Mastering Deductible Season: Strategies for Finance Teams to Manage Cash Flow and Revenue Cycle

The start of each year brings a familiar challenge for healthcare finance teams: deductible season. It’s a critical time of the year that can significantly affect cash flow and revenue cycle management (RCM) for healthcare organizations.

This guide explores the challenges of this time of year and what leaders can do to support revenue operations and patient satisfaction before, during, and after deductible season.

What is Deductible Season?

On January 1, health insurance deductible amounts reset. This period, known as deductible season, lasts from January through approximately May each year, when most patients meet their deductibles. However, depending on individual healthcare usage, some patients may take longer to reach their deductibles, extending this period beyond May.

During this time, patients face higher out-of-pocket costs as they work to meet their medical insurance deductible before their coverage kicks in. Healthcare providers see fewer insurance payments and a higher proportion of patient financial responsibility.

According to a study by the Peterson-Kaiser Health System Tracker, the average American reaches their deductible around May 19, a date referred to as "Deductible Relief Day." This is later in the year than a decade ago, previously around March, reflecting the steady rise in average deductible amounts for employer-sponsored health plans.

Out-of-pocket (OOP) costs have also increased significantly, with deductibles accounting for the majority of OOP spending early in the year. This delay in meeting deductibles can lead to higher upfront costs for patients, often resulting in delayed or forgone care due to financial burdens.

Deductible Season Challenges for Finance Teams

Deductible season can be challenging for healthcare organizations in a few ways:

• Delayed and missed payments - When patients are unprepared for these increased costs, it leads to delayed and missed payments, especially when many patients are already facing seasonal financial strain.
• Increased workload - A significant increase in patient financial responsibility requires healthcare providers to process more patient payments, respond to more patient inquiries, and follow up on more non-payments. This increases the workload for finance teams, accounts receivable (A/R), and patient services teams.
• Cash flow disruption - Deductible season often disrupts normal cash flow patterns. Similar to a change in the provider’s payer mix, the shift from insurance-covered to patient-covered costs affects the amount, timing, and source of payments.

To overcome these challenges, healthcare organizations must prepare their staff, invest in the right technology, and implement effective RCM workflows.

Before Deductible Season

Before deductible season starts, prepare A/R, finance, and patient services teams to handle the workload.

Prepare for Insurance Verification

The insurance verification process is critical during deductible season when patients may have new insurance plans or updated coverage terms.

Healthcare organizations need an effective, consistent process that includes the following steps:

1. Verify patient identity and insurance provider
2. Confirm active policy status
3. Verify deductible amounts and remaining balances
4. Document copay and coinsurance requirements
5. Review Medicare considerations and supplemental plans
6. Flag coverage changes or issues
7. Validate prior authorizations

A successful process for insurance verification prevents costly delays and denials later in the billing cycle. Providers can use automated insurance verification and digital billing tools to further streamline this process and reduce administrative workload.

Ensure Patient Info and Medical Documentation is Up-to-Date

Accurate patient info and medical documentation is essential to keep up with patient billing, especially during deductible season.

Ensure high-quality data in these areas:

• Contact information (address, phone, email) is the foundation of patient communication, billing, verification, and other key functions
• Communication preferences enable providers to send billing and payment reminders in the most effective channel
• Payment methods on file streamline and speed up the patient payment process
• Insurance details must be accurate to avoid unnecessary delays that further disrupt cash flow

Technology enablement plays a key role here. Providers can configure their billing software and patient management tools to notify patients to review and update their information. By scheduling these requests to go out periodically—especially in the lead-up to deductible season—providers can avoid unnecessary delays due to outdated info.

Establish Clear Workflows for RCM and Patient Services

Healthcare organizations need clear, repeatable processes for payment collections and patient communications. Review and streamline A/R processes, RCM workflows, billing practices, and patient services protocols before the busiest time of the year. This helps speed up administrative tasks that directly affect cash flow, like collecting copays, deductibles, and coinsurance at the time of service.

An important part of establishing financial workflows is the consistent use of technology. Healthcare organizations should standardize the use of RCM software, digital billing and coding, and eligibility verification tools, and ensure all staff are well-trained on these technologies.

Train Staff on Important Financial Processes

Deductible season brings a high volume of patient inquiries. Patient services and A/R teams need to understand the complexities of insurance coverage and answers to common questions—like the benefit period for Medicare Part A vs. annual deductible reset for Part B. In addition to technical knowledge, staff need training in soft skills to clearly communicate details to patients who are stressed about their financial obligations.

Before deductible season, train A/R and patient services teams on:

• Insurance eligibility verification procedures
• Patient communication best practices
• Common questions about deductibles, copays, and coinsurance
• Escalation protocols for complex patient situations
• Resources and support available to patients
• Online payment platforms and patient portals

During Deductible Season

When deductible season is in full swing, focus on improving cash flow, monitoring revenue metrics, and maximizing payments at time of service.

Collect Payments at Time of Service

The chances of collecting payment drop by 62% once a patient leaves the site of care. During deductible season in particular, it’s essential to maximize point-of-service (POS) payments to improve cash flow.

