurance company pays the claim). This leads practices to face significantly decreasing cash flow and revenues if balances are not paid on time.
Since it takes more effort for medical offices to collect the initial reimbursements from insurance companies, and since insurance companies are paying less than before, patients are getting more and more unexpected bills from their doctor. Even worse, with the increasing balances of unpaid bills (or claims not yet paid by the insurance company), the practice may struggle to keep up with an ever increasing workload on back office personnel because they just don't have the time, or the efficient systems, to keep up with all the small details of every claim from every patient. That can cause a "good paying" patient to become infuriated upon receiving a collections notice on a debt he or she never knew existed.
Most medical office employees are tasked to their limits getting properly coded claims out to the various insurance companies, following up on claims, billing patients, and following up on outstanding balances. The idea, and the expense, of tracking the patient balances, which are now becoming a larger part of their accounts receivable, can easily become too much for the staff to manage effectively. The medical practices have little choice except to add costly staff or get help from a professional accounts receivables management firm. If medical practices do not adapt to this new normal of "patient paid" medical services, then their future as a private practice is in jeopardy.