Discounting Late Accounts

March 1, 2007

We are considering offering a discount to all self-pay accounts over 120 days old. We’d send these patients letters offering a discount if they pay off their remaining balance in full. For example, a patient who owes $100 would have the opportunity to pay $50 and clear her balance. Otherwise, we would continue to receive monthly payments for the $100, or the account would go to collections. Would this be legal, and do you have a suggestion on how we should word this letter to our patients?

Question: We are considering offering a discount to all self-pay accounts over 120 days old. We’d send these patients letters offering a discount if they pay off their remaining balance in full.

For example, a patient who owes $100 would have the opportunity to pay $50 and clear her balance. Otherwise, we would continue to receive monthly payments for the $100, or the account would go to collections.

Would this be legal, and do you have a suggestion on how we should word this letter to our patients?

Answer: Sure, it’s legal. The one thing you can’t discount is the copay amount, but no one but you will care if you shortchange yourself otherwise.

Some advice, though:

I assume you have data showing that you have a poor collection rate after 90 or 120 days. Make sure to review every aspect of your collections process before you decide to accept a discount. What else are you doing to collect? Can you collect better at the time of service? Do you try calling the patients? Do you insist on collecting if they come in for another service? Do you terminate patients who have high overdue accounts? When does the first and second statement go out? What have your results been with collection agencies in the past? Did they get the accounts in a timely manner (within 90 days)?

It caught my attention that you would even consider sending another statement to a patient who is 120 days late and still won’t take a 50 percent discount. That person should go to collections. I get the impression that you need to be tougher with collections earlier on so that you can avoid having to discount in the first place.

If you do a discount you will want to communicate to patients, by mail or phone, that this is a last-ditch discount, not a new price, and that if they don’t pay or call to set up a payment schedule, they will go to collections within seven days. You’ll also want to let patients know that this won’t happen every time. Set a policy that any patient who gets a 120-day discount and then gets in arrears again goes immediately to collections or is dismissed from the practice.

Finally, be sure not to discount your rates too low. Fifty percent seems like a lot. In short, work it hard before the 120-day barrier. Ideally, you collect it all, but if you can’t, something is better than nothing.