Bulletin: Pre-Payment - The New Best Practice

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• 38 hospitals closed or declared bankruptcy in the past two
years...one of them was 135 years old. - (Becker’s)

• As many as 283 hospitals are on the verge of closure. Hospital financial officers have to make substantial changes. (USA Today)

The Issues...

1. There has been a 400% increase in the total number of Americans covered by high-deductible healthcare plans.

2. There has been a 47% increase in the average patient’s deductible in the last five years.

3. People don’t understand their plans & aren’t financially able to pay the premiums or deductibles.

4. Result: hospitals are experiencing steep increases in uncompensated care (AHA report)

Over $413 billion in uncompensated care has been provided by all hospitals since 2000 due to:

• Bad debt (200% increase)
• Charity care
• Medicare & Medicaid paying less than cost

5. A 300% increase in uncompensated care is projected over the next five years. (Deloitte)


1. Revenue growth & cash flow margins are at an alltime low (3.9%).

2. Expenses are growing more rapidly than revenue.

3. Operating margins are extremely tight.

4. Non-operating income from investments and endowments is sharply decreasing.

5. Inpatient & outpatient volume is substantially declining.

6. Facilities & equipment are becoming obsolete due to limited access to capital.

7. Over 25% of all Non-Profit Hospitals are operating at a loss.


1. Mailing 100 bills to individual patients at $10 to $15 per letter costs (in unrecoverable expenses) $1,000 to $1,500 per month, amounting to $12,000 to $18,000 annually.

2. Providers are always at a disadvantage collecting after the fact because patients feel less urgency about settling their debt once they've received care.

3. Research has shown these patients are 50% to 70% less likely to pay a bill once they leave the facility.”

4. Collectability of receivables drops by 40% to 80% once they are 90 to 120 days old.

5. Collection agencies can take as much as 30% of the collected debt.

Knowing these facts…it’s absolutely crucial for hospitals to secure fees and payments in advance or before patients get out the door.

“Hospitals should move beyond the traditional approach of billing patients after services and provide patients with pre-service financial clearance and payment options.” - Deloitte


1. Install Point of Service Software (see Patient Liability Estimator description below)

2. Train workers at the counter to be assertive in discussing the costs of care.

3. Routinely verify coverage electronically before scheduling tests and other services.

4. Inform patients on the spot how much they'll need to pay in advance before scheduling tests, radiology screenings, etc., or what they'll be expected to pay during their visit.

5. Communicate payment responsibility through multiple channels.

6. When confirming appointments, schedulers and receptionists should remind patients of their payment obligations at the time of their visit.

7. Many hospitals offer a pre-payment discount incentive (if the patient pays the full amount in advance)

8. When patients say they don't have the money, ask for the amount they can remit & offer a financing program at reasonable interest rates.

9. Develop elective procedure self-pay policies requiring an upfront partial or full payment.

10. Clarify policies for uninsured patients (i.e. an accurate, consistent charity care policy)


• Since June of 2013 a small, hospital in rural north central Oklahoma has been using a Patient Estimator tool from Medical Recovery Services. Their up-front cash reimbursements are now averaging about 70% of patient liabilities. ($12,386 per month…a total of $148,632 for 2014).

• In September 2014, a multi-specialty surgery center in St. Louis began using the Patient Estimator. In the first 3 months, up-front cash payments (which started from virtually zero) averaged $57,920 per month. If this trend continues, a conservative estimate calculates their collections for fiscal year 2015 will be in excess of $600,000.

For the past ten years, Medical Recovery Services has worked to help small community and critical access hospitals to succeed and prosper, keeping their communities thriving and vibrant. We offer a complete range of products and services at exceptionally affordable rates. Please let us know how we might help you.

1. Revenue Cycle Strategist – by Lola Butcher, Healthcare Financial Management Association Newsletter, February 2014
2. Semi-Annual Meeting of the Advisory Panel on Hospital Outpatient Payment (HOP Panel)
3. Your Receivables Lose Value Over Time, Professional Recovery Personnel, October 2012 Blog
4. How to Never get Ripped Off AGAIN, by Maria Brophy, http://mariabrophy.com/business-of-art

For additional information, or to contact Medical Recovery Services, go to:


or call Donald Tapella at (816) 229-4887, ext.111