Question

What can a healthcare organization do to reduce delinquency costs associated with accounts receivable? Please be specific and provide examples. For finance class.

Answer 1

Hello

MEANING - Deliquency Cost refers to the cost incurred by the healthcare organisation because of patients not paying the amount on time.

The collection period of healthcare organisation is largely determined by the payment practices of patient's managed care company and insurance companies and it ranges from 30 days to 90 days and sometimes becoming even longer.

Reasons :

1) Inadequate and Incorrect info gathered.

2) Lack of automated methods of prorating claims.

3) Low-income Self-pay Patients.

4) Inadequate/ Inefficient Collection System.

5) Outsourcing of Collection system leading to dissemination of improper innformation to patients.

6) Lack of punitive practices for customers not settling bill on time.  

Steps to reduce deliquency cost related to account receivables:

1) Improve efficiency of collecting system by educating and training the people responsible.

2) The collection system should be maintained as an in-house facility so as to have more control over what exactly is being communicated to patients to tackle the inaccuracy of information.

3) There can be an established system of punishments in the form of interests on late payment so as to encourage prompt payment. For example : Payment delayed more than 90 days will attract an interest of 24%p.a.

4) Using data analytics to analyze receivables may be, for example, on the basis of ability to pay or propensity to pay like 61% of receivables are at low risk, 28% is at medium and 11% is at high risk.

5) Properly communicating the self-pay patients the initiatives and schemes of government that may be available to them for their help so that they can cash in the chance. It will be a win-win for both.

6) The proper credit and collection policy should discuss provisions for bill cutoffs, methods for encouraging prompt payment and follow-up billing.

7) The medical record should document all phases of the patient's care.

8) Proper in-house continuous audits of benefits which are in process of transferring insurance benefits from patients to healthcare institute.

9) Doing alll good things with the patients to achieve high patient satisfaction.

All these can help to significantly reduce deliquency cost of accounts receivable.

Although not relevant here,

You can do all good things to patients in the four walls of the clinic and create high customer satisfaction, but don't ruin it a month later when you are trying to get the money oout of their pocket. It is very much important to maintain that customer satisfaction throughout the collection process too so as to call this process a efficient one. It is about being smarter with how to collect, without being aggresive.

I hope this clears your doubt.

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