How to Improve Patient Collections: Strategies, Best Practices & Templates
Today’s healthcare providers rely on a combination of direct patient payments and insurance payouts. Use this guide to optimize your patient collections process and improve your financials. Learn top strategies, get tips from billing pros, and download our free statement and letter templates.
Patient collections is the process that healthcare providers use to collect patient payments. It's crucial to maximize revenue because insurance payors are covering fewer services. Communicating clearly with patients is the most important part of this process.
In the modern healthcare landscape, healthcare providers depend on direct payments from patients more than ever. To manage their accounts receivable, healthcare providers follow a specific workflow before, during, and after a patient receives services.
Steve Kennedy, Associate Director of Revenue Cycle Management at Plutus Health, says modern patient collections workflow leverages technology to streamline the billing process for the patient and the healthcare provider.
Steve Kennedy, Associate Director of Revenue Cycle Management at Plutus Health
"Traditionally, patient collections and revenue cycle management relied on manual systems," says Kennedy. “Patients, medical staff, and billing personnel had to input details manually, send claims and statements by mail, and follow up via telephone. Today, billing companies streamline this process with automated technology, making it easier for patients to pay and for providers to estimate and send bills. It is a win-win for everyone involved."
Kennedy outlines the process: “The typical workflow starts with healthcare providers securing prior authorization, verifying insurance, and ideally offering patients a pre-service financial estimate. Post-service, the provider's billing department submits a claim to the patient's insurance, which processes it and ideally pays its share. Any remaining balance the provider bills to the patient, factoring in deductibles and co-pays.”
Kennedy says technology has greatly improved the typical workflow.
“Today, most providers use online patient portals to send statements and accept payments. If a patient fails to pay, the billing team sends automated follow-up emails, text reminders, and more. “
Finally, if a patient fails to pay, the healthcare provider usually must refer the debt to a collection agency. In many cases, there’s always some bad debt that the healthcare provider won’t be able to collect despite their efforts.
However, Kennedy stresses that it is far better to establish proper patient collection systems than to waste resources on engaging debt collection agencies and suffering from cash flow problems.
Several factors are converging to make patient collections more important for healthcare providers. One is that healthcare costs continue to rise, but insurance companies are not adjusting their reimbursement policies to match.
Consequently, the burden of payment is increasingly shifting to patients. Unfortunately, patients often misunderstand key details about their insurance plans, like how deductibles and co-pays work. This confusion can lead to delayed or impartial payments that impede the provider’s cash flow.
Lakshmi Narayan, Vice President of U.S. Healthcare Operations at Plutus Health
“Healthcare providers are being squeezed from both sides,” says Lakshmi Narayan, Vice President of the U.S. Healthcare Operations at Plutus Health. Narayan has more than 20 years of experience in healthcare revenue cycle management operations.
"The cost of doing business is increasing, but businesses are not responding by also increasing their reimbursement rate," he says. "As a result, the healthcare companies are stuck between the payors and the cost of doing business."
In the past, when insurance payors covered more services, providers might not even go through the trouble of collecting modest fees. However, healthcare providers must manage their accounts receivable more closely in today's climate.
“They have to go after every penny if they want to stay afloat,” says Narayan.
According to the Healthcare Financial Management Association (HFMA), patient payments account for about 30 percent of healthcare provider revenue, an increase from less than 10% a decade ago.
However, most revenue cycle management processes focus on collecting money from insurance payors, not patients. That means most providers don’t maximize how much they can collect from patients. For example, the same HFMA article points to a 2018 study that says that, on average, healthcare providers collect less than 6% of patients’ balances over $200, meaning that hospitals are leaving more and more money on the table.
Narayan stresses that old systems won’t be enough in this new paradigm.
“The healthcare landscape is changing. Patient payments will make up an increasing amount of a provider’s revenue. This reality underscores the importance of establishing a strong patient collection system and policy that is based on digitizing as much as possible. Without it, a provider leaves money on the table that could make or break their clinic.”
Kennedy, the Plutus RCM associate director, also notes that healthcare industries must provide the type of digital experiences that other industries provide and that consumers expect as the norm.
