Healthcare practice owners and managers are often astounded to realize that it can cost as much as $6 or $7 to successfully collect a patient payment using traditional invoices through the mail. Considering employee time, as well as postage and envelopes, the cost truly adds up when sending dozens of invoices each week. The hours spent preparing invoices also detract from other endeavors around the office – valuable time that could be focused on improving patient flow, records management, etc. – not to mention that most patients are sent two or even three invoices before they return payment. Establishing a formal payment policy with your patients can help improve collections and reduce practice overhead.
Designing a Patient Payment Policy:
When designing your payment policy, spend some time talking with your staff, the person responsible for your billing and colleagues at other practices. These resources often provide insightful information from direct personal experience about what works and what doesn’t. Consider the history of your practice in defining how far you should to reach with your payment policy; there are variations from one locale to the next with respect to age, economic status, and so on. In some areas a written statement of which insurances you accept and that “payment is due in full at the time of service” might be satisfactory. Other areas might require detailed information about payment plans, minimum payments and your use of collections agencies to set the appropriate expectations.
Just remember to keep it simple. The more straightforward your policy, the more effective it will be. Be upfront about your rules, clear on how you will handle non-payment, and direct with enforcement. Too many practices have found out the hard way it’s much easier to offer a clearly written policy in advance than it is to calm a shocked patient down when asked to remit a large payment on the spot.
A Few Considerations:
The most straightforward, direct payment policy would require all patient obligations are met at the time of service, but that’s not always an option. What about patients who “forget” their checkbook? How about those patients who just don’t have enough money to cover an expensive procedure? Below are a few options you might want to consider.
Invoicing Charges:
Some practices offer to send out patient invoices in lieu of payment at the office but add an “invoicing charge” to each mailed statement. These charges often range anywhere from $1-$5 per statement and help defray some overhead, but rarely all of it. While invoicing charges can be effective in getting patients to remit payment with the first bill, they can reflect negatively in a saturated market with strong competition between practices, not to mention for new practices seeking to build a patient base.
Payment Plans:
Payment plans can be a good alternative for patients unable to meet full obligations at the time of service, but detailed parameters are an imperative. Keep in mind payment plans that run too long increase the risk of default. Some practices have found the best approach is to limit terms to six months or less.
For some types of practices, an example payment plan policy might establish a minimum of say, $100 due at the time of service, with the balance divided into equal installments over the following 6 months. Or, you might divide the total balance into 6 monthly installments, with the first installment due at the time of service.
Regardless of how your payment plan is structured, it should focus on two equally important goals. First, keep it simple to avoid confusion. Second, find a reasonable balance between collecting as much as possible up front, at the time of the visit, and what the patient can bear. If patients stretch too far upfront, they may not be able to make the remaining payments over the following period, resulting in the worst case scenario for everyone – default.
Interest:
Most offices offering payment plans do not charge interest, but it’s not an unheard of practice. Interest charges, like invoicing charges, can be a negative determining factor in competitive markets and for new practices. Charging interest also requires additional staff time to calculate invoices before mailing, rarely offsetting the added overhead. Another important factor to remember with interest charges is adherence to the rules Truth in Lending Act. This can add several more layers of requirements to your practice’s administration, creating further unnecessary complications.
Collections Agencies:
Teaming with a collections agency can provide you with some recourse if patients fall into default, but consider your options carefully as collection agencies can charge anywhere from 15% to 50% on receivables. Any such partnerships should be thoroughly researched in advance, and outlined in detail in your policy, including agency contact information for your patients.
No Shows:
Patients who fail to show up for a visit without notice is, frankly, annoying and rude. But invoicing no shows can turn patients away from future visits, not to mention they typically have a very low receivable rate. If you plan on invoicing no shows, keep both of these points in mind as the overhead costs of invoicing may give you enough cause to write it off completely.
Alternate Payment Methods:
Consider offering as many payment methods as possible. Recent years have seen a decrease in credit card processing fee, making them more attractive even for practices with only moderate patient traffic. Credit cards can also be used to bill for monthly installments and payment plans if signed authorization is provided. This will also help circumvent the proverbial ‘check in the mail,’ and, you’ll know immediately if the charge is rejected.
Communication:
Whatever parameters are defined in your payment policy, communication is key to ensuring smooth implementation. Remember that your office staff is on the front line when it comes to addressing the policy with patients and should be given clear instructions on all aspects. An office wide meeting can benefit everyone, offering the opportunity for staff to ask questions before implementation. Provide front office staff with an “internal” copy of the policy with suggestions on when and how to remind patients of the policy.
In relaying the new policy to patients, a sign at the check-in counter stating “All patient obligations must be resolved at the time of service” is an easy first step. Second, create a detailed flyer outlining your policy and keep a stack visible in the waiting area, and, for the first few months, each patient should be provided with a copy of your flyer upon check-in. Front office staff should of advise patients when they call for an appointment and remind them verbally when upon arrival. If steps are necessary, you might require each patient sign a “Payment Policy Agreement” and keep it with their records.
Some practices now even send a “new patient information packet” when an appointment is scheduled far enough in advance. This is an excellent opportunity to include billing policies with other information about your practice. Practices might also include background information on providers, healthy living suggestions geared toward the practice specialty, or information on how patients should prepare for an office visit.
Implementation:
Creating your policy is the first step to improving out of pocket collections, but it will only be as effective as your implementation and follow through. A few small adjustments to office procedures will ensure this is carried out successfully.
First, it should become standard procedure for staff to obtain pre-authorization from insurance carriers – before the appointment, not just before a claim is filed. Create a list of steps associated with scheduling a patient visit that includes researching co-pays, deductibles, visitation allowances, etc. directly with the carrier. Although pre-authorizations can be made over the phone, “self-serve” online with many carriers is much quicker. Common carrier websites could even be bookmarked on workstations for easy access.
Second, condition your staff to leverage information from pre-authorizations and discuss patient obligations at check-in. All parties should be fully aware of their responsibilities and patients expected to advise how they will remit payment.
Third, to ensure patients don’t “get away” without paying everyone should be required to check-out, as well as check-in. All members of your staff – doctors, nurses, assistants, whoever is the last to visit with the patient – should clearly remind them to stop by the front desk or cashier to address co-pays on the way out, and receive detailed instructions on additional balances that will be billed to them.
Finally, review the performance of your policy. Allow one or two weeks for changes to take effect and begin evaluation of results. Arm yourself with detailed information about collections rates for the weeks and months prior to the change and compare against the weeks immediately following. Take note of what’s going on around the office; evaluate how the staff is managing the new policy and make changes as necessary. If something does not appear to be working, make sure you’ve given ample time to fully measure results, but don’t be afraid to make another change. Remember, maximizing out of pocket collections is an ongoing task, but if done properly it can yield great improvements in your practice’s overall profitability.