This requires a thoughtful balancing of the need for timely payment with sensitivity to patients’ financial situations. Offer clear cost estimates before service so patients are more prepared for their financial obligations, consider a deposit system for scheduled procedures, and offer payment plans to help patients deal with higher out-of-pocket costs.

Monitor Revenue Cycle Metrics

During deductible season, organizations need to closely monitor metrics related to cash flow, payment trends, and potential sources of revenue leakage. By tracking the right revenue cycle KPIs, healthcare leaders can adjust financial policies, revisit staff training, or adjust revenue strategy as needed.

RCM analytics should provide insights into both broad trends and specific areas of concern. This might include tracking collection rates by service type, analyzing payment patterns by payer, and identifying services or departments that need additional support during this challenging period.

After Deductible Season

Success during deductible season depends on year-round financial management, process improvement, technology enablement, and patient support. Once deductible season ends, finance leaders can turn their attention to evaluating performance and planning for the future: how to improve the patient financial experience, internal RCM processes, and overall financial health.

Improve Payment Accessibility

Simply put, make it as easy as possible for patients to pay. A frictionless payment process means faster payments and higher patient satisfaction with the billing process.

There are several ways for providers to improve payment accessibility:

• Offer easy payment options via patient-specific secure links with no-login needed, user-friendly online portals, or text to pay.
• Offer multiple payment methods to accommodate more patients.
• Use automated payment plans that simplify paying off outstanding balances.
• Provide real-time billing support to answer patient questions and offer resources.
• Implement a credit card on file program, as long as it is clear how and when cards will be charged.
• Enable Family Billing, allowing patients to view and pay bills for multiple dependents (such as children or other family members) through a streamlined process, ensuring transparency and ease of management.
• Offer clear, itemized billing statements that reduce confusion and minimize billing questions.

These steps, among others, help reduce days spent in A/R or days sales outstanding (DSO).

Improve Patient Communication and Patient Education

Patient communication is an essential part of the healthcare revenue cycle. Review key patient communications at key stages of the process—see below—and determine their effectiveness. Carefully consider the format and channel of each communication. For example, billing reminders via text message is a growing preference among patients; look for billing technology that can support sending individualized communications via patients’ preferred channel.

Pre-Service

• Send educational materials about insurance coverage
• Provide cost estimates
• Explain deductible reset implications

Point of Service

• Review financial responsibility
• Discuss payment plan options
• Address questions about insurance coverage
• Explain the billing process

Post-Service

• Send automated payment reminders
• Provide online account access
• Offer support for billing questions
• Follow up on outstanding balances

Patient education is an important part of year-round communications leading up to deductible season. Help patients prepare for higher out-of-pocket costs with:

• Resources or webinars on understanding insurance
• FAQs sent before appointments
• Educational materials on deductibles, co-pays, and coinsurance

Implement and Optimize RCM Technology

Software, automation, and AI can play a major role in managing deductible season. With the right technology enablement for RCM, staff can get better insights from financial data, spend less time on repetitive tasks, and improve collection rates.

Prioritize tools that support:

• Automated payment reminders
• AI-based patient support for billing questions
• Automated eligibility verification
• AI-assisted payment posting
• Integrated payment processing systems
• Data analytics that predict payment behavior trends
• Real-time reporting dashboards

Ensure technology implementation is thoughtful and strategic. RCM tools should allow A/R and patient financial services staff to focus on more complex patient interactions while routine processes run efficiently in the background.

Review Payment Recovery and Collections Strategies

Post-service communications should be clear and supportive. Make automated payment reminders informative, and offer support for billing questions through multiple channels.

Finance leaders can use data to prioritize patient outreach based on payment risk. Industry groups, like the American Medical Association, offer resources to help navigate post-service collections and reduce bad debt.

Evaluate RCM KPIs

Review deductible season performance against important RCM KPIs like:

• Days in Accounts Receivable (DSO - days sales outstanding)
• Collection Rate by Service Type
• Patient Satisfaction Scores related to billing processes

Also, review the KPI infrastructure itself. Was revenue data accurate? Was it easy to access via the tools, dashboards, and other reporting mechanisms available to finance teams? If not, explore solutions to those problems before they become major barriers to RCM.

Improve Deductible Season with Collectly

The key to a successful deductible season lies in preparation, proactive management, and continuous improvement. With the right systems and strategies in place, healthcare organizations can maintain stable cash flow and provide excellent patient financial services during an exceptionally busy time.

Collectly offers automated billing reminders, easy payment workflows, and a variety of payment options that make deductible season easier. With integrated EHR and RCM systems, plus real-time reporting and dashboards, healthcare providers can improve overall financial management.

Collectly automates payment reminders using the patient’s preferred communication method and offers 24/7/365 AI-powered patient billing support. With these features and more, Collectly users report up to 80% less time spent on patient support-related tasks and a 95% improvement in patient satisfaction with the billing process.

See what Collectly can do to improve deductible season for you!