“Healthcare is severely lagging behind other industries in terms of providing digital, convenient experiences for their consumers.”
Key Takeaways:
Automating the patient collections workflow reduces manual input errors, makes it easier for patients to pay, and reduces the workload of front-end staff.
Help patients understand their bills by providing a cost estimate before service and sending transparent, easy-to-read statements.
One of the best ways to increase patient collections is to offer multiple payment options, like credit cards, debit cards, and contactless pay.
Online patient portals are the most convenient way for providers to streamline the collections process and for patients to make and manage payments.
Providers should always empathize and work with a patient's financial situation by offering options like payment plans or sliding scale fees.
The majority of patients expect healthcare providers to offer digital, convenient ways to pay their bills, like patient portals.
Strategies to Improve Patient Collections
To improve patient collections, providers should make it easy for patients to understand and pay their bills. Offer several payment options and communicate with channels like text and email. Also, establish strong in-clinic practices and keep patient credit cards and insurance cards on file.
Here's a list of top strategies to improve patient collections:
Enhance communication with the patient
Top revenue cycle management experts say improving communication is the most effective way to improve patient collections. By streamlining communication, healthcare providers can remove common friction points and make it easier for the patient to pay their bills.
"The challenge of patient collections starts with communication,” Kennedy says. “In some cases, a patient receives a statement three to four months after the service date. They might forget what happened, feel confused, and delay their payment. On the provider end, the long delay between the service and statement restricts cash flow."
Here are tactics that Kennedy and other experts recommend to ensure clear communication with patients.
Send out statements via email or text
"Even email is becoming outdated, especially for younger populations who prefer text messaging," notes Kennedy. "It's best to use both, so you appeal to the preferences of a wide demographic. For example, send email reminders and statements, but also make sure you can send texts with links that direct the consumer to a patient portal."
Provide access to a patient portal
A patient portal is a centralized online platform where patients can easily manage their financial transactions with a healthcare provider and access their financial records 24/7.
Patient portals make bill-paying easier. "On a patient portal, patients can securely store their payment information and easily settle their balance with a single click," Kennedy says. "Additionally, they have access to their complete payment history, empowering them to track their financial transactions for their own records."
Offer many ways to pay
"Give the patient multiple ways to pay," says Arun Kumar, a developer at Calpion Inc. "Most patients want to pay with a credit card, not write a check," he says. "That being said, you should still offer e-checks, debit cards, and payment plans. As technology continues to evolve, we may see opportunities for patients to pay using popular apps like Venmo or PayPal or through specialized apps from payment specialists."
"Having many payment options makes the process easier for the patient," adds Kennedy.
The following tactics will help diversify your payment options:
Increase the variety of credit cards accepted
Providers that accept all major credit cards accommodate more patients' preferences and financial situations.
Accept debit cards
Some patients prefer to pay with debit cards, usually because they have concerns over the security of credit cards.
Accept other forms of electronic payment
Offer other electronic payment methods, such as:
Online bill payments through patients' online banking.
Payments through a specialized billing patient portal.
Payments through mobile payment apps (for example, Apple Pay, Samsung Pay, Zelle).
Contactless payment allows patients to “tap” their smartphones for transactions.
Continue to accept checks and cash
While most patients prefer to pay online, it's important to continue accepting traditional forms of payment, such as checks and cash, to accommodate all situations and preferences.
Offer financing programs
Offer payment plans so a patient can pay their bill in installments.
Send patient statements promptly
"Keeping a consistent schedule for sending patient statements is crucial," emphasizes Narayan, the Plutus VP. "If you wait months before sending a statement, patients may not even recall what service the bill is for. Sending statements promptly ensures that patients receive them while the details are fresh in their minds."
Here are tactics to implement this strategy:
Automated statement generation
Use billing software to generate and distribute patient statements automatically.
Offer electronic statements
Patients can receive statements electronically via email, text message, or through a patient portal. The billing team generates electronic statements and sends them out immediately, ensuring patients receive them promptly.
Collect detailed and accurate patient information
"It's absolutely critical to gather complete patient information before providing any services," emphasizes Kennedy, the Plutus RCM associate director. "Otherwise, patients could visit your practice, but you may not be able to follow up with them. Failing to collect necessary patient details inevitably leads to problems, even if the patient intends to pay. A patient won't actively seek you out to settle their bill. It's your job to contact them."
