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 By Neil B. Gailmard, OD, MBA, FAAO, Editor February 18, 2009 - Tip #367 
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More on TOS Discounts

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Tip #364, Complaints about Fees and Medical Billing, prompted a large response from readers. As always, readers bring up some excellent points and I'll share an interesting one here.

A compelling argument

Here is the email from a reader:

I can understand some of the points you make with your latest practice management tip and strongly agree that most of our colleagues do not place a high enough value on their services.

You know all the requirements of dealing with insurance - and patients are beginning to learn them as well.  Some consumer websites as common as MSN discuss asking for a discount for payment at time of service from any health care provider, so consumers are well aware of the practice.

I recently had a self-employed patient who has a catastrophic care plan ($10,000 deductible).  Being an astute business person, he listed off all the costs we have dealing with insurance and stated he did not expect to pay for these services if he was giving us cash today (yes, he paid with the green stuff) and insurance companies pay a discounted fee as well.  He understood he could get a $50 eye exam down the street but expected to pay for quality - just not more than everyone else actually pays just because he is paying cash.  I have to say his statements all ring true and we have no valid argument to counter his points as they are based on fact.  He appreciated that we had a time of service (TOS) discount based on real business decisions and numbers and was more than willing to pay that (our TOS discount is under 20%).

Another issue, one you addressed, is most providers have not "tested" what patients will tolerate for private fees.  In our region our two highest reimbursing plans will pay up to $189 for 92004 and $125 for 92015.   I would think that fees at that level, without a discount for payment at time of service, would "test" the private pay patient more than we care to see ... or we could choose not to accept higher fees from these insurance plans.

My response

You raise some good points and I admit that I constantly rechallenge my thinking on fee structure. I'm not against all TOS discounts. The practice makes sense and is fair. I just wouldn't offer one if I didn't have to and I think most eye care practitioners don't have to. What damages patient goodwill is not quoting fees in advance and the confusion over not knowing what the fee will be. You can still quote a fee with a TOS discount by simply explaining that policy over the phone.

But here is how I see the example you cite about the patient knowing about insurance discounts and wanting the same. He does sound astute and he is a good negotiator. The flaw in his argument is that he does not bring you a large volume of patients like insurance plans do. That is why we grant the plans a discount. I'd give this guy a discount too if he brought in and paid the fees on behalf of many other patients.

And in reality, if we're really, really honest, most medical plans pay quite well for exam services. Most ODs are pretty happy with the fee levels paid by Medicare and private insurance plans, as evidenced by the tendency to think we're not worth that much in the private pay world.

In my opinion, the costs of dealing with insurance are somewhat exaggerated to make a point and to justify the TOS discount. Yes, problems with claims and collections can occur in some cases, but I'd say if you aren't able to electronically bill directly from your PMS system and get paid in a timely manner, then I'd drop that insurer.

Sure, he could find a $50 eye exam somewhere but I have a hunch that this type of patient would not like that. We all know that there are many levels of service in all aspects of commerce - from haircuts to shoes to restaurants to houses. I think it's best for my practice to stay at the upper end of eye care and let people who want the $50 exam go to a big box chain store.

So, I would have said (quite humbly) to this patient that we just can't discount our exam fee and still provide the high level of service and technology that we feel is important in eye care. He may have gone elsewhere after hearing that, but perhaps not and he is only one person anyway. The vast majority of your patients would not question it if you dropped the TOS discount. So if you lose a small percentage of people, but collect much higher fees from the rest, you're still better off.

Your point about the highest reimbursing plans is a challenge. I'm always amazed when I hear of a company paying fees that are regarded as way beyond the norm. But I'm a businessman and I'm not going to ignore the potential for high fees. I would look closely at how many patients are seen with those plans and if it is easy to bill and collect. If it's just an occasional anomaly I'd ignore it. If it's real and prevalent, I'd probably set the fee fairly high and offer a TOS discount.

Your point is well taken in that there is a limit to how high fees can go.

Best wishes for continued success,

Read Past Tips Neil B. Gailmard, OD, MBA, FAAO
Editor, Optometric Management Tip of the Week

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Send questions and comments to neil@gailmard.com.

Dr. Gailmard offers consulting services to eye care professionals through Prima Eye Group; information is available at www.primaeyegroup.com.

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