Payment Plans for Patients

You've sent three patient statements and still no payment. Time to send the account to collections? Maybe not. Many practices find that negotiating payment, or budget, plans is an effective way to get patients to make good on their debt.

While methods and logistics for creating such plans vary, practice managers agree that communication with patients is critical to a successful payoff.

"We are in the business of caring for patients," says Lisa Roberts, reimbursement specialist at Obstetrics & Gynecology in St. Louis, Mo. "We want to help people settle their accounts."

Senior reimbursement specialist Laurel Jones, from Bakersfield Orthopedic Medical Group in California, adds, "You can't just send statement after statement and expect those who need financial assistance to call. You've got to contact them and discuss how the account will be paid."

Sharon Cardwell, a consultant for Larson-Allen in St. Louis and a former practice manager, agrees. "Having an actual conversation with the patient can reveal a great deal of information," she says. "A phone call can quickly reveal personal situations that are keeping the patient from paying the bill -- or that the patient has a secondary insurance that they assume you filed." But you've got to intervene early.

Strategies that work

Roberts' practice sends two or three patient statements after insurance pays its share, and then, if it receives no response, has a pre-collections company call the patient to find out how the account can be settled. "Often, she pays the account right then, with a credit card," Roberts reports. "Other times, a payment plan is established."

Jones uses a similar approach: "We talk to patients when they come in for their appointment -- before their account gets beyond 90 to 120 days old." The encounter form used by the practice includes the patient's balance; those with a balance of $100 or more are marked with the notation to see Jones first to initiate the discussion.
With those patients, Jones says, "I sit down and ask if the patient can make a payment or if he or she needs to set up payment arrangements. About 85 percent make a payment on the spot."

This strategy has been effective, Jones says. Of the practice's roughly 140 accounts that are greater than 120 days old, 80 percent are making regular payments.

Jennifer Clifton, administrator of Myrtle Beach Internists in South Carolina, sends two statements before initiating a series of three collection letters. "During my monthly account review, I call the patients who have received collection letters," she says. "Usually I get the patient to commit to a payment series that settles the account in three months. The others go to collections, but I've only sent five or six people that route. The budget plan really works."

In hardship cases, Clifton negotiates payment plans using discounts. "In our state, many Medicaid patients need treatment beyond the number of annual, reimbursed visits [permitted by the government]," she says. "We work with these patients to make sure they receive all the visits they need, and get help paying their bill."

For those Medicaid patients who need visits beyond the allotted amount, Clifton waives 50 percent of the practice's fee when they agree to pay within 90 days. Patients appreciate this, and Clifton reports that their budget payments are on time. Check with your carrier about state laws that relate to this type of negotiation.

How much is enough?

But just how much per month can you expect patients to pay? For many practices, the answer depends on the total account balance. "We try to get patients to pay off the balance in 60 to 90 days," says Clifton. "Our patients typically owe $100 to $200 at the time we establish the payment plan, so monthly amounts range from about $30 to $60 per month."

Although patients in specialty practices typically owe more, Cardwell says the bill should still be cleared within six months. "Rarely do you want to stretch it further because the chance of collecting gets smaller and smaller," she cautions. 

Still, some practices are more flexible. Bakersfield Orthopedic sets its payments based on total balance thresholds. For instance, "if the patient owes less than $500, the minimum payment is $25," Jones says, "but we start the negotiation process by asking for at least $50 a month." If the patient owes more than $500, the practice requires a minimum payment of $50 per month, but tries to get a commitment of $75 to $100.

And Allergy, Asthma & Internal Medicine of Northern New Mexico allows patients to pay whatever they can afford, "even if it's only $10," says Julie Richey, business manager. "Some of our patients have been paying for quite some time. Our physicians continue to treat them as long as they are making an effort," Richey adds.

Be careful if you agree to low monthly amounts, however. Experts agree the cost of sending a statement ranges from $7 to $9, so allowing low payment amounts makes account payoff a slow process.

Agreements and logistics

Cardwell insists on getting the patient to sign a written agreement "because it makes them unable to deny the details." Jones asks patients to sign a "Promise to Pay" letter. You, too, should have patients sign a statement that spells out how much they agreed to pay for how many months.

Most practices send regular statements throughout the budget plan process, but if your goal is to make payments convenient and decrease costs, ask patients if they would like their credit card to be charged each month. Obtain written permission and a signature, and then simply run the patient's credit card at an agreed-upon date each month. Obstetrics & Gynecology of St. Louis offers this option, but adds an extra precaution: "Even after we have the patient's signature, we call her each month before we bill the card," Roberts says. "Then we mail a receipt."

The credit card option is a modern version of the old coupon books, which few practices use these days. But if you decide to offer coupons, you can easily make the "booklet" on your computer -- simply create a Word document with multiple coupons that can be cut into individual strips, and mail them to the patient. Each coupon should indicate the patient's name, account, payment amount, due date, and a line for the patient to write the amount actually being sent (look in the Tools section of this site for a sample you can use). 

Whatever the budget plan method, those patients who fail to meet it should incur a consequence.

In Clifton's practice, the accounts of those who haven't kept their word make their way to her desk. "If the patient is coming in for a non-life-threatening prescription, they've got to pay their budget amount before the physicians write the script." And while defaulters at Bakersfield Orthopedic continue to be seen, for existing conditions, "if they come in for a new condition, I always get at least a partial payment, if not payment in full, before the physician sees them," Jones says.
 
Keep it current

Savvy practices let the computer track adherence to payment plans. "Once a patient has agreed to a monthly amount, the billing office enters it into the computer's collection module," Richey explains. "If payments are being made, the account remains current. If they aren't, the billing office is alerted on the monthly budget non-payment report." This report alerts the billing staff to make phone calls or take other appropriate action.

Should you charge interest on delinquent accounts? You can, but it's a double-edged sword. Many patients who have trouble paying the principal will have even more difficulty paying the principal plus interest, and some may simply stop paying altogether, figuring they'll never catch up.

"We tried charging interest in the past," Roberts says, "but it's difficult to collect and you usually end up writing it off." Cardwell adds, "for the small amounts you do get, you burn up a lot of staff time -- and patients may view the tactic as punitive." If you decide to use interest as a deterrent to missed payments, check your state banking laws to find out the amount you are legally allowed to charge.

When set up and managed properly, payment plans are a great alternative to sending patients to collections or writing off accounts to bad debt. Ask your staff to make the first move by calling patients and setting up a workable payment solution. You're sure to see more money in your pocket.

Cheryl Toth can be reached at editor@physicianspractice.com.

This article originally appeared in the January/February 2003 issue of Physicians Practice.