Article Date: 2/1/2011

Can You Lower A/R While Promoting Patient Loyalty?
collections

Can You Lower A/R While Promoting Patient Loyalty?

The answer is yes — if you implement an effective collections policy, that is.

April Jasper, O.D. West Palm Beach, Fla.

One of the many challenges facing healthcare providers today is controlling accounts receivable (A/R). To minimize the impact of unpaid patient bills on your practice, it's essential you implement effective collections procedures, such as those presented in this article.

The patient's burden

As you're developing your collections program, it's beneficial to understand how recent changes in healthcare plans impact the patient and ultimately, your practice. Notably, the increasing number of consumer-directed health products results in patients now being responsible for higher deductibles and co-pays in an effort to keep their health insurance premiums low.

According to 2010 research, consumers now pay more in healthcare costs than do employers. International management consulting firm McKinsey & Company reports that healthcare costs rank seventh in the payment hierarchy of most households, following mortgage, utilities, health insurance, cell phone, Internet and cable bills.

“In health care, we're used to receiving the services and then worrying about the financial implications at a later date,” says Jim Bodenbender, senior vice president and general manager of financial solutions at Relay-Health, an Atlanta-based provider of web-based communications services that connect doctors and patients. “It can be hard to collect for a service that has already been rendered when it's competing for more pressing bills.”

According to McKinsey & Company, bad debt resulted in more than $65 billion in uncollected healthcare revenue in 2010. This is a significant portion of the more than $2.5 trillion spent on healthcare in the United States each year.

Tracking bad debt

Many assume that uninsured patients are responsible for this uncollected healthcare revenue. However, a closer evaluation reveals that the fastest growing portion of bad debt stems from what those patients with insurance fail to pay after their insurance has paid its portion of their bill. Multiple hospital surveys show that in the hospital system, the “balance after insurance” for insured patients is growing at a rate of 30% per year. The figure for those without insurance (self-pay) is 19% per year.

It's important that we not assume that consumers are unwilling or unable to pay their healthcare bills. McKinsey & Company research shows that when surveying the consumer (patient), more than 74% of insured consumers said they were willing and able to pay their out-of-pocket medical expenses that amount to less than $1,000 per year. Interestingly, 90% were willing to pay if the expense was less than $500 per year.

Why don't patients pay?

The same McKinsey survey participants said the reason patients didn't pay was due to a lack of financing options (37%) and total confusion regarding what they owe (17%). For example, many patients said that the explanation of benefits (EOB) they received from the insurance company stated, “this is not a bill.” And further, the amount owed by the patient, according to the EOB, differed from the amount quoted by the doctor's office. The result? These patients didn't pay anything.

These statistics show a growing trend that demands the positioning of collection procedures as a high priority for all healthcare providers. In an average optometrist's office that accepts insurance assignment and has a medically oriented practice, the average patient responsibility per day could be as much as $1,000 in co-pays and deductibles.

Consider the following examples: If we calculate co-pays alone at $30 per patient visit, a practice that sees 20 patients per day depends on patients to pay $600 in co-pays per day. Multiplied by 200 workdays per year, this co-pay amount balloons to $120,000. This total does not even account for the additional percentages and deductibles for which the patient is responsible. In short, this is a significant amount of revenue.

If we estimate that the administrative costs for collecting the “patient balance after insurance pays” equals $4 per line item, then the cost for a patient that has five codes per claim translates to $20 per visit. In an office with 10 claims per day with a balance due, this can total $200 per day, or $40,000 in a 200-workday year. It typically costs an office as much as the co-pay itself to recoup patient co-pays at a later date.

Establish procedures for collections

Fortunately, your office can take steps to all but eliminate your practice's A/R amounts, as I describe in the following steps.

