How Much Does it Really Cost to Send Out a Statement?

Two or three times a year, I hear people say that it cost anywhere from $5 to $8 (I’ve even heard as high as $15) to send a patient statement in the mail. “When one considers the employee’s time, the envelope, the piece a paper and the postage” experts say, “it can cost upwards of $5 to send a statement.”

I wonder, where did these statement cost figures come from? I’ve never seen anything ever publish regarding this “cost” and why it is so high. Only rhetoric. Have you?

I also wonder if it is only the medical field that has these high cost or it is the same regardless of industry. I get a Comcast bill every month… are they spending 5 or 6 bucks for each one of my statements too?

Let’s say a practice sends out 450 statements a month at a cost of $5 dollars a piece. 450 x $5 = $2250 x 12 months = $27,000. If one sends out 1000 statements a month, which I’m sure a large practice can easily do, the cost can add up to $60,000 under the $5 cost assumption. If it really cost $10, then the figures double.

If the cost applies to all industries, imagine how much money it cost a credit card company or Comcast when one considers these companies send out millions of statements a month.

When experts mention the cost of statements, the intent is to encourage practices to collect co-payments and balances upfront because not doing so cost the practice money. I get that. Collecting upfront for as much as you can is good business.

But it seems to me that if it cost $5 or more to send out a statement, experts shouldn’t make the argument to collect copayments and patient balances upfront alone, but rather champion the fact that sending out statements is an expensive and unnecessary cost that medical practices ought not to bear.

In other words, if it really cost that much to send a statement, why isn’t there more emphasis on eliminating statements all together?

Whether it’s $27,000, $60,000 or more, that is a lot of money. Imagine if sending out statements is eliminated… how much would a medical practice save? A practice could easily hire 2 or 3 people for that kind of money and not even miss a beat.

Personally, I think the $5 and up figure is way too high. I find it hard to believe that sending out a paper statement cost nearly as much as buying, storing, managing, preparing, counseling and administering a vaccine.

But, I can’t be certain because I haven’t seen any empirical data. Nonetheless, if in fact it does cost that much, we should spend more energy in figuring out ways to eliminate statements all together (and enjoy significant savings) than to focus on merely reducing just a portion of a practice’s statements  by collecting upfront.

What do you think? Or does this sound like something way out in left field? I’d love to hear your thoughts.

7 thoughts on “How Much Does it Really Cost to Send Out a Statement?”

  1. Hey Guys, I have not noticed mention of first sending the insurance and documentation to get the claim paid. That takes a live person. Most insurance claims get denied or have additional requests for “more” information. So maybe 60 days until a payment of any sort arrives. Then depending on where in the month it arrives, waiting until billing cycles. The bill goes out, wait at least 3o days for a payment. In many cases, a second statement or phone call. It can take as much a 6 months to actually receive a payment. NOW the cost of all the “hands on, phone calls, preparation of documentation, sending the final statement, and now waiting on the payment. Applying the payment and reconciling the patient file? No way will $10-12 cover that. Even on the lower interest credit cards, the interest is 9.9%. So you loose the interest the money could be making. We estimate up to $35.00 for the statement in normal circumstances.

  2. Brandon,

    I agree with everything Mary Pat said, and would also remind you that when these studies are done, they include everything – like utilities and rent in the building that houses the employees who do the work. Also factored in are the benefits paid to those employees. Not mentioned are the costs from our practice management systems or clearing houses, not just for the actual statement with postage, but also the monthly fees we pay to purchase, support, and protect those systems.

    I honestly believe if you factor in all the costs at every step of the process, you’ll find the $10-$12 figure much more believable.

    Jane

    1. When you include everything like utilities, clearing houses etc, I wonder if those cost are part of treating a patient, in other words, the cost of doing business, or if it ought to be allocated to the cost of the patient statement.

      I’d definitely like to see some data because I’m not convinced.

      Thank you for the feedback.

