A remedy for providers amid rising consumer debt and complaints

The nation’s medical billing system is “complicated and burdensome” for patients, leading to a flood of medical debt that often ends up in collections and creates a cascade of far-reaching consequences for patients.

That was one of the critical takeaways from a sobering recent report from the Consumer Financial Protection Bureau (CFPB) that details the scope of the United States’ problems with medical debt and medical billing. According to the CFPB report, 20% of U.S. households report that they have medical debt, which collectively accounts for $88 billion of outstanding debt on credit reports.

Overall, 58% of bills that are in collections and on people’s credit records are medical bills. The problem grew worse as people deferred care during the COVID-19 pandemic, with costs and medical debt expected to increase “post-pandemic,” according to CFPB.

The issue is more acute among certain groups. Past-due medical debt is more prevalent among Black (28%) and Hispanic (22%) individuals than non-Hispanic Whites (17%) and Asians (10%), and also more common in the Southeastern and Southwestern U.S., in part because states in those regions do not have expanded Medicaid coverage.

For providers, an increase in consumer medical debt can generate numerous downstream problems, such as uncollected revenue, delays to collect, and unnecessary burden on staff. However, all roads don’t have to lead to collections; by adopting digital tools that deliver more flexibility and transparency to patients, providers can increase the chances of receiving prompt patient payments.

The cost of collections
Consumer medical debt may go unpaid by consumers – and eventually end up being sent by providers to collections agencies – for any number of reasons, but the CFPB cites a few of the most common: medical bills are often incurred through unexpected and emergency events, are subject to opaque pricing, and involve complicated insurance and pricing rules.

For patients, the negative consequences of bills going to collections may be severe. Medical bills that end up on credit reports may result in reduced access to credit, greater risk of bankruptcy, avoidance of medical care, and difficulty securing employment, even when the bill itself is inaccurate or erroneous.

In part because patients understand the seriousness of debt going to collections, attempts to collect medical debt are a frequent subject of consumer complaints. In 2021, the CPFB sent more than 750,000 complaints to approximately 3,400 companies for review and response, with about 15% of those complaints pertaining to medical debt.

In complaints about medical debt, consumers often expressed surprise and frustration when finding out about old or small medical debts upon checking their credit report, often while they were in the midst of applying for credit, according to CFPB. Mounting debt and consumer frustration can become a problem for providers when patients go public with complaints and providers suffer reputational harm.

More options and flexibility for prompter payment
Providers can help patients overcome barriers that lead to medical debt by offering several digital patient engagement tools that make it easier for patients to pay the bills they owe. The following tools deliver convenience and ease-of-use for patients, while increasing productivity for staff by automating frequent, repeated tasks.

Digital wallets: Mobile versions of patients’ financial accounts that are accessible via smart devices and computers, digital wallets may be used at payment terminals or via apps and websites. Well-known examples include Apple Pay and Google Pay. Consumers have embraced digital wallets primarily because they are so convenient, replacing cash and credits cards with a fast, easy, and secure payment option. For providers, digital wallets reduce friction and speed the checkout process.

Self-scheduling: Driven in part by greater comfort acquired during the pandemic, modern consumers often expect the option to self-schedule events, whether dinner reservations, oil changes, or hairstyling appointments. By offering patients the option to self-schedule online appointments, as opposed to requiring them to call in during office hours, providers reduce barriers to care and improve patient satisfaction.

Automated appointment reminders: Providers leverage digital tools to create automated appointment reminders that are sent to patients at specific times, such as a day or a week before scheduled visits. These reminders can be configured to reflect individual patient preferences for channel of contact, such as text messages, emails, or phone calls, to increase patient engagement and satisfaction.

Online pre-service check-in and cost estimates: Patients can perform online pre-service check-ins to confirm important data, such as demographic information, insurance and benefits coverage, copay, and service amount estimate based on visit type. When providers inform patients of likely out-of-pocket costs prior to appointments, they increase the likelihood of prompt collections. By offering a more streamlined, automated process, providers can also boost patient throughput. With pre-service cost estimates, providers can collect co-pay and out-of-pocket costs at check-in, while at the same time storing the patient’s credit card information to automatically bill for any balance due, all within existing workflows.

Post-visit payment plans: Flexible payment plans help patients manage the often-significant expense and uncertainty of medical bills. By offering patients flexible options for payments, providers can improve collections and reduce the amount of bad debt sent to collections agencies. Integration with electronic health records systems prevents double-posting of charges and improves the patient experience through better price transparency in patient portals.

Rising medical debt creates immense pressure that ripples across the healthcare system, though no two groups are affected as heavily as patients and providers. However, by offering digital engagement tools that increase flexibility and convenience for patients, providers can improve the chances of prompt collection while boosting patient satisfaction.

Rajesh "Raj" Voddiraju serves as President, Patient Engagement Technologies division, Health iPASS. In this role, he manages the Division's P&L, sets the strategic direction/vision, and oversees all business development, sales, operations, marketing, and technology. Mr. Voddiraju has over 25 years of experience in founding and leading fast-growth businesses in the B2B Software, Healthcare IT and Fintech industries.