What is Cost to Collect?

By Andrew Woughter, Senior Vice President Product Strategy | Posted: 07/11/2017

Patient responsibility in health care provider payments continues to grow. By 2019, providers could see a 50% increase in the amount of revenue they are owed directly from patientsi. Nearly $200 billion, or 30 percent, of those patient collections could be written off, as patient payments can be more difficult to collect on than commercial payor portions. While Medicare reimbursements are generally paid out to hospitals within 30 days of claim submission, patients can take more than twice the time to settle outstanding paymentsii. The shift in payment responsibility is the latest trend putting increasing pressure on health systems to collect every dollar they are owed. In turn, this added effort increases hospitals’ cost to collect.

What is cost to collect?

Cost to collect is one of HFMA’s MAP Keysiii and is one important indicator of the overall efficiency of a hospital’s collections management process. According to HFMA, expenses associated with functions like eligibility and insurance verification, transcription and coding, and clinical documentation improvement should be included in the calculation of cost to collect. It should exclude certain other factors, though, like software licensing fees and physical space costs.

Cost to collect can be difficult to accurately measure, as a hospital may reallocate costs into different departments or business units year over year. Additionally, cost associated with collecting on a given claim can change over time. Cost to collect increases over the life of an unpaid claim, as more resources are applied and the likelihood of full payment declines.

Other factors that drive this metric up include manual claims statusing, time-intensive tasks like medical records retrieval and review, and rework – repeating the same set of corrections to address multiple denials that may be received on the same claim.

To ensure success in managing cost to collect, a comprehensive approach is best. This includes addressing process gaps at the front, middle and back of the revenue cycle, educating and engaging patients as partners, and automating routine daily functions like appropriately routing denials.

To learn the top five reasons for denials, click here.

i Modern Healthcare: Hospitals turn to friendlier tools to collect unpaid bills

ii Becker's Hospital Review: Beating the patient-pay problem with 3 point-of-service collection strategies

iii HFMA: Map Keys