Collecting the patient portion: Being proactive, early and often

With insured patients paying a larger share of their health costs, it's increasingly important for doctors to get that payment as soon as possible. Here's how.

By Pamela Lewis Dolan — Posted April 2, 2007

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Most doctors would love the luxury of giving longtime patients a wink and nod and telling them not to worry about paying their share up front.

But today's catchphrase "consumer-driven health care" not only means more is coming out of the patient's pocket, but also the consumer is driving a more significant portion of the physician's revenue. The growth of high-deductible health plans and PPOs means a patient is probably having to cover a lot more than the $10 or $20 of an HMO co-pay.

Experts say taking a lax approach to collecting the patient portion could have a significant and negative impact on the practice's finances. But being proactive about collecting from the patient could save your practice money and improve cash flow.

The key, experts say, is to place the priority on the front end and eliminate as much back-end collection as possible, including the standard paper bill.

"It's the new consumer-driven health care; you are going to have to [place priority at the front end] in your practice in order to cover your own cash flow," said Cindy Dunn, RN, a consultant with the Englewood, Colo.-based Medical Group Management Assn.

"The biggest thing with co-pay collections has been to avoid [collecting] them," said Ron Rosenberg, MPH, president and founder of Practice Management Resource Group. "But it's a losing proposition to have to bill for them."

Eliminating, or at least significantly reducing, the billing process and collecting from patients at the time of service may be easier than you think.

Rosenberg said the process of converting to a system in which patients pay up front starts with retraining staff, then patients.

"Everyone needs to sign on that we are going to collect co-pays at the time of service," Rosenberg said. The patient needs to be reminded over and over that this is the new system. The system is most likely to fail when patients are caught by surprise.

Alerting patients to a new system can be intimidating, said Rosenberg, who often does role-playing games with front-desk staff in the process of making the change.

Dunn said staff can also just be up-front and tell the patient that collection is needed to improve cash flow so the practice can meet its financial obligations.

But if you are expecting patients to make payments, you have to make it as easy as possible for them, Dunn said. "Practices should accept all credit cards."

Connie Dixon, practice administrator for Denver-Vail Orthopedics, agreed that accepting all forms of payment makes a difference. Dixon also found that a little change in wording helps, too. "In the past we would ask the patient if they would like to pay their co-pay. Well, of course they don't, I don't want to pay my own co-pay," she said. Now, the receptionist goes down the list of payment options, and the only question asked is how the patient would like to pay.

The reason many practices haven't established policies of collecting at the time of service is because determining the amount to charge is sometimes near impossible, with patients responsible for a percentage of charges, rather than a fixed co-pay.

Jeff Peters, president and CEO of Health Directions, a Chicago-based consulting firm, said most HSAs have made it easier for practices and patients by providing members with a debit card. If the funds aren't there, the transaction is declined.

But there's still the problem of determining how much the patient owes, or if the deductible has been met.

Sharon Secrist, accounts receivable manager for the Cardiology Center of Amarillo in Texas, said even after the five-physician practice invested in an electronic data interchange program a year ago in order to process claims electronically, there still isn't a system to quickly check what each payer's allowable rates are, the percentage the member owes, or how much a patient has paid toward a deductible.

Secrist said the practice only collects from those who have fixed co-pay amounts. She said instead of reconciling payments received versus payments owed, and possibly having to send out reimbursements to patients who overpay, she prefers sending most patients paper bills after the insurer has paid.

But the consensus among experts is to place whatever manpower necessary on the front end to determine the patient portion before the patient leaves.

"This is time oppressive, but the return is impressive," Dunn said.

Rosenberg recently visited a practice at which a team of three people spent their day calling payers to determine how much each patient has paid toward the deductible and how much the co-pay should be. He said as arduous as that task might seem, it was still more cost effective than having those same three people send out bills.

Dunn said most practice management software has the capability to download fee schedules from payers, but many practices don't realize it. And, some of the software may be too costly for cash-strapped practices. Dunn said a cheaper option is to create a spreadsheet listing the top 50 CPT codes and the corresponding payments from each insurer, and a list of the percentages patients in each plan would owe.

Bills can't always be avoided

Jerry Bridge, founder and president of San Diego-based Bridge Practice Management Group, said days of insurers covering almost all health care expenses without requiring as much as a small co-payment spoiled patients, and doctors, to the point that the attitude of "don't worry about it" has trickled down.

Patients also have more bills (cell phones, cable, credit cards) than they used to, and not paying those bills have tangible consequences such as being cut off. Because a doctor can't un-fix a patient, medical bills are often the last to get paid, he said.

There are always some patients who fall through the cracks. And, especially when a new system is being implemented, some patients may already have an outstanding balance.