Use these expert tactics to gather all the pertinent details:
Gather insurance information before the appointment
Before any appointments, collect accurate information about a patient's insurance coverage. This includes policy numbers, coverage limitations, and required authorizations. "It's an industry best practice to scan a patient's insurance ID card before their first service," Kennedy says.
Keep a credit card on file
Make sure you have a payment method for each patient on file.
Have the patient confirm their information
Present the gathered information to the patient so they can personally validate the information.
Communicate the estimated cost of services ahead of time
Generally, the sooner you can have a financial conversation with the patient, the better.
“It's always a good practice to provide patients with a good faith estimate of the cost of services," advises Narayan, the Plutus VP. "It's best to have financial counselors on staff dedicated to confirming eligibility, discussing deductibles with patients, and providing accurate estimates.”
“These habits don't just help the patient,” he adds. “It might encourage them to pay some portion of their bill up-front, before the service, improving the provider's cash flow.”
Point-of-service (POS) collection refers to collecting patient payments at the time of service. Sometimes, providers try to collect any remaining deductible along with the patient’s co-pay. This approach, however, is not always appropriate or feasible.
“Most patients would rather wait to see how much their insurance will cover,” says Kennedy, the Plutus RCM associate director. “Even if you show them your estimate, a patient will be hesitant to pay first. Point-of-service collections tend to work best for repeat services, like physiotherapy, or for patients who don’t have insurance coverage and already anticipate a bill.”
Leverage the “No Surprises Act” to provide an estimate and improve trust with the patient
The 2022 No Surprises Act is a federal bill requiring providers to offer clear cost estimates before service. It aims to prevent surprise medical bills and ensure payors don’t charge patients more than the in-network rate for certain out-of-network services, particularly in emergencies.
Train staff to be empathetic and calm when communicating with patients
Healthcare transactions often carry emotional weight, and any financial conversation can quickly turn confrontational. Healthcare team members need to maintain their composure while navigating these challenges.
Ideally, a clinic will provide its staff with training on how to explain out-of-pocket costs, employ active listening techniques, respect patient preferences, and disregard any personal biases and prejudices. The staff should also know how to direct the patients to make payment plans if the provider offers these services.
Improve the clarity of patient statements
“Patient statements can be complex because they communicate the balance of two responsible parties, the insurance payor and the patient,” explains Kennedy. "It's crucial for statements to clearly delineate each party's financial responsibility and provide a straightforward process for the patient to follow up and make payments.”
Here's a list of three features that experts say a patient statement must have:
At-a-glance estimate of the total balance
“The 'total due' should be the start of the patient statement,” emphasizes Narayan. “It's essential that the patients understand, at a glance, what they owe.”
Payment methods and options
Ensure the statement lists all available payment methods and options.
Line-item summary
Include a line-item summary of charges along with the total patient balance.
Provide contact information for trained staff
Include contact information for trained staff in case the patient wants to follow up or has any questions.
Payment Instructions
Clearly outline how a patient can pay their bill. For example, provide a link to the patient portal.
Create and maintain a clear payment plan and policy
Given the importance of patient collections, every provider must have a well-defined patient payment plan that includes policies and guidelines that can address various scenarios.
Here are specific ways to follow this strategy:
Create a communication strategy for your payment policy
Create a guidebook outlining how you will inform patients about payment timelines, options, and any penalties for late or incomplete payments. Ensure patients receive this information at multiple points in their interaction with the provider, such as during appointment scheduling, check-in, before services, and on your website.
“The goal is to make sure that patients understand this information well before they reach the point of payment,” says Kennedy.
Track the outcomes of communication efforts and gather feedback on policies
Systematically record and analyze the outcomes of tactics and policies implemented to improve patient collections or communication. Establish key metrics, such as the percentage of patient bills paid on time and average days in accounts receivable, to measure how your strategy changes affect your bottom line. Gather patient feedback on the clarity and effectiveness of the payment policy to inform future improvements.
