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

My online friend Mary Pat Whaley from managemypractice.com wrote a thoughtful comment on my “how much does it cost to send out a statement?” post. I value Mary Pat’s opinions very much, so I wanted to post her comments in an actual post, so the readers of this blog can get an additional perspective from an industry veteran.

If you haven’t read the post Mary Pat is referencing, take a moment and read it (click here) so you will get a better idea of what we are talking about. If you’ve read my post, then read on. Here’s Mary Pat’s comment:

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!

On this particular issue, I disagree with Mary Pat. I don’t think it cost upwards of $10 to send out a statements. That figure is too high in my opinion. However, if in fact it is as high as $10 or $12, then I think we need a paradigm shift in how we view statements. Here is my argument and my response to Mary Pat.

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 year. 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.

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.

What are your thoughts on this issue? I’d love to hear your opinions on the matter.