► Before implementing any collections procedures mentioned here, check your participation agreement with each health insurer to ensure your chosen management technique is permissible.
► Verify with each patient's insurance company what the patient's financial responsibility is for any procedures that will be done in your office before the patient arrives at the office. Many of the insurance carriers offer online pricing tools that allow you to calculate the patient's responsibility, including deductible and co-pay information, after your office enters the appropriate procedure codes.
► If you need to do extra testing on the day of the patient's visit that was not anticipated ahead of time, have someone in the office check the patient's insurance immediately in order to inform the patient of these costs at the time of service. While this requires extra effort on the part of your staff, remember, patients are willing to pay, as long as the practice provides them with clear information on the required payment ahead of time.
► Have a written financial policy posted for patients in your office and on your practice website. Include this policy in your welcome packet for new patients, and have them sign it, verifying they understand and accept financial responsibility for services provided at the time of service. This policy should also include the statement that it's the patient's responsibility to understand insurance benefits, including any co-pays, deductibles, etc.
► Inform the patient of what his/her financial responsibility is for the visit, and collect all fees before the patient encounter. In the past, offices that attempted to collect patient fees at the time of service did so at the end of the patient encounter. In order to prevent misunderstandings and lengthy discussions — and to keep the collection rate at time of service at the benchmark of 90% — it's important to collect before the patient encounter.
► Have financing options available through a third-party financing company for patients who have difficulty paying their out-of-pocket costs. Some fiance companies will even offer no-interest financing to the patient at no risk to the practice. By offering such attractive financing terms, these companies can help your practice build its base of loyal patients.
► In the event that you do extend a financial hardship waiver, it is important to have a written financial hardship/charity care policy in place. This policy could then be applied to any patient claiming indigence and include discounts based on Federal Poverty Guidelines, which are published each year by the U.S. Department of Health and Human Services. (For the most recent guidelines, visit http://aspe.hhs.gov/poverty/index.shtml.)
► Consider posting a list of services you offer and your fee schedule in your office and on your practice website so patients can be prepared for the expenses they will incur.

What your staff can do

When you establish new policies in your practice, it's important to educate your staff regarding the reasons for the change. Many doctors have found that staff members are relieved by the institution of a collections policy. They recognize that the policy makes it easier for them to collect fees at the time of service. Many times, the office team already knows that this area is a problem, and they are looking for a way to simplify and streamline the collections process.

The front desk staff are the most appropriate employees in the practice to collect these fees, as they are the first to encounter patients. The person in the office confirming patient appointments should also prepare patients by explaining, ahead of time, what their financial responsibilities will be for the visit. This staff member should also remind the patient to bring his health insurance card to the visit.

The billing staff should make notes in the patient record for the front office staff to refer to so that they collect the proper amounts. Give your staff a script when collecting these amounts. Make certain that they are kind yet firm when discussing fees with patients. One way to address the patient: “Mrs. Jasper, your fee for today will be $XXX. How will you be paying for your services today — cash, credit or check?”

It is important that your staff not leave any option for non-payment.

If asked why

While rare, patients may ask why you are collecting fees before the encounter. When they do, be sure to communicate the following:

1. “We are abiding by new business norms.”
2. “We are abiding by obligations set forth in insurance contracts that obligate all doctors to collect co-pays and deductibles owed to them.”
3. “We are reducing office costs by eliminating the need for mailing statements and costs associated with billing.”
4. “We'd like to reduce the wait time at the end of the patient encounter.”

Without an effective collections policy, our only option for payment will be to retrieve a small portion on these unpaid amounts through collections — a choice that is best to avoid.

“Referring patients to collection [agencies] is occasionally necessary; however, it would certainly assure that those patients will not return to one's office in the future,” say David A. Lee and Eve J. Higginbotham in the Clinical Guide to Comprehensive Ophthalmology (Thieme 1999).

The right time

Medical practices and consultants report that A/Rs amount to as much as 30% of their gross revenues. Reducing this percentage is quite easy if fees are collected at the time of service. Even a slight decrease in this receivable percentage can yield a significant increase in practice income.

Remember: If we don't make a profit, we can't afford to stay in business and help more people with their eyecare needs and provide for our families. Implementing collection policies and financial procedures is a crucial step in running a successful and profitable optometric business. OM

Dr. Jasper is in private practice. A graduate of Nova Southeastern University, she completed a residency in ocular disease at the Brockton/West Roxbury VA Medical Center in West Roxbury, Mass. She is a fellow of the American Academy of Optometry, trustee for the Florida Optometric Association and a Vision-Source administrator. E-mail Dr. Jasper at drjasper@aeswpb.com. To comment on this article, e-mail optometricmanagement@gmail.com.


Optometric Management, Issue: February 2011