Outsource your payment collections
Many practices benefit significantly from outsourcing their payment collections to a specialized billing team.
“Patient collections is a demanding process that requires its own department and team of experts,” says Kumar.
“Larger practices might generate tens of thousands of statements in a few months. Managing that workload is a huge challenge that's compounded if you're trying to use an internal team who also has to manage other aspects of operating a successful practice.”
“Investing in outsourcing will actually make you money in the long run,” adds Kennedy. “An expert team will recover payments that might have slipped through the cracks and clean up your patient collection process. Also, they’ll free up in-house staff to focus on patient care, improving patient satisfaction and indirectly motivating patients to settle their bills.”
Here are specific outsourcing tips:
Outsource to a medical billing and collections vendor, not a collections agency
Look for a vendor specializing in medical billing and collections rather than a generic collections agency. Research and select a vendor with a strong track record in healthcare and ask for client testimonials and case studies. You want to ensure that your team understands the nuances of healthcare billing, compliance, and patient communication.
Consider outsourcing your entire RCM
Patient collections are just one part of your RCM. Outsourcing your entire RCM can be a strategic decision to improve your overall financial performance.
Patient Collections Accelerator Pack
Our Patient Collections Accelerator Pack has everything you need to start optimizing your patient collections. Download templates for patient statements, collection letters, texts, and emails. Plus, check out our overview of the entire workflow for hospitals, private practices, and ambulatory surgery centers (ASCs).
Our Patient Collections Accelerator Pack will kick-start your patient collections process. Vetted by experts, it includes templates for patient statements, letters, emails, and texts. Plus, you’ll find diagrams of traditional and modern workflows for various practices — from huge hospitals to the smallest private practices.
Modern patient collection workflows use electronic systems to optimize the process. Clinics communicate with patients through text, email, and online portals. This approach is more efficient than traditional manual systems.
“Optimizing your patient collection workflow is an absolute must-do for healthcare providers operating in today’s climate of increasing costs and decreasing insurance coverage,” says Kennedy.
According to Kennedy, Narayan, and Kumar, a modern patient collection workflow is set up with patient collections in mind. Traditional workflows that use manual services depend on insurance payors fronting the bill. While these workflows worked in the past, they are outdated now.
Here are two illustrations comparing the traditional workflow with today’s modern landscape. They cover three levels of providers: ambulatory surgical centers (ASCs), private practices, and hospitals. Notice that the optimized workflow uses automated systems, leverages patient portals, and communicates with patients through digital channels like text and email.
Typical Patient Collections Workflow
Optimized Patient Collection Workflow
Patient Collection Best Practices
To optimize your patient collection process, following best practices is essential. For example, use templates to create patient statements and reminders. Gather all the patient’s information during clinic visits. Also, establish clear payment policies for any payment programs.
Here’s a comprehensive list of broad best practices straight from billing experts:
Use templates
Templates automate your communication process and ensure consistent messaging. You can use templates for medical collection letters, text reminders, statements and more.
Experts recommend creating templates for the following materials:
First and second patient collection letters
The first patient collection letter serves as an initial reminder, while the second reminder uses more stern language to prompt action.
Patient statements
Patient statements offer a clear breakdown of charges and outstanding balances. A template should have fields that include the patient's information, a line-by-line summary of each service, and the insurance payment and patient balance.
Automated email reminders
Automated patient reminders can use similar language as the collection letters. The first email template should maintain a light tone and serve as an initial reminder, whereas the second can have more urgent language that stresses the importance of prompt payment.
“Brevity wins the day in texting,” says Casey. She explains that shorter messages are easier for the patient to digest quickly. "When a text arrives, it will often appear on a locked screen, and the recipient will only see the first part of the message. Your goal is to use that real estate to get them to tap and read more. To do that, start with the most important parts of your message: Who you are and what you want. " Also, if you want to send a long message, you'll need to pay for an MMS (multimedia message service) text, which is more expensive than typical SMS (short media service) texts.
“The maximum character count for an SMS message is 160 characters, and that includes any opt-out instructions, the name of your company, and any links. For anything longer, you'll have to send an MMS message, which can be two to three times more expensive.”
