Billing & Collections: Playing Hardball

Chris Francis sounds a little frustrated.

“Most people are not really prepared to meet their coinsurance or deductible amount,” he says, but “when we give people the option of rescheduling their procedure,” rather than proceeding without payment, many will find a way to pay. “A lot of people are trying to test the system.”

Waco Surgical Group, where Francis is the administrator, has considered charging interest on overdue accounts or even taking patients to small claims court to collect large, overdue accounts - and to release a little steam. In the end, though, it hasn’t yet adopted these more punitive measures, opting instead to work with patients one on one to find solutions. The group feels like it needs to balance service against more aggressive collection tactics.

“In a smaller market like Waco, we are the largest surgical practice. We want to be available to everyone we can possibly be available to,” says Francis.

The Texas practice isn’t the only one struggling with the impact of consumer-directed plans. As overdue patient accounts stack up, more physicians feel like they’re playing the patsy. And there’s a temptation to retaliate with interest fees, court dates, or other hardball tactics. Why shouldn’t patients pay up?

Whether patients pay, says consultant Judy Capko, “doesn’t have much to do with their own expendable income; it’s an attitude.”

How frustrating.

But hold up.

Before you respond emotionally, tighten up your collection processes. If there are fewer outstanding accounts, there’s less aggravation.

If you do decide to get tough, be sure you understand the best options.

Start with sound collections

“Doctors are the worst business people when it comes to getting their money. They’ll send out the same bill five times,” complains Gregory Mertz, a consultant with The Horizon Group in Virginia Beach.

Patients don’t pay because they figure that no one really expects them to.

Mertz worked with a large family practice in Memphis that would send out statement after statement to patients and never collect.

He had the practice set a firm policy, communicated clearly to patients in advance, to send out two statements then pass all patient accounts to collections. “Word got out,” says Mertz, and the practice started getting paid. “If you follow your policy, if you stick to the fact that if you don’t pay me I’m going to send you to collections, that is as effective as using late charges or interest and you don’t run as big a risk of upsetting patients.”

Capko agrees. Charging interest “is a very touchy area. I really discourage it. It’s easier just to make sure you are collecting right.”

Her tips for tightening up:

• Don’t offer credit - If a patient does owe you money, try to have him put his balance on a credit card or use a credit agency such as CareCredit that extends credit lines to patients. You get paid in full, and the patient can work out his troubles with someone else. Patients need to pay down credit cards to keep the card and avoid ruining their credit altogether. “I don’t think the loyalty to a physician is as strong as loyalty to a credit card,” suggests Jeffrey Hausfeld, a physician and managing director for FMS Financial Solutions.

• Use your team - The best time to collect is always when the patient is in the office, but it doesn’t often happen. “We’ve gotten really good at training the front office staff to not hold patients accountable for anything but their copay and that needs to change,” says Capko. “Let’s say you have a patient who didn’t pay you and now has gotten two statements. They come into the doctor and no one says anything.” That just tells the patient you aren’t serious, Capko points out. “We do have to wire down how we are going to comply with our own policy.” Consider the front desk an extension of the billing office. Make sure the front line can see when patients have deductibles, coinsurance, or unpaid balances and that they know what to do about it.

• Act fast - “If patients don’t respond to the first statement, they are telling you it’s not important,” Capko points out. Don’t keep sending statements. “It’s very easy to ignore something that comes in the mail. Try picking up the phone.” Staff can simply say they are calling to help the patient work out a payment method.

In general, take a hard look at your policies for collecting from patients

and

a hard look at whether anyone actually follows them. “If you have a lot of patients [you’d consider charging interest], something else is wrong,” suggests Todd Welter, who often reviews billing departments from his Denver-based consulting firm. Find out what’s broken in your house before you go hard after patients. You set the tone that patients follow.

Charging interest?

Of course, no matter how diligent you are, some patients are not going to pay. Even then, think twice about charging interest.

“Physicians cannot act as lending institutions. Otherwise, you are like a bank. You aren’t licensed to be a bank,” warns Hausfeld.

If you assess an interest fee, you must comply with the Fair Debt Collection Practices Act as well as state truth-in-lending regulations, an onerous task.

Hausfeld has seen many practices get in trouble for violations. In one instance, a staff member called a patient’s workplace and left a message saying, “This is Dr. So-and-So’s office calling about a delinquent account.”

“There are a lot of people out there who are professionals at not paying their bills. The patient went after this physician’s office,” Hausfeld recounts. “They threatened to sue, and the doctor ended up writing off a $3,000 account because he knew he was wrong.”

A simpler option: Charge a flat fee on all late accounts.

Try a late fee

“Most practices elect to charge a late charge. That’s a whole lot cleaner,” says Mertz.

A flat fee “very often works out to be more anyway. A $20 reprocessing fee on a balance of $200 is 10 percent. That’s probably loan shark-type interest,” Welter says.

How much should you charge? “A physician really ought to sit down and see what it costs them to rebill and do what’s fair,” Welter says, but $20 to $30 seems to be the norm.

Charging a late fee has a potential hidden benefit, too. It forces staff to get busy on patient billing and follow up. Busy staff might figure they’ll get to patient accounts later on - and never really get to them. But if patients start getting bills with late fees attached when they’ve never seen other statements or gotten a phone call, you’ll hear about it. Staff have an additional spur to get accurate bills out on schedule.

Another possibility is to charge patients for any fees related to sending their account to collections, including a 30 to 35 percent charge and any legal fees, Hausfeld suggests.

“For us, it’s a leverage point. We’ll say to a patient, ‘You owe $1,000. With a collection fee it’s $1,350. If you pay today, we can settle it at $1,000.’”

Of course, you’ll want to document late fees or collection fees in the financial policies patients get when they join your practice. Make sure to remind them, as well, during the collection process.

And keeping your eye on the ball is key.

Track results

“The most important issue of all is looking at what your motivation is for doing this,” Capko insists. “Is it valid?”

Don’t assess any sort of fee as a money-making scheme or to punish patients.

“Anytime you can avoid being punitive you are better off in any relationship,” suggests Capko.

Rather, your goal is to hold patients accountable.

Measure, then, whether collections actually are faster. Monitor whether your fees are alienating patients or referral sources. Assess whether the process of following up on fees is costing more than you are collecting.

If you focus on what you are taking in through late fees, you’ll be less focused on collecting fast in the first place. Again, your target is improving collections, not making money off of late fees. That’s penny-wise, pound-foolish.

Don’t get mad. Get paid.

Pamela Moore is a senior editor with Physicians Practice. She can be reached at pmoore@physicianspractice.com.

This article originally appeared in the April 2008 issue of Physicians Practice.