Billing & collections for patients and providers

Billing and Collections: Let’s Discuss the Basics

For many healthcare professionals, including most staff members and leaders in hospitals and health systems, billing and collections may not be a major focus of their daily work. Patients, for their part, may see medical billing as a source of concern or difficulty, or at best a necessary but unenjoyable part of the medical journey. Despite this, billing and collections are vital for the financial health of healthcare organizations, and they can have a significant impact on the overall patient experience, patient satisfaction, and patient retention and referrals. Anything hospitals and health systems can do to make billing and collections easier and more effective for staff members—and positive and more transparent for patients—could be highly beneficial for all involved.

While the specifics will vary from organization to organization, the billing and collections process tends to follow a standard set of steps or stages.

• Insurance verification: Collecting and confirming the patient’s insurance details are necessary to submit claims for any portion to be covered via third-party payment. For existing patients, this information will likely be on file but needs to be confirmed regularly (usually annually).
• Coding and claim submission: Once a patient receives (or agrees to receive) treatment, the corresponding charges need to be determined and submitted to the payer. This generally involves two steps: coding and claim submission. Medical coding, often handled by a dedicated coder, entails assigning the correct CPT®, ICD-10-CM, and HCPCS Level II codes, which enables charges to be sent to the payer to be processed (claim submission).
• Adjudication: The payer will review the claim details and either accept (pay as requested), reject (flag errors to be corrected), or deny (refuse to pay) the claim. In the case of rejection or denial, providers may submit a revised claim or appeal.
• Patient billing: After adjudication, or in cases where treatments are not covered or a patient doesn’t have insurance, healthcare providers may need to bill patients directly for balances due. This involves preparing a billing statement and sending it to the patient, usually by mailing a printed invoice or emailing a digital statement.
• Collections: At its most efficient, medical collections simply means receiving payment as requested, whether via paper check, a credit card on file, an online payment portal or other means. When payment is past due, the focus shifts to pursuing payment by various means, including re-sending invoices, communicating with patients, or eventually enlisting assistance from third-party collections agencies or writing off charges.

The Payment Shift: Billing and Collections in an Out-of-pocket Era

The standard billing and collections process has been in place for decades, since employer-sponsored health insurance employee benefits and healthcare coverage in general became more widespread in the mid twentieth century. Many healthcare providers, including most hospitals and health systems aligned their policies, processes, systems, and staffing related to billing and collections to this approach, collecting all or most of any payment owed from third-party payers (insurance companies or government payers).

In the twenty-first century, and especially in recent years, a major shift has taken place, as more patients today are responsible for paying a larger portion of healthcare costs out of pocket. One reason for this “payment shift” is the prevalence of high-deductible healthcare plans (HDHPs), which surveyed employers said nearly a third of covered employees held in 2020, up from just 13% in 2010 and 0% in 2000 . Deductibles in general have risen dramatically as well, increasing 182% since 2006, and 69% of employees had a deductible of $1,000 or more in 2020.¹

The Impact of Healthcare Consumerism

In addition to rising deductibles, many patients are confronting rising out-of-pocket healthcare costs in a variety of areas. These include payments collected by payers (insurance premiums), healthcare providers (copays, coinsurance), healthcare retailers (medicine, supplies, equipment), and other health and wellness businesses. In this environment, traditional healthcare providers may see their billing and collections impacted not only by the need to collect more payments directly from patients, but also by a general shift in patient preferences and expectations.

In addition to rising deductibles, many patients are confronting rising out-of-pocket healthcare costs in a variety of areas. These include payments collected by payers (insurance premiums), healthcare providers (copays, coinsurance), healthcare retailers (medicine, supplies, equipment), and other health and wellness businesses. In this environment, traditional healthcare providers may see their billing and collections impacted not only by the need to collect more payments directly from patients, but also by a general shift in patient preferences and expectations.

Meeting Patient Expectations for Billing and Collections

For many consumers today, the purchase process for a sizable or specialized product or service may involve several stages: doing online research, reading reviews and ratings, comparing options for where to buy, arranging the purchase, managing payment, and possibly following up with service and support staff, and/or managing a customer account over time. In the current healthcare environment, all of these same steps are possible, and many patients have begun to explore and embrace them.

