Kim Lafontana


The growing trend of “self-pay” patients is fast becoming a factor affecting the financial well-being of nearly every practice in the country. Over the past year, athenahealth has seen a significant rise in self-pay income as a percentage of the average medical practice’s total accounts receivable. 

We’ve also observed changes in the mix of types of self-pay collections, which come in several different flavors. Self-payments can take the form of copays, coinsurance payments, deductible payments, or out-of-pocket payments by uninsured patients. 

The deductible category is the fastest-growing portion of the self-pay segment by far, probably due to the current boom in consumer-directed health plans, which have quickly turned into a nationwide phenomenon. Athenahealth has calculated that deductibles as a share of A/R in medical practices have grown more than 19 percent since 2003. 

For most practices, this has meant shouldering an increasingly complex collections burden that represents significant operational costs. Costs associated with self-pay include the administrative burden of tracking down patients for payments due and the time and effort needed to determine how much patients will owe considering the care they require, what their insurance covers, and the amount remaining on their deductible. Practices must also deal with the additional accounting complexity of common consumer-directed healthcare scenarios that call for them to refund payments made using health savings account dollars and to estimate the mix of taxed and pre-tax dollars and accounts for tax reporting. In the end, practices often wind up writing off a much larger portion of self-pay revenue than insurance-paid claims. 

Looking at recent material from our database, you can get a sense of the magnitude of these hidden costs. Compared with copays (which almost never get written off and have an average of 16 days in A/R), deductible dollars take more than four times as long to collect, and a whopping 18 percent of deductibles ultimately get written off. 

To lessen your exposure to this growing problem, you can either reduce the portion of your business that is self-pay (which may not be practical for some practices) and/or adopt proven “best practices” for improving self-pay collections. 

Since your patient mix is always changing and plans frequently alter their coverage options, it’s difficult to determine how much your practice will be affected by self-pay. One tool that may help can be found at 

 and athenahealth, ranks payers nationally and regionally on a number of metrics, including the percentage of charges specific payers refer to patient responsibility. PayerView data - featured in last month’s cover story, which you can read at 

 - may give you a sense of which of your payers contribute most to your self-pay business and help you evaluate the impact of changing your payer mix if you have the option to do so. 


When it comes to improving your ability to collect self-pay, one simple concept should be your guiding principle: time of service (TOS). TOS is the golden moment for collecting payments from patients - the further you get from TOS, the less likely you are to collect at all. Critical factors that will determine your success in collecting at TOS are: 

Knowing what the patient’s responsibility is going to be.

 What care is the patient going to receive? What is the patient’s coverage for that care? What is the remaining deductible? 

 to the patient before the appointment and at the appointment both the amount owed and your expectation for payment at TOS. 

Developing and implementing a clear protocol

 for your staff members when they ask for and collect patient payments. 

Sounds simple, but in practice, of course, collecting from patients is by no means easy, particularly when it comes to determining an individual patient’s financial responsibility. Why is this so difficult? 

Many payers do not have updated information on the remaining deductible for individual patients, and accessing such data can be very time-consuming, requiring phone calls or fax requests. We recommend getting in touch with all of your payers and asking them to identify the easiest way to get deductible tracker information for their customers. If a payer does not supply the information, formally request a change in the policy through as many channels as possible. 

Once you have determined what a specific patient owes, politely make clear to the patient your expectation for payment at TOS. To ensure that you’ll collect the payment, develop a clear, written policy that you effectively communicate to both staff and patients; know when it’s time to cut your losses and turn delinquent accounts over to collections; and measure your performance and make changes in your payment policy when necessary. 

By far, the most effective thing you can do is develop a well-defined payment policy, require your staff and patients to review and sign off on it, and train your team to follow it consistently. A clear policy not only educates patients on what is expected of them; it also limits the stress on your staff. When staff members know that the rules have been spelled out for patients and that there’s a consistent process the practice follows each time, they’ll find it much easier to adhere to the process themselves. 

A good internal policy will set out the following basic rules for different self-pay situations: 

 Full or partial payment is expected at TOS. 

 Full or partial payment is expected at TOS. Based on the amount due, set benchmarks for advising your billing department when a patient with an outstanding balance is next scheduled for an appointment. Establish consistent criteria for requirements, guidelines, and approval processes to develop payment plans for patients with outstanding balances. 

Your front-desk staff should be able to advise your patients about their benefits and their responsibilities, and then collect at check-in. For services that require more than a copay, you may want to create payment schedules and ask that the balance be at least partially paid before the new services are provided. 

The longer it takes to collect, the less you will collect. In our experience, the average practice has less than a 25 percent chance of collecting after a statement is mailed to a patient. By the time a fourth statement is sent, the collection rate falls to roughly 4 percent.

Kim LaFontana is vice president of payer performance management and Kim Williams is senior client service manager for athenahealth, a revenue cycle management company for medical practices whose database of billing information is the statistical basis for this series. They can be reached via 

This article originally appeared in the July/August 2006 issue of Physicians Practice

Articles

Practice Management Lab: Finding Success With Self-Pay


One of the most important elements of efficient practice management? Eliminate as many claim and billing problems as possible 

 they occur. That’s the secret to controlling denials, too. And the best way to prevent a denial is to learn from the denials you already receive. 

Although learning from experience is essentially the key to effective claim denial management, it is also the part that the vast majority of practices entirely overlook. Most pay much more attention - and spend much more energy - on appeals. 