Include opt-out instructions in texts
“I strongly recommend including opt-out instructions in every text,” says Casey. “Technically, an opt-out message is not required for this use case, but it does help build trust and gives your patients a quick and easy way to stop receiving texts, if that's what they want. Otherwise, they would have to call the company to opt out. Most people won't go to that trouble—instead, they'll report the message. If too many people report the message, your carrier might take action against your phone number, like failing your messages or suspending your number outright.
Write like a text, not an email
“Don't write your texts as if they were emails,” says Casey. “A text always starts with the company name, for example: Health Medicine: Your payment of $100 is now due. Please remit payment here: [shortened link.]”
Casey adds, “Leave greetings like “Dear” or endings like “Sincerely” for emails.”
Communicate a clear payment policy around payment plans
"Ensure you have clear policies regarding any payment plans," advises Kennedy. "Detail your late payment policy, including any interest charges. Also, ask yourself if you can accommodate sliding-scale payment plans that allow lower-income patients to receive care at a reduced cost.”
Kennedy also stresses the importance of technology when managing payment plans. “Automate these services,” he strongly advises. “It's impractical to have a staff member manually charge 500 people $50/week. Software can efficiently handle these processes."
However, Kumar says it's still prudent to make sure you understand and cater to your target demographic.
"If your target demographic skews older, make sure you continue to accept checks and provide email statements,” says Kumar. “In contrast, younger generations often favor text message reminders and patient portals. While offering all these options is best, prioritize catering to your most common demographic first.”
Keep telehealth patient payment workflows in mind
Since the COVID-19 pandemic, telehealth options have grown in availability and popularity. Yet, even though telehealth visits rely on technology, the billing processes that support them may still be antiquated.
According to a 2021 Healthcare Payment Insight Report by US Bank, 45% of telehealth patients received a bill in the mail after the appointment. This statistic suggests that while experts are sure telehealth will continue to be popular, many providers still incorporate telehealth into the traditional patient collections workflow.
Focus on a patient-centric, empathetic approach “Many patients are concerned about healthcare affordability," Kennedy says. "While providers also feel the squeeze, it's crucial for departments to grasp the healthcare landscape in the United States and its emotional impact. There are strategies to ensure effective revenue collection while remaining empathetic and patient-centric. Offer flexible payment plans, explore sliding-scale options, and provide comprehensive training to staff, empowering them to be compassionate, considerate, and helpful to every patient.”
Outsource with a partner who stays up on current tech
Most practices don't have the resources to stay updated with the latest tech to improve their patient collections. Practices can improve their revenue streams by partnering with a tech-savvy outsourcing firm. These firms provide AI-driven analytics, patient portals, automated systems, and more. Moreover, they monitor emerging technologies to enhance the collection process and maximize revenue potential continuously.
Trends in Patient Collections
The biggest trend in patient collections is the move to online. More people prefer electronic communication and using patient portals to pay bills. In response, providers are digitizing their patient collection processes. Also, healthcare affordability remains a key concern for many patients.
According to experts and industry surveys, the prominent trend in patient collections mirrors shifts other sectors have experienced: a movement to digitize the experience, particularly in payment processes.
"Healthcare has lagged behind other industries when it comes to providing convenient, digital payment experiences," says Kennedy. "The closer we can get to offering convenient, digital ways to pay, the more patients will pay their bills promptly. Consequently, we mitigate the adverse effects on accounts receivable and cash flow within the healthcare system."
Here’s a summary of key patient collection trends that are defining the field and shaping the technology around these processes:
Preference for online payments
J.P. Morgan's 2023 “Trends in Healthcare Payments” reports that 73% of healthcare consumers prefer to pay medical bills online, compared with in-person, phone, or mail options. The same study revealed that consumers say they prefer statements, yet only 4% of them opt in for this option, indicating that the industry is still behind in informing consumers about their options.
The same survey showed that almost 70% of global consumers think the shift to digital payments will be permanent across industries.
These statistics emphasize the importance of developing online payment tools for use in healthcare.
Online financial consulting and live chat
More patients feel comfortable communicating about billing with experts online via a live chat or patient portal.
