Meeting healthcare strategy goals with electronic patient refunds

Healthcare providers can use a digital payments menu to close the loop on paper check refunds and drive the process entirely to digital.

In today’s world of healthcare treasury management, two goals topping the lists of most executives are “maximizing process efficiency” and “improving the patient financial experience.”

Now there’s an easy way for healthcare providers to do both — a banking solution that eliminates the need for providers to issue patient refund checks.

A prescription for reducing checks

Most providers deliver well over half of patient refunds to the original method of payment, usually a payment card on file. The revenue cycle management team initiates card refunds, and the accounts payable unit issues paper checks for the remaining refunds.

Dan Haber, a working capital consultant at U.S. Bank, serves a large healthcare provider that sends about 300,000 statements (bills) to patients each month. Only about 8,000, or less than 3%, result in the need for a refund, for reasons ranging from overpayment to billing adjustments to coding errors, he says.

Of those 8,000, about 5,500 — almost 70% — get refunded back to the patient’s card, leaving the provider’s accounts payable staff to issue about 2,500 patient refund checks a month.

That may not seem like a big number. But the possibility of eliminating the issuing of those checks offers a major opportunity for the provider to redeploy staff to other tasks and give patients the kind of fast, convenient refunds they have come to expect as consumers.

So, Haber asked a simple question: “Wouldn’t it make sense to close the loop on paper check refunds and drive the process entirely to digital?”

Why not introduce a payments menu?

A growing number of banks now offer a solution for closing that loop. It includes using an electronic disbursement platform with a digital payments menu that allows providers to give their patients a choice about how they will receive their refund payments, including through various electronic payment methods.

With this solution, the provider sends a refund payment instruction to its bank detailing which patient to pay, the amount of the payment and the patient’s email address. The patient then receives a provider-branded email asking them to visit a provider-branded website where they can enroll and select a payment method for their refund. Typical options include an ACH to their bank account, faster payments through Zelle^®, the RTP^® network or push-to-card, or a prepaid card. With most of these solutions, you can include paper check as an option, but it’s not required.

Every patient that selects an electronic payment option represents one less refund check. What’s more, the solution retains information on the patient’s payment preference, so the next time the patient is owed a refund, the bank already knows which payment method to use without asking again.

How the menu addresses key goals

If the patient does not enroll, usually the default is to send the patient a check. But issuing and delivering that check becomes the bank’s job — because with the payments menu solution, the healthcare provider outsources that task to the bank.

By reducing the volume of checks issued, the provider mitigates check fraud risk, reduces costs associated with issuing and mailing checks, and can reassign accounts payable staff to other duties. Plus, patients get their refunds faster and don’t have to spend time depositing a check, which improves their financial experience. “With the trend toward patients paying more out of pocket, the patient’s financial experience is more important than ever,” Haber notes.

A digital payments menu will reduce the need for refund checks, but it won’t eliminate them, and some will need to be escheated, he says. As a result, providers can create even more efficiencies by adopting a bank automated escheatment service that performs the duties related to managing refund checks that go uncashed.

Accounts payable in healthcare: Keep it digital

The most effective way to reduce patient refund check volume is to get as many patients as possible to pay their medical bills by card or some other electronic option on the provider’s online portal. That way the refund can be delivered over that same efficient payment rail.

However, every patient won’t opt to pay on a portal, and as a result, some refunds will have to be delivered by other means. That’s where a digital payments menu can support a better refund solution. It reduces the need for refund checks and enables a provider to outsource any remaining check-issuance duties to its bank. This gives patients the type of convenient digital refund most prefer and appreciate while unburdening accounts payable staff.