How to Effectively Handle Late Payments and Optimize Your Accounting

The Impact of Late Payments In Your Revenue

Managing late payments is critical to maintaining your practice’s financial health. This is because late payments disrupt cash flow, making it harder for practices to meet financial obligations, such as:

• Paying vendors
• Settling staff salaries
• Maintaining essential services

The Healthcare Financial Management Association (HFMA) recommends that accounts receivable (A/R) over 90 days should be less than 10% of total A/R, and self-pay A/R over 90 days should be below 30%. Anything higher suggests a significant process issue.

Over time, delayed payments can cause a backlog of unpaid claims, leading to operational and capital shortages. Healthcare practices can help prevent these negative financial effects by identifying the factors that affect payments and addressing late payments directly, stabilizing cash flow, and continuing to provide high-quality patient care.

Factors That Contribute to Late Payments

Late payments in healthcare often stem from a combination of systemic issues and individual circumstances. For instance, just this year, a recent cyberattack disrupted several systems and services, causing large-scale disruption to payment processing services.

Understanding these potential factors is essential to address the root causes and improve the payment process.

• Complex insurance policies. In a PhRMA survey, 39% of insured Americans don’t understand their coverage, and 35% find it hard to navigate. This is even higher (42%) for those in poor health. Patients frequently need help deciphering their out-of-pocket costs, leading to delays in payment as they attempt to clarify their financial responsibilities.
• Lack of payment transparency. Over 50% of patients with overdue balances are financially able to pay their bills. However, the complexity of billing payments adds up to such deferring payments. More billing policies must be clarified for patients, making it easier to pay on time.
• Need for adequate follow-up systems. Balances remain unpaid longer when practices fail to send timely reminders or clear communication about overdue payments.
• Economic challenges. About four in ten adults (41%) report having debt due to medical or dental bills. Financial hardships, such as unexpected expenses or limited income, can prevent patients from meeting payment obligations.
• Administrative errors. Mistakes in billing, such as incorrect charges, missed insurance claims, or mishandled data, can lead to disputes and delays. These issues may also arise from cybersecurity breaches or cyberattacks.

Addressing these factors is crucial to reducing late payments, optimizing the revenue cycle, and fostering a smoother billing experience for patients and practices.

Strategies for Minimizing Late Payments in Medical Practices

Below, we outline five proven strategies that can help manage late payments while ensuring a smooth and efficient financial workflow.

1. Start with clear payment policies.
   • In early 2024, HFMA surveyed patients and found that 40% had not received any feedback about price transparency—emphasizing the importance of clear communication.
   • Establishing transparent payment policies is foundational. Before receiving services, patients should be informed about their financial responsibilities, including co-pays, deductibles, and out-of-pocket costs. This upfront clarity reduces confusion and encourages prompt payments.
2. Offer multiple payment options.
   • Another HFMA survey shows that 19% of patients are more inclined to pay bills promptly when given multiple payment options.
   • Providing flexible payment options, such as credit cards, online portals, and payment plans, significantly reduces barriers to timely payments, making patients more likely to pay.
3. Automate payment reminders.
   • In a JP Morgan study, 70% of consumers are willing to use a unified digital platform to manage their healthcare needs.
   • Timely, automated reminders can enhance payment rates by proactively alerting patients about upcoming dues, helping them stay on top of their payments.
4. Implement real-time eligibility verification.
   • Insurance verification errors often lead to delayed payments as patients dispute unexpected charges.
   • Real-time eligibility checks ensure patients understand their coverage upfront, reducing confusion and disputes. This step streamlines the payment process and builds trust.
     
5. Streamline billing communication through reliable RCM services.
   • According to Salucro’s report, 36% of patients would consider changing healthcare providers due to a poor billing experience, including inaccurate billing statements, limited communication options, and insufficient payment methods.
     
   • Collaborating with a reliable revenue cycle management (RCM) provider ensures transparency and fosters trust.

Consistently addressing late payments with the right approach ensures steady cash flow and allows the practice to focus on providing excellent patient care. With a strong system, practices can remain financially stable and grow without the burden of overdue payments.

Case Study:
How Synapse Improved Collections by 26.8%

For example, in this Synapse case study, a gastroenterology practice faced delays due to inaccurate coding and billing processes. Synapse reviewed their coding practices and introduced accurate billing methods.

This resulted in:

• A 26.8% increase in collections
• Faster claim processing
• Improved revenue cycle efficiency

By addressing discrepancies and implementing robust revenue cycle management (RCM) practices, Synapse helped stabilize the client’s financial performance.

Maximize Synapse Accounting Services to Minimize Late Payments

The impact of late payments goes beyond disrupted cash flow—it affects a practice’s ability to deliver quality care. Partnering with Synapse, a robust RCM service with accounting and bookkeeping services, provides the tools and expertise to tackle late payments effectively while enhancing patient satisfaction.

Why choose Synapse Accounting and Bookkeeping?

• Improved cash flow. Accurate billing practices reduce unpaid bills and create predictable revenue.
• Compliance assurance. Stay up-to-date with evolving insurance and regulatory requirements.
• Stronger patient relationships. Transparent processes ensure patients feel informed and cared for.

From automated reminders to real-time verification tools and secure payment options, Synapse provides the foundation for a more efficient and financially stable practice. Schedule a consultation to learn more about strengthening your practice’s accounting and billing.

Sources:

Americans’ Challenges with Health Care Costs;
https://www.kff.org/health-costs/issue-brief/americans-challenges-with-health-care-costs/

Report: Delayed or missing payments increased for hospitals in first quarter;
https://www.aha.org/news/headline/2024-05-13-report-delayed-or-missing-payments-increased-hospitals-first-quarter

Accenture Digital Health Consumer Survey;
https://www.ehidc.org/sites/default/files/resources/files/Accenture-2019-Digital-Health-Consumer-Survey.pdf

Curing Payment Confusion;
https://www.hfma.org/guidance/curing-payment-confusion/

The Future of Healthcare Payments;
https://www.jpmorgan.com/content/dam/jpmorgan/images/payments/healthcare-payments-solutions/the-future-of-healthcare-payments.pdf