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Getting to Zero Patient AR Through Patient Financing

Hospitals strive diligently to accelerate cash flow and minimize bad debt. Receivables management is a central front in the challenge. The ideal state would be to achieve zero accounts receivable consistent with positive patient financial experiences. Is this goal attainable? This report examines the challenges of reducing patient AR and how an effective patient financing strategy can help you realize the goal.

Source of the Problem

The crux of the issue is the recent rapid growth in patients’ financial obligations for their care. Patients as payers are now playing an increasingly integral role in healthcare finance. High Deductible Health Plans are one factor driving this trend, as enrollment has ballooned to include just under 22 million people, up from only 4.5 million a decade ago.1 More than 40% of consumers now have this type of plan.2 A recent Kaiser Family Foundation study produced these additional sobering statistics:

  • The average family insurance premiums and contributions have increased 22% and 25%, respectively, over the last five years (see Figure 1).
  • The percentage of workers with an annual single coverage deductible of $2,000 or higher has grown from 18% to 28%.
  • Average copayment for a hospital admission is now $326.3

Meanwhile, healthcare costs continue to climb faster than the inflation rate.

Graph showing increase in worker contribution compared to employer contribution for healthcare insurance

What’s the impact on the nation’s healthcare providers? Generally, the government issues reimbursement in 15 days, and commercial payers fall into the 30-45-day range. However, patient self-payment is highly variable and riskier. Thus, whenever an organization extends financing, it is imperative to obtain repayment as fast as possible.

Patient Payment Barriers

CommerceHealthcare® research and practice experience shows that, whether an organization extends financing itself or uses a partner, patients confront four principal problems in meeting their obligations.


As their financial obligation soars, patients need a longer duration to repay debt fully. Most payment plans offered do not extend long enough to accommodate this need.


No one size fits all. Many organizations need a more flexible toolkit encompassing credit analysis, terms, rates and other elements of payment plans.


Many providers manage their own patient financing, in large part to maintain control of the process. Experience has shown, though, that individuals tend to regard the debt relationship with a bank more formally than with a hospital or physician practice. For this reason, a bank-managed program significantly enhances the likelihood of patients maintaining payments.


With healthcare costs increasing, and patients responsible for covering a larger percentage of costs, many find themselves unable to meet their required financial obligations. In response, many providers have begun to institute mandatory upfront payments - at least partial ones. While the expectation is clear, the fact remains that many patients struggle to meet even the partial payment requirements.

Internal Challenges

Optimizing receivables management takes consistent execution. Unfortunately, two internal barriers are common. The first is significant variation in front line staff interaction with patients. Often, different payment options are presented for similar patient scenarios. Additionally, financial conversations between staff and patients are inconsistent. Whether caused by suboptimal training or lack of process standardization, the result is frustrated patients and increasing patient bad debt.

The second challenge is frequent gaps in data tracking and analytics. More specifically, it is essential health systems and hospitals measure yield on patient payment plans. This includes gaining a clearer picture of write-off statistics and trends.

graphic showing icons of cash, mouse, money sign, and shield

Getting to Zero Patient AR: The Solution

The path to success involves collaboration with a financial firm capable of implementing a patient financing platform designed to speed funds to your organization. To succeed, such a program must incorporate several characteristics working in tandem:

  • Payment in 7 days maximum. For every payment and for the complete approved patient obligation.
  • Fully electronic payments. Funds should be delivered electronically with ERA transaction files to speed posting, automate the process and reduce errors.
  • Offer to all patients. By enabling access to everyone, organizations can give patients peace of mind that care will be covered. It also avoids friction caused by credit checks and updates to a patient’s credit history.
  • Open lines of credit that automatically accommodate costs incurred from subsequent care encounters after the initial event. Make sure payments can be consolidated across facilities in your health system.
  • Highly flexible financing. The financial strength and credit experience of a bank partner permits it to offer longer and more varied options than most provider payment plans.
  • No “middleman.” Many financing vendors administer a connection between institutions and a consortium of lenders. This scenario introduces many third-party players and increases the risk of negatively impacting your patient experience. It also raises uncertainties about what happens when one or more consortium members exit the program. 


The Right Financial Partner: Choose Carefully

In evaluating financial partners, it is important to distinguish those who adhere to the fundamental success factors delineated. For example, many will advertise a speed-to-funds “headline” number. It is often not representative of most payments. Those firms may pay differentially based on the hospital’s propensity to pay score for a patient. A medium score induces the financier to wait 2-3 payments before releasing funds to the organization. Low scores likely get routed to early out firms, further complicating time-to-cash and reconciliation processes.

The Role of Technology

Another factor that can contribute to faster payments and fewer write-offs is technology-enabled process improvements. Getting patients engaged early is one path to acceleration. Payment estimation software is available which uses data from payer contracts, hospital charges and individual insurance benefits to help patients understand their potential obligations. CommerceHealthcare® aids hospitals in going even further with pre-service enrollment. A dedicated portal enables patient information entry in advance of care. Any administrative issues can be addressed early and enrollment processed with any estimated charges submitted to CommerceHealthcare®. Providers can receive immediate funding before patient service begins, expediting cash flow by months.


Substantial positive outcomes are generated in three areas when the solution outlined in this paper is adopted and pursued extensively:

  • Financial. Significant reductions in receivables as payments are made more rapidly. Reduced bad debt as patients obtain the right financing to meet their unique situations.
  • Efficiency. Staff time is freed as your financing partner assumes the administration of patient loans. At the same time, the program builds consistency among staff in dealing with patients, generating a cost-effective standardization.
  • Patient satisfaction. Pre-approvals, no credit checks, open credit lines covering full obligation - these and other central program components create a highly positive experience and engender loyalty to your institution.

As shown in Figure 2, these three benefit categories form a “virtuous circle” whereby gains influence and reinforce each area, ensuring sustainable long-term results.

graph showing how the right financial platform can improve patient satisfaction, financial outcomes and efficiency.

image of anne goodwill pritchett, senior vice president of revenue cycle operations at hackensack meridian health

Case Study Snapshot

Hackensack University Medical Center had tried for years to accommodate uninsured and other patients struggling to pay their bills. However, defaults left the organization with significant uncollected debt.

Learn how interest-free loans resulted in a significant reduction of patient bad debt.

Read more


Getting to zero AR is an ambitious goal. But adoption of the patient financing platform described in this paper can go a long way toward that objective. The strategies outlined in this article deliver clear financial benefits to your organization and your patients.


  1. America’s Health Insurance Plans, Health Savings Accounts and Consumer-Directed Health Plans Grow as Valuable Financial Planning Tools, April 2018.
  2. Oliver Wyman, Waiting for Consumers: The Oliver Wyman 2018 Consumer Survey of U.S. Healthcare, 2018.
  3. Kaiser Family Foundation, 2019 Employer Health Benefits Survey, September 25, 2019.