Are you Making it Difficult for Patients to Make Payments?

December 17, 2009
James S. Lacy, JD

Physicians' offices are serious businesses and by operating as such, in concert with patient-friendly business and clinical policies, you can avoid risk, better collect payments owed, and ultimately weather the changes now sweeping through the healthcare industry.

Each year, multispecialty medical practices lose over $51,000 of earned income per physician to inadequate payment and collection policies. That statistic, which begins with revenue figures from a recent Medical Group Management Association survey1, takes into account the fact that most practices only collect roughly 60% of their patient co-payments (which comprise 20% of average office revenues2).

Current economic conditions have only made matters worse. Patients are increasingly facing disruptions in health insurance brought on by unemployment, or shifts in employer coverage. As a result, many families are facing higher co-pays, deductibles that can approach $5,000 under supposedly low-cost “catastrophic” plans or, in worst cases, the entire financial burden, regardless of amount.

Clearly, patients are struggling with direct healthcare costs like never before. Yet many medical practices, either through ignorance or deliberate policies, actually hinder their patients’ willingness to pay.

There are solutions to this situation—and they may not be as difficult as you think. To begin with, physician’s offices need to think and operate more like a consumer-friendly retail business, with incentives that promote payment. Acting like a merchant needn’t compromise or even compete with your quality of care. On the contrary, it can actually enhance your ability to serve your patients well, since your margins and overall business efficiencies will increase.

Adopting certain standards and practices can increase collections, ease patient concerns, strengthen your daily operations, and certainly lower stress levels around your office. Here are some practical ways through which you can make it easier for patients to meet their financial obligations:

Offer multiple payment options. “Paper or plastic?” doesn’t apply only to the grocery checkout line. The American Bankers Association reports that only 49% of people pay bills by check currently, compared with 72% in 2001. The world is moving away from paper and toward credit cards, debit cards, and e-payment. It’s wise for physician’s offices to do the same.

For better or worse, patients increasingly regard their doctors as another “retailer”. By offering multiple credit/debit card options, you match their ability to pay. To make payment even easier, allow patients to use their credit and debit cards over the phone and via the Internet.

Because some patients still prefer to pay by check, it’s important to take steps to reduce the related costs. One multispecialty physicians office that required payment before seeing the doctor was experiencing a nearly 10% “insufficient funds” returned check rate. After implementing a check verification solution similar to those used by Wal-Mart and other major retailers, the practice saw its returned checks decline dramatically, and collections at point-of-care increase.

Finally, for individuals who are uninsured, underinsured or have high deductibles, instruct your staff to work out a suitable payment plan. Make sure they are discreet; your patients will appreciate the sensitivity and, more often than not, respond with timely remittances.

Analyze your receivables. It’s surprising how many office managers—and physicians—are in the dark regarding their account receivables. Taking the time to understand your outstanding accounts will better enable you to reduce them.

If you use a clearinghouse (and you should), check to see if it offers analytics tools as part of its core offerings. If not, look for one that does. Then use those tools to examine the categories that are your patients’ responsibility, such as co-payments, deductibles, coinsurance payments, and other similar fees. By reviewing these categories over time, you can see where problem areas are developing, enabling you to effectively address the most serious situations.

Establish business rules that increase collections. Many practices don’t achieve desired co-pay levels because they don’t ask for payment at the time of treatment. Make your expectations clear before services are rendered—on your Web site, by phone, and at the front desk. A friendly reminder at the time an appointment is scheduled doesn’t hurt either! In fact, offices that make their policies clear report a 65% improvement in co-payment collection, compared to those that don’t.

Another important strategy is to use technology to reduce the cost of pursuing collections. Billing software help you bill quickly and implement outbound follow-ups promptly (it’s important to position your follow-ups as “reminders” instead of hard-noted collection notices).

Many practices write off outstanding balances of $25 or less. All this does is encourage non-payment, especially for those patients who have $10 co-pays. Thanks to automated collection software, the cost of pursuing past-due collections has dropped to under $5, making it possible to clear up these low balances and increase your monthly income.

An important side benefit of lowering your collection threshold, is the ability to catch incidences of petty theft—which leads us to our final point:

Implement proper accounting controls. A sad, but very real, fact is that instances of theft and embezzlement by medical office workers are more common than you think. Co-pays and other payments made in cash are prime opportunities for theft, especially when standard accounting practices are not in place.

If a patient makes a payment by cash or check, insist that a written receipt be issued. Furthermore, make sure collection duties are segregated. Those who open the mail, accept cash, and post deposits, cannot also handle the books. In small practices where there are not enough employees to separate these tasks, a retail lockbox service can be used. This allows patients to mail their payments to a PO Box; funds are deposited automatically on a daily basis, thus preventing handling by employees altogether.

Remember, physicians' offices are not “mom and pop” storefronts. They are serious businesses with all the responsibilities and capabilities one would expect in a customer-facing enterprise. By operating like a business and making your policies patient-friendly on both the clinical and business sides, you can avoid risk, collect a greater share of the payments owed you and ultimately, better weather the changes that are sweeping through the healthcare industry.

1“Cost Survey for Multispecialty Practices, 2009 Report Based on 2008 Data,” Medical Group Management Association.

2Jorgenson, Douglas “Opting to Opt in or Out? Reimbursement and Cash Flow Options”, Physiatry Practice Management Resources, August 2006.

Jim is Chief Financial Officer, General Counsel, and Corporate Secretary of ZirMed, Inc., a Louisville-based technology company providing revenue cycle management solutions to healthcare providers. Mr. Lacy is licensed to practice law in the Commonwealth of Kentucky. Mr. Lacy welcomes responses and questions about patient responsibility, and can be reached at (502) 779-4302 or jim.lacy@zirmed.com.