But think about that tactic. Getting good at appealing denials is very valuable, but if you were able to stop and look at each of your denials individually and come up with ways of preventing them from reoccurring, it wouldn’t be long before your skills in the art of appeals became much less relevant. You’d be able to focus your appeal powers just on those claims in which you are actually appealing a payer’s decision - not merely correcting your own work.

Many practices unadvisedly arrange their appeals processes in a manner that practically prevents them from learning from denials. They identify a staff member or designate small teams whose job it is to look at incoming denials, decide which ones are worth appealing, and then work them to closure. 

This makes sense as a specialization strategy in that you are building the appeals skill set of one or more of your staff by having them focus on that task alone, and then reaping the rewards of their ever-increasing efficiency. This approach is sound as far as it goes, but it is much wiser to orient your entire practice to the task of identifying the most efficient ways to 

The first step toward effective denial management is gathering useful, accurate data. You need to know what kinds of denials your practice typically receives, and what is causing them. 

It’s popular and easy to blame payers for denials - they have clunky systems, they change their rules at random, and they lack the ability to set up their claims adjudication systems to accurately process claims according to their own contract rules. Such criticism is fair enough, but it is just not useful. You most likely cannot change your payers’ practices, but you can change the way you communicate with them, yielding you very significant benefits.

Denials tend to fall into several distinct categories. The pie chart shows the distribution of denials from a national sample within the athenahealth database. 

As you can see, three types of denials account for more than half their volume, and if you could successfully address the top seven, you would eliminate about 90 percent of all denials. The bottom line: You can focus your efforts instead of being all over the map.

Your denial distribution will certainly vary from this national aggregate. Depending upon your size, specialty, and payer mix, you will probably have a slightly different set of billing priorities, but each of these denial types can be tracked back to a specific phase of your business process. Some claims are destined to be denied before they are ever submitted due to errors made in scheduling and registration; other claims sow the seeds of their ultimate denial when they are submitted. But each time a claim is denied marks an opportunity to learn from your mistakes and improve your processes to decrease their likelihood in the future.

There are many ways to look at the business processes associated with claims and denials. For the purposes of this article, we think the most practical way to look at it is within the context of the lifecycle of a patient visit. From the claims/payment perspective, the lifecycle of a visit begins with registration and/or scheduling, involves some level of pre-visit prep, includes a clinical encounter, generates claims that are (hopefully) submitted, and ends with those claims being paid or written off. 

Each of these phases is associated with specific types of denials. Once you’ve identified the denial types that most often occur in your office and the parts of your workflow associated with each type, your next step is to focus on communication, accountability, and motivation. Communication is key, since you must have a mechanism to inform relevant staff of the denial triggers that occur within their phase of the visit lifecycle, and then train them to counteract those triggers.

We have found this communication to be most effective when done in a manner that is neither punitive nor accusatory, but rather within the spirit of presenting an opportunity to improve. Use your communication mechanisms to create accountability - not resentment. That’s where the motivation part comes in.

Here’s a summary of what you’ll need to do to get your denials under control:

Understand your denial trends and drivers; create categories of denials and classify each denial based on these definitions. 

Tip: If you use a practice management information system, set up a library of payer denial codes. Make sure when you post payments and denials you use those codes and run regular reports to detect trends in denials by type.

Spend time each month analyzing which denial categories are up or down and identifying your best opportunities to prevent denials. You should do this overall and by payer, as these trends are likely to be very different. 

Tip: It’s hard to find time to look at the reports and make decisions, but it will pay off. Block off an afternoon in your calendar during the first week of each month to invest in this, and you will find within a few months that you have less work to do.

Link the knowledge you’ve created back to the relevant point in the lifecycle that needs reform, ideally holding the relevant group accountable, or - better yet - making them responsible for working denials they’ve created.

Tip: Reward positive changes. Track denial rates for each of your groups each month and reward them when those rates go down. Pizza parties, movie gift certificates, and extra paid time off can all go a long way toward building pride and morale, and a little healthy competition is never a bad thing. 

Of course, regardless of your best efforts, you will always have appeals to file. Here are a few best practices:

Prioritize your work based on the likelihood of payment and the value. 

Don’t let your staff spin their wheels on $5 secondary claims just to make a point with the payer. Go where the money is.

Assign work based on your payers. Most large practices assign work based on their physicians, but this is inefficient when it comes to working denials. Working by payer allows you to learn the little peculiarities of specific ones (we all know they exist) and tricks to make the denial process smoother. You will soon find your staff knows whom to call at each payers’ corporate offices and can perhaps better convince them that paying specific claims is the right thing to do.

Track and reward staff for work well done, measured not by volume but by dollars collected. This tells you if your prioritization is working and if you are pursuing the most lucrative claims. But don’t forget that the real goal of this function isn’t to work denials forever; it’s to eliminate them entirely.

One last thing to remember is that not all unpaid or underpaid claims come back as strictly “denied.” Next month we will discuss claims that are technically “paid,” but are either paid incorrectly (bundled, global charges) or at the wrong rate according to your contract. Finding and pursuing these claims can be worth significant income to your practice, so check this space next month to learn more about zero-pays and under-pays.

Kim LaFontana is vice president of payer performance management for athenahealth, a revenue cycle management company for medical practices whose database of billing information is the statistical basis for this series. She can be reached via 

This article originally appeared in the May 2006 issue of Physicians Practice.

Many practices focus time and money on appealing denied claims - a good strategy, if necessary. But wouldn't you rather avoid denials altogether?