According to the 2021 U.S. Bank Healthcare study, more than 56% of respondents said they would be very comfortable resolving payment and billing questions via a live chat.
More telehealth
Since the COVID-19 pandemic, there has been a surge in the number of patients using telehealth.
More use of artificial intelligence and software
Most billing companies already use artificial intelligence (AI) and robotic process automation (RPA) software to automate patient payments. For example, top billing companies use AI to predict when a payor will deny a claim and automate tedious tasks like adding modifiers. Experts expect AI will play an increasingly important role in healthcare payments.
“It's incredibly important to stay on top of emerging trends,” says Kumar. “Or partner with someone who will. Otherwise, your systems will lag in efficiency compared with your competitors.”
Affordability concerns
The U.S. Bank Healthcare Payment survey revealed that 66% of respondents were afraid they couldn't afford healthcare, and 50% of Americans feared a large healthcare event would lead to bankruptcy.
The passage of the No Surprises Act helped give healthcare consumers some protections for emergency bills, but healthcare affordability remains a pressing concern, particularly in the United States. These statistics underscore the need for providers to stay empathetic, even when their business is on the line, and to explore options like payment plans and sliding-scale options for low-income patients. For example, the same study showed that 38% of respondents set up recurring payments with a provider when they could not pay a bill.
Consumers want to use patient portals
About 50% of healthcare consumers use online portals at least one to four times a month to pay bills and check balances, according to the US Bank 2021 report. The respondents cited convenience as the main feature that draws them to these portals.
Healthcare portals are growing in popularity for their convenient billing options and because many provide the ability to chat with experts.
Increasing Importance of Patient Portals for Patient Collections
Patient portals offer healthcare providers an efficient way to collect payments and improve patient satisfaction and engagement. They provide a secure and convenient way for patients to manage their healthcare bills. Every year, more healthcare consumers use patient portals to make payments.
Patient payment portals are a critical tool in modern healthcare. These secure online platforms allow patients to pay their bills digitally through various payment options. These portals address patients' growing expectations for digital payment solutions within the healthcare industry.
Patient portals effectively streamline interactions between patients and providers. Through a simple sign-up process, patients can access the portal via a link sent through text or email. Once registered, they can conveniently manage payments, opting for autopay features to simplify the process. Additionally, the portals store eStatements and maintain a comprehensive transaction history for patient reference.
“Patient portals are the most effective, convenient way for patients to make healthcare payments. By prioritizing the patient experience, providers will experience benefits like improved cash flow,” says Kumar.
Narayan agrees, noting that patient portals remove friction points involved in paying a bill. “If you have your credit card on file, for example, you can simply make a payment, and in an instant, you’ll receive an email with a receipt that’s also stored on the portal. You can even set up autopay features, which is particularly helpful for patients who need recurring care.”
Healthcare providers and patients have taken notice, with more providers offering payment portals and more patients using them to manage their bills. For example, according to the 2022 JP Morgan survey, “Trends in Healthcare Payments,” patient payments through online pay portals grew by 75% on average per year from 2019 to 2022.
How AnodynePay’s Patient Portal Can Help Your Practice
AnodynePay's patient portal minimizes stress, maximizes revenue, and simplifies payments. Built with convenience in mind, the portal is the simplest way for patients to manage their healthcare transactions. It’s all part of Anodyne’s mission to improve the patient payment experience for everyone.
AnodynePay stands out as a modern billing solution that prioritizes optimizing the patient experience, particularly in billing. The company considers the entire patient journey when designing each part of its automated solution.
AnodynePay's patient portal epitomizes their patient-centric approach to billing. The patient portal is a digital hub for patients, offering access to e-statements, multiple payment options, and secure 24/7 access to medical finance records. Patients can easily schedule appointments, pay dues, or contact the billing department for assistance.
Revolutionize your clinic's billing process with AnodynePay's patient portal – because when it comes to efficient healthcare management, transparency and simplicity are key.
Lakshmi Narayana has 17+ years of experience in Revenue Cycle Management Operations. He has a hands-on leader with extensive expertise in revenue cycle management, patient financial services, credentialing, training, reporting, business process analysis, and quality. Lakshmi has a proven record in project management of the U.S. healthcare process.
