Patients, Pay Up!

So you thought collecting from insurance companies was hard? Meet the new payers -- your patients.

The average patient is now responsible for paying nearly 35 percent of his own medical bills, more than three times the amount he paid out-of-pocket in 1980, according to the Centers for Medicare and Medicaid Services (CMS). As a result, physician practices are under increasing pressure from patients to offer discounted services and lengthy payment plans, and from insurers to make certain the patients' portions of bills are collected.

In this new world of self-paid healthcare, it's important to have a written financial policy that spells out patients' responsibilities and clarifies the role of staff in collecting payment.

"If a practice wants to get paid, they need to have a financial ... policy," says Elizabeth Woodcock, an Atlanta-based physician practice consultant. "And it's very important that it's written and evenly applied so you don't get patients calling up to say, 'Dr. Joe gave my neighbor a 5 percent discount but he wouldn't give me one.' That's an immediate problem."

The essence of a good policy is to encourage voluntary payment and prevent conflicts with patients, says Charlotte Kohler, RN, a practice consultant in Woodstock, Md. "When you start talking about writing policies, a lot of people say, 'Oh my goodness, it's so big, how do I handle it?'" says Kohler. "I talk about doing them in little chunks, starting with your hot spots, the issues that cause the most conflict or raise the most questions."

Hot spots vary from practice to practice, just as the age and economic status of patients varies by specialty and location. Still, a few universal issues will reliably spark conflict unless they are skillfully handled. These include such questions as whether and how much to charge for missed appointments; which patients qualify for discounted care or a payment plan; and how to terminate a deadbeat patient.

Whether you develop a basic policy that covers only obvious hot spots or a more complete one that tackles every possible scenario, the important thing is to get started. Below are some of the key issues to include in a financial policy.

Put it in writing

Most practice consultants suggest creating a brochure for patients that outlines policies they need to know about, including acceptable insurers and payment procedures (such as when copays are due).

At a new patient's first visit, have a staff member explain the brochure and, ideally, sign a paper indicating that they understand it.

You should also have a more detailed financial policy, in writing, for your staff. There are several good reasons for putting your financial policy on paper. You don't want your billing staff to learn key policies by word-of-mouth --  unwritten policies are often unclear and sometimes employees never hear about them at all.

In the absence of clear direction, some staff members may repeat mistakes they've been making for years, or apply policies they learned at another practice. Some of their actions may even be illegal, since payment collection is a minefield of legal requirements.

Another good reason to have a written policy: practices that accept Medicare or Medicaid are required by federal and state law to be able to document policies affecting these patients. Though it rarely becomes an issue, the law is especially important if the practice offers discounted or charity care.

Finally, a written policy makes a great patient-education tool. Front-office staff can show new patients the policy and underline key points. Doing so informs patients that they are expected to pay their share of coinsurance, or the entire cost of care if they are uninsured. It also gives patients the opportunity to raise questions about financial hardship before they receive care, rather than after the fact, when it's too late to adjust your services to their circumstances.

Be careful, though, not to volunteer the possibility of copay or deductible waivers or any other form of discounted care, warns Jennifer Miller, an attorney in Washington, D.C., for the Medical Group Management Association (MGMA). Advertising discounts is a violation of the federal anti-kickback law, which prohibits practices from giving anything of value in exchange for services covered by Medicare or Medicaid. For this reason, just make sure patients have read your brochure and then refer all questions concerning financial hardship to the business office.

Fees, payment options

This is the nuts and bolts portion of the financial policy. It specifies in the patient financial brochure what payment is required of whom, when it's due, and how it should be made. The policy should include, at a minimum:

• What payment is required on each office visit.
• Allowable forms of payment (check, cash, money order, credit card, etc.).
• Charges for broken appointments, if any.
• Service fees, if any, for filling out more than one insurance form. 
• The fee for a bounced check.

In addition, the practice's policy should include some items for employees' eyes only (otherwise, you'll encourage patients to delay payment):

• The maximum length of a payment plan (two years, for instance), the minimum amount per payment, and frequency of payments. These factors are critical to successful collection efforts.
• Interest charges, if any, for payment plans. Note that if you charge interest, your policy should first be approved by an attorney to ensure it does not violate the Fairness in Lending Act. Because the rules are complex, most practices choose not to charge interest on balances owed.
• Who in the practice has the authority to write off a portion of the balance owed by the patient, and what amount they may write off without the physicians' approval.
• When to transfer a delinquent account to a collection agency.

Verify hardship

Nearly three-fourths of practices offer discounts or charity care for uninsured or under-insured patients, according to the Center for Studying Health System Change. If yours is one of them, it's essential to first verify the patient's ability to pay. "It's not sufficient to just say, 'Hi, are you poor?'" says MGMA's Miller. "[The patient] needs to provide evidence by paystub or W2. And you can't just do it once and then walk away. You have to update their financial situation every year, because they could be unemployed one year and employed the next."

Rules on determining hardship can even help prevent discrimination lawsuits. Miller says physicians may be sued if front-office staff offer discounts or payment plans to one patient while denying it to another who happens to be of a different race, sex, religion, etc.

Even if you aren't sued, it makes much better business sense to offer discounts based on a clear and consistent policy, if you choose to offer them at all.

All aboard

You'll want to keep your physicians informed -- and, to the extent possible, involved -- as you go through the policy-writing process. That will make it easier to get them to sign off on the policy you come up with.

Once you have that approval, distribute the policy to the billing office and put a copy in your practice's procedure manual. Next, discuss the policy with your entire staff. Kohler suggests introducing it item by item during several lunchtime meetings. A good approach is to ask staff what hurdles they'll face in implementing the new policy.

"That usually works better than the didactic [process of] telling them what you're going to do," says Kohler.

But training doesn't end there. Terry Allison Rappuhn, a healthcare consultant and former hospital CFO, recommends monitoring front-office staff to ensure they implement the policy correctly. "How can you know whether your people are actually communicating to patients what you want them to unless you listen in?" she asks.

Rappuhn is the director of Patient Friendly Billing, a program run jointly by MGMA and the Healthcare Financial Management Association, which aims to make healthcare billing practices less confusing for patients. Having a written financial policy and clearly communicating it to patients is one of the program's key recommendations.

"The more we do to set patients' expectations up front, the easier it will be for the patient to comply with our policies around billing and collections," says Rappuhn. "Organizations that do this successfully will see higher patient satisfaction, lower collections costs, and improved cash flows."

Todd Stein, BA, a freelance health and business writer based in Portland, Ore., is a graduate of California State University. Previously a reporter for the Sacramento Bee, Stein has specialized in healthcare topics since 1990. The former writer/producer of HIMSS Newsbreak, a weekly Internet broadcast on healthcare information technology, Stein also has written for the Los Angeles Times, Better Homes and Gardens, and San Francisco Magazine. He can be reached via editor@physicianspractice.com.

This article originally appeared in the March 2005 issue of Physicians Practice.