Background
This case study examines a large healthcare system that sought to optimize its recovery rates on patient debt through both in-house collections (early out) and third-party collections. The healthcare system managed a diverse portfolio of patient accounts, ranging from recent balances to accounts aged over two years. The goal was to assess the effectiveness of different contact frequencies, communication methods, and timing of collections on overall recovery rates.
Initial Metrics and Goals
Average A/R portfolio: $20 million monthly in patient balances
Payer mix: 60% self-pay, 20% commercial insurance, 10% Medicare/Medicaid, 10% other
Recovery goal: Maximize recovery within the first 90 days of delinquency
Target recovery rate for early out collections (090 days): 30%-40%
Target recovery rate for accounts in bad debt (over 90 days): 10%-20%
Collection Strategies and Methods
1. In-house Early Out Collections (0–90 Days)
Frequency of Contact:
- Contact within the first 30 days of delinquency with two weekly reminders.
- Decrease to one weekly contact during the 31–60-day period if no response.
- Two final monthly contacts between days 61-90.
Preferred Contact Methods:
- Text messaging and email (primary methods) to initiate contact, supplemented by phone calls.
- Voicemail messages for missed calls emphasizing available payment options and potential consequences of nonpayment.
2. Results of Early Out Collections
- Recovery Rate within 90 Days: 35% overall.
- Preferred Methods Outcome:
- Text messages had the highest engagement rate, with 50% of responses resulting in partial or full payment.
- Email responses yielded a 20% engagement rate, with some patients setting up payment plans.
- Phone contact resulted in the highest conversion to payment but had a lower engagement rate (15%).
- Impact on Recovery Rate by Day 90: After multiple contact attempts, the recovery rate declined to less than 10% for balances unpaid by the 90day mark.
3. A/R Aging and Recovery Rate Trends Beyond 90 Days
Recovery rates significantly decreased as accounts aged:
Findings
1. Timing is critical. Recovery rates decline significantly after 90 days, with early out strategies yielding the highest returns.
2. Frequency of contact matters but must be balanced. Too many contacts within a short period resulted in higher optout rates. Optimal frequency appeared to be two contacts per week within the first 30 days, then tapering.
3. Preferred communication methods impact engagement. Text messages and emails were the most effective for initial outreach, with phone calls proving useful for follow-up when initial responses were not received.
4. Long-term decline in recovery potential. Beyond 90 days, recovery rates dropped approximately by half each subsequent 90-day cycle, with accounts over a year old having minimal collection success.
Recommendations
1. Maximize early out efforts. Concentrate resources within the first 60 days of delinquency using a mixed method approach with a focus on text and email for initial outreach.
2. Establish a threshold for account escalation. Shift accounts to bad debt collections at the 90-day mark if no engagement is achieved.
3. Implement a phased contact strategy. Reduce contact frequency and emphasize specific payment solutions in later stages of early out collections.
4. Consider legal action selectively for high balance accounts. After 180 days, focus on large balances for legal action or other intensive recovery methods.
Conclusion
This healthcare system improved recovery rates by strategically focusing on early contact and adjusting methods as accounts aged. While recovery was most successful within the first 90 days, each additional 30-day delay reduced the likelihood of full collection by approximately 20%, underscoring the importance of timely, structured outreach in A/R management.