For hospitals and health systems, the trend of healthcare consumerism can have many implications, impacting everything from the need to monitor websites that feature reviews and ratings of doctors or healthcare facilities, to making more detailed information readily available via more channels, to offering new options for patient communications and invoice payment. For billing and collections specifically, patients may welcome the opportunity to receive medical bills via email, get billing notifications via text message, pay balances due through an online portal, use a digital payment platform or mobile payment app, or take advantage of promotional financing or payment plans rather than paying for the full cost all at once.

Telehealth and Technology Innovation

Patients and providers alike have turned to technology for more than appointment reminders and digital billing statements and payments. Increasingly, technology has become a vital and natural channel for care delivery, with telehealth solutions connecting physically separated patients and providers via audio or video consultations, healthcare apps, or other platforms. The global Coronavirus (COVID-19) pandemic accelerated adoption of telemedicine in the U.S., according to CareCredit research conducted in 2020, which found that up to 31% of surveyed cardholders said they transitioned to telemedicine during the pandemic, and up to 64% said they preferred telemedicine to in-person office visits. In addition, more than half of surveyed patients said they planned to use telemedicine in the future when possible.²

In terms of telehealth billing and collections, the Coronavirus pandemic resulted in some temporary changes to relevant policies and practices, such as geographic requirements for Medicare reimbursement. Outside of these circumstances, a variety of federal and state regulations and guidelines can apply depending on the services provided via telehealth, insurance coverage (Medicare, Medicaid, or private pay), and other factors. In general, billing and collections for telemedicine should involve the same steps and follow a similar process as with traditional services, apart from the need for specific medical coding and possible differences in reimbursement rates.

Billing and Collections Success Strategies

To make billing and collections a win-win for providers and patients alike, it pays to lay the groundwork for success long before the point of billing patients for balances due. In fact, many patient billing and collections best practices depend on integrating financial considerations throughout the entire healthcare journey, in order to deliver a better end-to-end patient financial experience. While every hospital or health system is likely to have specific challenges and opportunities in doing so, some general success strategies may be worth consideration.

• Define and document financial policies: While every healthcare organization has financial policies, they may or may not be comprehensive, well-defined, documented in detail, and communicated and implemented consistently. In addition, policies related to billing and collections may need to be revisited in light of new market dynamics, patient preferences, regulatory updates, technology advances, and organization priorities.
• Provide targeted training and tools: Simply sharing relevant policies and process with internal stakeholders may not be enough to ensure full understanding and alignment. For frontline staff especially, implementing financial policies can be challenging, especially if they involve conversations with patients to discuss costs, request payment, or field questions related to billing and collections. Talking about money can be uncomfortable for anyone, and healthcare professionals may not feel prepared for these conversations or consider them a priority. Focused training and on-the-job tools can help overcome this hesitation and enable staff members to see that financial conversations can help patients by giving them information they need and want, as well as solutions to help them prepare for and manage the costs of their care.
• Communicate early and often: Once internal stakeholders are on the same page, a crucial next step is sharing relevant information with patients. This can include cost estimates, payment requirements (timing and amount), payment methods accepted, and options such as promotional financing and payment plans. While some of this information will be most actionable at various stages, sharing as much as possible at every stage of the journey can be helpful. For example, it may be wise to include information on appealing payment methods and financing availability on general website pages for patients conducting initial research, payment expectations on appointment booking pages or in on-hold phone messages, digital payment channels and payment plans on invoices, and so on.
• Offer transparency and convenience: While it may not be possible to change healthcare costs or financial policies, giving patients a clear understanding of these details, and offering helpful and convenient options for payment, can make the billing and collections experience much more positive. Cost transparency, while often tricky, is becoming easier with the availability of free or low-cost online estimators such as FAIR Health Consumer Cost Lookup and Clear Health Costs, which could be helpful for both staff and patients. In terms of convenience, accepting digital and mobile payments has also become easier through a growing number of technology platforms and solutions that may be straightforward to integrate with legacy systems or offer as standalone resources. Third-party healthcare financing, such as the CareCredit credit card, can also make it easy to allow patients to pay for their healthcare expenses over time, while reducing the time and effort required for billing and collections (and without the risk and responsibility of in-house payment plans).