Why some practices stopped accepting patients' cash

Sacramento Ear, Nose & Throat in California has a message for its patients: Your cash is no good here.

A couple of years ago, the 19-physician otolaryngology practice stopped accepting cash payments from patients. No singles, tens, twenties, pennies, dimes or quarters -- no matter how shiny or crisp. Instead, official policy is that patients pay only with a credit or debit card, or by check.

It's a policy that patients have come to accept. In fact, patients drove the policy in the first place, said practice CEO Jeffrey Dudley.

"Most people don't carry a lot of cash anymore. Cash is no longer king," he said.

According to a survey of 3,210 consumers that Javelin Strategy & Research completed in October 2011, 54% used a credit or debit card most frequently to pay for goods or services, and only 21% relied on cash. The use of cash was more common among people over 65 than those 18 to 24 years old.

Trend data are not available, but industry watchers say the numbers indicate that cash is no longer the preferred method of payment.

Few practices seem to have gone so far as to exclude cash payments, but those that have cite many reasons for doing so. Eliminating cash reduces the risk of embezzlement if a staffer takes $10 here and there over a period of time. "Cash has legs," Dudley said. "Cash is pretty easy to slip into your pocket. We wanted to eliminate the temptation."

Practices said cash is much more difficult to manage, and the 2% to 3% fee for each credit-card transaction is more than covered by the reduction in costs for managing cash -- such as transporting it to the bank.

For these reasons and others, the practice of allergy and asthma specialist Sudhir Prabhu, MD, went cashless about six months ago. Family Allergy & Asthma Consultants, which has four offices in and around Jacksonville, Fla., already was seeing a majority of its patients paying with plastic.

The coordination needed to manage the cash that did come in and always being able to provide change left Dr. Prabhu asking if this form of payment was worth the effort.

"When you take cash, you have to have a lot of safeguards in place," he said. "We have multiple locations and one bank. It just became logistically difficult to collect money from all the locations."

Those who counsel practices on money matters advise considering several issues when thinking about forgoing cash.

"It depends on the situation," said Jeffrey Milburn, an independent health care consultant with the Medical Group Management Assn. "Some of the issues to consider are the type of the practice, the daily volume and the specialty. Accepting cash is a convenience for the patient, and some people don't have credit or debit cards or checking accounts. Or even if they have credit cards, they have maxed them out. I don't think we are a cashless society yet."

Questions to consider before eliminating cash payments:

• How does the patient population prefer to pay?
• Do patients have noncash means with which to pay, and will they use them?
• What is the usual amount that patients have to pay?

Practices with a large number of low-dollar transactions may find it worthwhile to accept cash, analysts said. Those that tend to have higher patient payments may find that a cash option is not important.

Oak Tree Internal Medicine in San Ramon, Calif., accepts cash, along with plastic, checks and money orders, because it has many patients with $5 and $10 co-pays. Most weeks, the office collects fewer than $200 in cash from patients, and the chance that this money will not end up where it is supposed to is low because it is a very small office with one physician and three staffers.

"It's not likely in the near future that we would stop accepting cash," said office manager Karen Pratt. "We try to make things as easy as possible for our patients. I think patients really appreciate being able to pay with the method they want to be able to pay with."

If a practice does decide to go cash-free, experts advise publicizing the new policy as widely as possible on various information materials. Legally, medical practices can stipulate the form of payment accepted.

Practices may want to consider some flexibility in enforcing a no-cash policy.

Sacramento Ear, Nose & Throat will accept cash, even though the official policy says it doesn't. The practice provides a small number of cosmetic procedures and has found that some patients who receive them prefer to pay cash.

"We're not going to turn it down, but we do make sure it gets off the front desk to the business office," Dudley said. "We really don't ask for cash, but we're not going to not accept cash."