Providers are faced with competitive bidding, accreditation, reduced reimbursements, and increased demand from a rapidly aging Medicare population. Studies show that by 2030, the Medicare population will increase from 36 million aged 65 and over to more than 72 million. This demographic shift will provide significant profitability challenges for those who resist new approaches. However, significant opportunities will emerge for those who institute proper protocols in the collection of patient receivables.

The time is now to create lean organizations, increase efficiencies, and find ways to offset reduced reimbursement. Proper patient receivable management is now essential as payment responsibility shifts from payors to patients.

HME/DME providers have consistently lost profit margin by ignoring patient co-payments and deductibles, and these unpaid balances currently comprise 10% to 35% of a provider's accounts receivable. Patient-pay balances are traditionally high-quantity, low-dollar receivables that have not consistently received the attention they deserve from providers due to the significant time required to manage these accounts.

The task of patient receivable management can be time-consuming, tedious, and a burden that most providers often choose to ignore. With limited in-house resources, providers instead focus on insurance receivables and not properly train staff members to handle difficult patient communications. Even providers that recognize the importance of patient receivables often dedicate valuable internal insurance billing specialists to the tasks of printing, manually folding, and hand-stamping past-due notices on invoices and statements. They toil with billing software systems that are not designed to adequately manage patient receivables, and handle patient communication in their "spare" time. Account tracking, patient follow-up, and result monitoring are virtually nonexistent in many of today's software packages.

David Bargmann

Patient-owed receivables continue to increase with the expansion of health savings accounts (HSAs) and new lower-cost insurance products. In 2005, enrollment in HSAs increased 220%, and the trend continued in 2006 with a 43% increase. The US Treasury Department forecasts that 14 million HSA policies will cover nearly 20% of the commercially insured population, representing 25 to 30 million Americans over the next 2 years. The HME/DME industry must immediately counteract these changes, or they will find themselves with rapidly increasing bad debt expenses and profit-threatening situations.

For years, many providers tried in vain to use outside debt collection agencies "specializing" in medical collections to recover their aged patient receivables after they are written off as bad debt. These specialists who are used to working hospital, practitioner, or large facility collections do not understand the complex world of DME/HME billing, and fail to give the proper attention to receivables due to the low-dollar balances. Active rentals, purchase options, denials, and covered equipment are foreign to a traditional collection agency, and most do not understand the intricacies related to the risk of alienating a provider's valuable referral sources through aggressive collection tactics. In the end, a provider is left frustrated by a paltry small percent in recoveries, and providers have bounced between agencies without success.

Where is a provider to turn? The use of a turnkey receivable management service focused on HME/DME is the solution to enhanced provider financial profitability. Search for a partner who will work directly from your billing software via remote desktop or VPN connections. This is crucial to having successful returns, as all billing notes, insurance information, and patient history are available to educate the patient on the details of their account. Make no mistake; outgoing phone contact with your entire patient base—regardless of balance size, and over varied date/time schedules—is mandatory to provide significant returns for ongoing patient receivable management solutions.

The proper partner will also have patient receivable experts screened to have the qualities that drive the best results, including creative problem solvers, good communicators, and trained negotiators. Search for a bilingual staff that can explain to each patient how their insurance has transacted, identify potential patient hardship conditions, enter all notes of the patient conversation in your billing system, and use personable, persuasive, and trained negotiation techniques to drive in the receivable. Ensure that an "easy payment" system exists that allows the patient to pay via check or credit card, or direct the patient to a Web portal for online payment.

A proper receivable management partner will provide results that:

• maximize patient cash flow;
• reduce DSO;
• lower operating costs;
• reduce bad debt expense and increase profitability; and
• maintain patient and referral source relationships.

Since most providers are open between 8 am and 5 pm, search for a receivable management service open from 8 am to 9 pm, as well as weekends, allowing an elevated opportunity to actually communicate with patients who work during normal business hours. In addition, seek a partner who can significantly enhance your invoices and statements formats.

Traditional HME/DME software systems provide substandard formats, confusing patients and causing them to disregard bills. These skilled services can extract the patient data from your billing software system and produce hybrid patient statements that combine patient billing and demographic information with appropriate payment options. Additionally, they can produce notifications for patients who have missed due dates, therefore enhancing patient-friendly communication. Ultimately, the ability to send patient invoices and statements that are both easy to understand and pay leads to reduced billing questions and improved collection rates.

For more valuable tips from top consultants, go to the free online archives section. Relevant articles include: May 2008 Get Lean for Greater Efficiency By Ty Bello. May 2008 Ask an Expert: Home Modification, Q&A with Louis Tenenbaum.

Every year about one in every six people move, representing 42 million Americans. Returned mail represents a significant opportunity to recover otherwise lost revenue. Seek a partner that has proper US postal service technology in place, where patient addresses can be verified before mailing to significantly reduce returned mail, and automatically send any patient bad address information to internal skip tracing departments for address correction and updating in your software system. Approximately 60% of residential telephone listings change every year, hence the need to use the same skip tracing services to locate new patient phone numbers quickly, and reduce calls to disconnected or wrong numbers.

Finally, as an industry best practice, limit your patient billing stage to 90 days from first invoice date, and if the patient has been unresponsive to significant verbal and written requests, consider transferring the balances to a more assertive bad-debt collection stage. Use caution to ensure the patient receivable management service offers this stage of collections in-house. HIPAA-compliant and third-party collection agency licensing protocols must be in place, and the accounts should not be sent to an outside collection agency that is unfamiliar with the account, or the inner workings of our complex industry.

By following these recommendations, a professional HME/DME patient receivable management service will allow your company to focus on its core competencies, while having an industry partner provide a variable-cost alternative to immediately improve your patient communication and corporate profitability for years to come.

David Bargmann is chief operating officer of Bargmann Management LLC Homecare Collection Service (HCS), a turnkey patient receivable management service. He can be reached via e-mail: or through his Web site: www.homecarecollection.com.