How Bad Collection Practices Put Your Practice At Risk

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We know that not all patients prioritize paying their medical bills. According to the Medical Group Management Association, in 2010 more than 60% of patient balances were never collected! This is not necessarily because patients refuse to pay, but often because practices don’t understand what patients owe or don’t ask patients for payment at the moment when they are most willing to pay – at the time of service. Not communicating to patients about their financial responsibility and not asking for payment at time of service can be detrimental to more than just your revenue. There are other reasons that you want to make sure you have a solid financial policy that you enforce consistently and fairly.

Word Gets Out

If you think patients don’t share which physician practices collect and which ones do not, think again. Word gets around in your community about practices that do not collect at time of service and do not pursue patient collections. Most practices collect only co-pays at time of service and some practices do not even ask patients for their co-pays. If you do not collect co-pays consistently for all patients, you can be sure patients will demand to defer payment of their co-pays too – one good reason to apply the same collection policies to all patients.

Breaching Payer Contracts

You may have heard that a balance can be written off to bad debt after sending three statements. If you are routinely writing off patient balances, your payer may consider that they are overpaying you since you do not find it necessary to collect the full amount that the patient owes. This can ultimately reduce your reimbursements. When you do not collect from patients, you send the clear message “What insurance pays us is enough and we do not need to collect from patients!” Many patients already believe that physicians make enough from what insurance pays alone – do you want to reinforce that myth?

Unnecessary Expenses

Every time you send a patient a statement it costs you money. It costs you money to have an employee open the payment envelope, find the correct patient in the billing system, post the payment, prepare a deposit or remote scan the check, and reconcile the checks with the posted amount. If collecting a $25 co-pay means sending one or more statements, you are reducing how much money you are truly collecting. You are spending a lot to collect a little. The cost savings when collecting at time of service (front-end collections) vs. sending statements after insurance pays (back-end collections) can be as much as 20%. When you add up the consequences of not collecting at time of service, you begin to realize you are spending too much money, losing too much money and potentially opening yourself to a challenge of your collection practices by patients and payers. Help your practice by establishing a fair financial policy, committing to collecting at time of service, and putting a plan in place to treat all patients – and your practice – fairly.

If you don’t think your Financial Policy is working for you, download our preferred financial policy here, customize it for your practice and work with your staff to educate patients about their financial responsibility. We also invite you to learn more about Credit Card on File here, which makes collections at time of service a breeze!

This article was first published on the Kareo blog.

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With 25+ years managing physician practices of all sizes and specialties in the private and public sectors, Mary Pat Whaley is one of the preeminent physician advocates and practice management consultants in the United States today. In addition to her Board Certification in Medical Practice Management, she is also a Certified Professional Coder and a Fellow in the American College of Medical Practice Executives.