      1. What this really comes down to is what does it cost to collect payment for your services?

        Any touch to that account for the purpose of collecting money costs you. Or, to see it the other way, every time your payment is delayed or you have to put forth effort to collect, your margin decreases. Yes, you may have collected in full at 120 days, but what did you spend to collect in full? Can you really even call it collecting in full, because the revenue to expense ratio changes unfavorably every day the account ages.

        I think the goal is to collect what is due by leveraging electronic payment mechanisms so hopefully, your staff never have to touch the account again. You will still lose some money as the payment plan stretches out, but your loss will be minimized.

        Great discussion!

        Mary Pat

  3. Hi Brandon,

    I am one of those people who think statements cost a lot more than we think they do!

    I saw this on Linked in today:
    “According to Nicholas Fabrizio, principal with the Medical Group Management Association (MGMA) Health Care Consulting Group, physicians across the country have seen their compensation decline 7% –12% as a result of the recent economic downturn.
    But with fewer opportunities to trim expenses, provider organizations have turned their
    attention to increasing revenue through various tactics such as improved up-front collections
    efforts. ‘All told, it costs $11– $12 to send out a statement,’ according to Fabrizio. ‘If you don’t
    collect a $25 copay, you’ve lost half your net revenue.’”

    I don’t think the Comcast scenario is a good analogy, Brandon because Comcast will shut you off if you don’t respond to their statement! Medical practices will rarely shut anyone off from care and will typically work very hard to help patients with payment arrangements so they can continue to receive care.

    The price of statements are not so much the cost of the paper or the stamp, but everything that surrounds the process. Let’s say you send a statement and the patient pays from that statement. Besides the initial cost of generating the statement, someone has to 1) open the mail payment, prepare a deposit or remote deposit it or pull it off the web if you are using a lockbox, 2)identify the account the payment is for if the patient didn’t return the statement stub 3)post the payment to the account.

    But what if the patient gets the statement and calls with a question? What if they call to make a payment plan? What if they don’t pay, or pay a partial amount? What if they are on a payment plan and pay a different amount than they agreed to? All of these scenarios have to be accounted for as part of the statement process, because if you had collected at time of service, or had the patient’s approval to charge their balance after insurance paid, none of that work would be necessary. What is the cost of an employee’s time for 15 minutes?

    I do think statements are a drain on a medical practice’s resources, but I think it’s hard to exactly quantify the cost. I would agree that a statement costs $10-$12 per statement, and sometimes more!

    Best wishes,
    Mary Pat

    Mary Pat Whaley, FACMPE
    http://www.managemypractice.com

    1. Mary Pat,

      I think I found something you and I disagree on.

      I agree that increasing upfront collections reduces the amount of statements a practice sends, but it certainly doesn’t eliminate statements. At best, what would you say is the number of statements that would be reduced by increasing upfront collections?

      Let’s say a practice send out about 450 statements a month. By increasing the practices upfront collections, they reduce the amount of statements from 450 to 350 (22% less statements). 100 less statements, at $10 is $1000 saved. If they keep up this pace, they’d save $12,000 in a year. Not bad for any practice.

      Now, let’s say they eliminated statements by instituting a policy where credit cards are processed automatically if there is a balance. So, 450 statements a month, at $10 a statement, the practice would save $54,000 a year. If it really cost $12, they’d save $64,800 compared to the $12,000 that the upfront collections strategy alone is saving them.

      Here is my argument, if it really cost $10 or $12 to send out a statement, people like Mr. Fabrizio shouldn’t be encouraging practices to improve up-front collections alone, but also encouraging practices to implement policies that eliminate statements all together.

      I’m not convinced that it cost upwards of $10 to send out a statement, but I can’t be sure because I haven’t seen any real data to support the claims (even in your quote it says, “according to Fabrizio.” Where does Fabrizio get this data?) that sending out statements cost upwards of $10 each.

      Thank you for your thoughtful comment, Mary Pat.

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