There's no crime in telling patients their balance must be paid or arrangements for payment be made before they get another appointment, Peters said. The front-desk staff needs to have balance information readily available to alert patients as they call for appointments.

Dunn said this is where common sense and compassion come in. If a patient's debt is high, it's unrealistic to expect someone to come in with a check the next day. It's also unrealistic, and in most cases unlawful, to refuse treatment to a chronically ill patient, or an emergency patient, who can't afford to pay up front.

If it's determined a hardship exists, the practice manager can work with the patient on an agreeable amount to be paid in installments. Details of a payment plan are really discretionary depending on the practice and the patient's circumstances, Dunn said.

Also discretionary is the amount of effort a practice will put into collecting a bill. Peters estimates that it costs a practice $3 every time a bill is sent out. If a patient has an outstanding bill of $10 or $20, the practice will likely lose more money than it will collect by pursuing it. But for a bill of, say, $100, Peters said he would send at least two letters.

Paperless billing options make it more cost effective to go after even the smaller amounts.

Rosenberg said postdated checks can be made at the time a payment plan is established. Bridge said practices should also have a check-by-phone system or a way to pay bills online.

But when a bill does have to be sent, Rosenberg likes to see three phases: the bill, a pre-collection notice and a collection notice. You don't have to actually turn them over to collections, but the letter stating you will can many times spark some action, he said. But before any drastic measures are taken, at least one phone call should be made after the second bill is ignored.

Dunn said when she was a practice administrator making phone calls to delinquent patients, the conversation would take the tone of simply verifying information. It's a subtle way to let the patient know you haven't forgotten about the bill. It also gives the patient the opportunity to notify the practice of problems he or she may be having with an insurer or of additional hardships preventing them from paying.

A second attempt at a payment plan with reduced installments might be necessary, she said. Or the patient may be eligible for charity care.

The bitter end

When all measures have failed, and it's clear the last option is a collection agency, that's generally a clear sign the doctor-patient relationship has ended, experts say.

"You turn someone over to collection, you coincidentally discharge them as a patient," said Rosenberg.

The threshold most consultants set for collections is an overdue bill of at least 120 days. Dunn said in a family practice, those accounts should be less than 20% of all accounts receivable. But because doctors are becoming so reliant on the patient portion, some practices are turning accounts over in as little as 60 days, Dunn said.

Collections should be an exception rather than a rule, experts say. But the efforts need to involve everyone.

Rosenberg likes to make a game out of it with the front staff and billing.

"How many patient statements do we send out each month," Rosenberg said. "The goal is zero, which is never achievable. But patient balances, you just want to try to avoid them."

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What works

The Medical Group Management Assn.'s 2006 "Performance and Practices of Successful Medical Groups," based on 2005 data, showed the billing methods used by what it deemed better-performing practices compared with others.

Better performers Others
Co-pays collected
at time of service
90%-100% 46.6% 45.8%
75%-89% 31.4% 31.3%
50%-74% 10.2% 10.4%
Less than 50% 11.9% 12.5%
Actions to make bills
easier to pay and understand
Accounting staff provided face-to-face patient contact 59.4% 55.1%
Assisted patients in making financial arrangements 85.9% 78%
Provided online billing and payment capabilities 7.1% 9.2%
Provided capability to pay by credit card 92.2% 87.2%

Source: Medical Group Management Assn.

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Collecting in real time means knowing what's due

Real-time claims adjudication is widely considered the solution for physicians who want to collect from patients up-front, but find it nearly impossible to determine how much they owe. It's an electronic process in which physicians and other health care practitioners send patient information to the payer and within seconds can get a breakdown of the patient' insurance, what the co-pay amount is and how much of the deductible has been met.

There have been some promising developments with real-time claims adjudication -- Humana launched a nationwide system last year and several others have since launched pilot programs. But the process is still in its infancy, said Maggie O'Hara, group vice president of marketing and customer operations for Stamford, Conn.-based Ivans, a network connectivity company that has been involved with the system's implementation as an approved Medicare vendor.

One hurdle the industry has to jump is establishing a set of standards for the industry, which will make compatibility easier, O'Hara said. Adding to the challenge is that with a consumer-driven market there are many sources of funding. Physicians may not only have to go to the insurer for payment, but also a bank, she said.

Jennifer Lis, deputy director of the Council for Affordable Quality Healthcare, said the other challenge is getting doctors ready to bill patients at the time of service. "They have to be ready to bill on the spot" and many are not, she said.

The CAQH launched the Committee on Operating Rules and Information Exchange in January 2005. It's first step is developing rules to allow physicians to check eligibility at the time of service.

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