Using Bank Products to Fend off Deposit Runoff Part 5 of a 5-Part Series: Medical Billing Accounts

Non interest bearing deposit accounts are the gold standard for most banks in the current market. Rapid fed rate increases have put many banks in a position where their current loans have not yet ballooned and were written when the fed rate what sub 1%. This means that if banks want to continue making a profitable net interest margin they need to continue to have as many deposits as possible in non interest bearing accounts. The problem is that many  banks are now capturing deposit accounts by offing 4%+ on savings accounts so some of those sedentary accounts are being moved out of the bank to accounts where they can make money. The key to stopping this runoff is to keep those funds in motion. If the merchant uses their account to run their business they are less likely to move them off the balance sheet. Making deposits sticky and/or adding new accounts has never been more important and in this five-part series, we will expose five simple products and targets to help your bank add or retain deposit volume.

Part 5: Medical Billing Accounts

Payments, Lock Box and Remote Deposit

Medical offices, hospitals, and urgent care facilities all have a need for advanced banking services to maximize their efficiency and profitability. These organizations navigate insurance claims, payments, collections of copays, and delinquent bills. A bank with the proper tech and service stack can reduce the administrative staffing needed to complete these tasks and reduce their accounts receivable. All while creating a bank relationship with a historically stable type of business run by a highly educated staff and large deposit relationship. These clients offer great opportunities for banks when they need deposits and when they want to acquire sticky loans. Financial institutions that build a relationship with medical facilities will be able to weather their financial cycles more easily as these businesses are less affected by the cyclical nature of the market. People need medical attention no matter what is happening in the world and with an ever-growing elderly population the need for medical services continues to grow. 

If a doctor, dentist, optometrist, or chiropractor is independent of a hospital system they have to run their business like an entrepreneur. So in addition to being the practitioner that generates the bulk of revenue, they are also making the high-level business decisions or allowing a senior staff person to guide those financial decisions. Initial targets for these individuals when trying to acquire the relationship are usually “How can we help reduce your practice’s accounts receivables?”. Don’t be afraid to ask the hard questions that come with this one. “Do you have an AR aging report and how much has it been in past 30 days?” and “How much money did you send to collections last year?”. These questions will generate a number. It could be $10,000 or $100,000 but from that number, you can now leverage value. “If our financial institution could reduce that by 30% month over month (Take 30% and the number and multiply it by 12) to bring in $XX per year under 30 days and reduce collections by $XX would that add value? The answer is almost alwasy YES.

Start with the low-hanging fruit; payments. Ask how they take payments, ask to see one of the invoices they send to clients, and figure out the software they are using for practice management. Check to see if there is a way to pay from the invoice, if not work to get an online payment page. Review their processes for running insurance through and see if there is a solution to put a card on file while they wait for the response from the insurance company on the copay amount. How do they follow up on past-due bills? If they are mailing reminders, recommend text-to-pay and text reminders. These links increase collection rates by almost 80% in the medical space. Most collection issues in medical occur because the patient forgets to pay the bill or loses it, not because they don’t want to pay. Engaging with the patient and making their ability to pay easier is what they are looking for. They don’t want their $35 co-pay to end up in collections.

Starting with payments allows your financial institution to capture about 30% of the deposits, but alleviate 80% of the accounts receivables headaches. The next target should be making the receipt of checks easier. Many insurance companies utilize ACH to send insurance remittances to medical offices, but some still send checks. In addition, many older clients still prefer to send checks in for their medical bills. The solution for a smaller practice is remote deposit and for larger medical offices that receive over 100 checks per month, a lock box becomes the economical solution. This can be a difficult conversation because it is usually someone’s job at the office to open the mail and process the payments manually and post the checks. This may be the decision maker’s role or a clerk’s role. You will be selling efficiency and reducing human time, but be ready for the pushback if that time is 30%-100% of someone’s job. Find our who that person is and don’t make them part of the meetings about this solution. Depending on the number of checks these solutions cost more so you will have to pitch it as a way to free up that employee to complete other tasks, but for the pragmatic doctor, you can just address it as salary overhead reduction.

Medical is a great vertical, but remember it is not a set it and forget it client. These customers are postgraduate educated, so they enjoy gaining knowledge and learning new things. You will be fending off fintechs and independent financial firms. Continue to touch in with these customers and become a valued resource so your bank is the first place they turn for any financial solution.