How Flexible Payment Plans Can Reduce Bad Debt

As the number of uninsured Americans declines, the number enrolled in high deductible healthcare plans (HDHPs) has significantly climbed, ultimately increasing the financial responsibility of patients. This shift in responsibility from insurance companies to patients has caused healthcare organizations to see an increase in bad debt.

Between missed payments and open balances, healthcare organizations are struggling to collect, leading to a growing number of revenue lost to bad debt.  According to a recent study, 68% of patients with bills of $500 or less did not pay off the full balance, and 85% of patients with bills of $500-$1000 do not pay at all. Simply put, the higher the bill amount, the less likely patients are to pay. 

Hospitals in the United States have provided over $500 billion dollars in uncompensated care since the year 2000. As this number continues to climb, healthcare providers need to roll out strategies and solutions that help patients manage their financial responsibility. The number one reason for nonpayment is lack of payment options, not an unwillingness to pay. By offering flexible payment plans to patients, providers can expect improved collections and therefore, a reduction in bad debt.

The Power of Flexibility 

Many healthcare systems have explored in-house payment plans, but they typically are not successful in improving collections because they don't offer enough flexibility. Additionally, in-house programs can result in slowed cash flow as AR lingers on the books while the patient pays down the receivable. Recourse financing programs also come with obstacles for patients, such as high interest rates and hidden fees, often leaving patients owing more than the original balance due. When patients are auto-enrolled into a payment plan they cannot afford, payment stops entirely, and providers are back to manual processes of collecting. 

In order for providers to successfully collect from patients, they must recognize that payment plans are not one-size-fits-all. Terms must be flexible to accommodate various financial circumstances, equitable to include people of all backgrounds, and dynamic and adjustable for changing patient situations. The more involved patients are in choosing a plan that suits their needs, the more empowered they are to pay.

Open Up a Dialogue

When implementing a patient financing program within your healthcare system, start with conversation. 95% of patients reported that knowing out-of-pocket expenses upfront is important. Discussing patient responsibility ahead of treatment establishes expectations, and offering flexible financing provides patients with the tools to manage the responsibility. 

Meet patients where they are by allowing them to enroll at any point in the revenue cycle. As mentioned, financial circumstances can change–patients that intended on paying the balance in full may not be able to afford it when the bill comes. Flexible financing programs can reduce the probability the patient balance moves to bad debt by allowing patients to adjust their plan without penalty, such as time of enrollment, the length of the payment plan, and monthly amount. 

Happier Patients, Higher Rates of Collection

The shift to a consumer-driven healthcare market has patients seeking price transparency, convenience, and accessibility from healthcare providers pre-service. In order to maximize collections and maintain a positive patient experience, providers need to approach the financial component of healthcare with supportive solutions. A recent study found that enrollment in a third-party payment plan had a 20-50% greater participation compared to in-house collection methods. Giving patients more choices in their financial journey reduces the propensity of the account going into bad debt. 

Additionally, partnering with a third-party financing company allows healthcare systems to unload the day-to-day burden and cost of collections, enabling staff to focus on more important tasks outside of revenue cycle management. Providers that utilize a non-recourse financing program can expect a 6% or higher total decrease in annual bad debt expense and a 52% increase in collections. Having the option to pay small amounts overtime increases the probability that patients will pay in full, ultimately reducing the percentage of accounts going to bad debt. 

BridgeMed provides a mutually beneficial solution to both patients and healthcare providers with 100% non-recourse flexible financing plans. Patients are able to pay their medical bills in small amounts over time, eliminating the stress associated with out-of-pocket medical costs. Shifting the responsibility of collecting from provider staff to BridgeMed amplifies rates of collection, increases speed to cash, and reduces AR for healthcare systems, and also opens up the door to those who struggle to afford care. With BridgeMed, everybody wins!


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