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The Psychology of Collecting Debt

The Psychology of Collecting Debt: How to Get Patients to Pay Their Bills

Topic: The Psychology of Collecting Debt: How to Get Patients to Pay Their Bills

Being paid for services is perennial challenge for nearly all healthcare organizations, with billions of dollars each year going unpaid. During the COVID-19 pandemic, providers got hit hard financially and many lost their health insurance, so practices might want to focus more effort on collections. Understanding the psychology of collecting money is a good way to start. A combination of a human touch and technology can help the process along.

Mental Accounting

People generally expect to pay in full for a massage from a spa or a haircut offered by a stylist. When they buy a car or house, they sign a payment plan. But healthcare tends to be an area where people balk at paying their bills. This could be, in part, due to what is called mental accounting, the theory that people file money into different buckets based on their goals and values, according to an article on behavioraleconomics.com. Typically, people are more willing to spend on pleasurable activities – like $100 for dinner and a movie – than on a $100 doctor bill.

“Human connection is desperately what we all need right now,” Vicki Seredich, chief finance officer of Lockstep, the creator of the accounts receivable program Anytime Collect. “If we treat people as humans, we can produce a much better result than collections or a demanding phone call. People always pay the people they like first.”

Seredich recommends trying to find out what the issue or barrier is for patients paying their bills. When calling, she suggests verbiage like this: “I wanted to check in to see how you are doing because I see you haven’t paid your bill. I wanted to see how I can help you. Is there something that will work for you to get this cleared up?”

She also pointed to a few behavioral theories to keep in mind when working on collections:

  • People recall the most recent things they see more than past ones. Sending frequent reminders can keep a practice at the top of a person’s list of bills to pay.
  • People are more concerned with losses than gains, meaning they will pay off small debts more quickly than large ones. Focusing on collecting the least likely debts to be paid may help increase accounts receivables.
  • People hate to lose benefits – like a 3% credit for paying a fee early or in cash. Letting patients know they are about to lose that benefit may motivate them to pay their bill.

Credit Cards on File

Technology also offers solutions for increasing collections. For instance, people are perfectly fine having a credit card on file for their monthly Netflix subscription or to make purchases on Amazon.com easier. But healthcare providers are reticent to follow this practice.

According to an article published in HFM Management Magazine by Health iPASS, a patient payment solutions firm in Oak Brook, Illinois, 67% of Baby Boomers, 78% of Generation Xers and 89% of Millennials all have some sort of service subscription. Meanwhile, only 20% of healthcare providers think it’s the best way to improve collections.

“People used to be highly suspicious of keeping a credit card on file,” said Allyson Howard, assistant director of marketing for Health iPass . “But people have been conditioned to do it now. Doctors are hesitant, but most patients will be okay with it.”

Having a card on file can move collections numbers to as much as 97%, Howard said. Most patients are willing to keep a card on file for charges under $200. That is particularly useful for providers that provide frequent, inexpensive treatments like shots at an allergist.

“A huge amount of uncollected revenue comes from smaller balances,” she said.

Topic Discussed: The Psychology of Collecting Debt: How to Get Patients to Pay Their Bills

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