Pay Up, Self-Payer


More patients are paying out of pocket. Here's advice on how to collect.

Self-payers are a mixed blessing in the world of billing and collections. On the one hand, there are few worries about lost claims or unfair reimbursement levels -- just tell the patient your fee and collect it, right? Well, not exactly. With more patients paying out-of-pocket for their medical care  -- and the trend showing no signs of slowing  -- physicians need to develop processes for collecting self-pay fees up-front as often as possible, and for implementing a backup plan when patients can't pay in full.

According to a recent Medical Group Management Association (MGMA) survey, almost 8 percent of the charges in multispecialty groups in 2000 were attributable to self-pay. That was the first year the organization broke out self-pay into its own category. And according to Dave N. Gans, MGMA's director of practice management, that number is only expected to climb.

Gans says the self-payment surge can be blamed partly on the lagging economy -- people are out of work and forced to fund their own medical care. Even those who remain employed are having a hard time shouldering the rising costs of membership in their health plans. Still others would rather have some medical conditions kept from their insurance companies, so they quietly foot the bill.

On the flip side is a growing number of physicians -- mostly internists and other primary-care types -- who have had it with managed-care companies, and refuse to work with them anymore. So all of their patients pay their own way. Finally, for those practices that offer increasingly popular elective treatments like LASIK and dermabrasion, the patient is generally responsible for the entire bill.

All this leaves many doctors scratching their heads and wondering, "OK, so how do I get patients to pay?"

Collect it up-front

One key element to successful self-pay relationships, says Dudley Medlock, president of Dallas-based medical billing company D-MED Corp., is evident the minute the patient strolls into the office. Physicians should post a sign saying, "Payment is due in full at the time of the visit" -- and mean it.

Before treatment commences, Medlock says, it's incumbent upon the staff to ask how the patient plans to pay. If out-of-pocket is the answer, staff members need to do everything possible to collect that payment before the patient leaves -- or make arrangements for a payment plan. Often, says Medlock, "the staff doesn't want to ask for money; they're afraid they're going to make the patient mad. So they soft-sell the registration process."

Those practices that don't at least ask for payment up-front or arrange a payment schedule are the ones that end up having to spend money chasing down patients later. "If you don't get the self-pay on the front end, the chances of getting it on the back end go down tremendously," Medlock says.

Setting up payment plans will involve doing due diligence on the patient's personal finances. "You ask for a financial statement listing their debts and income," says Medlock. "If debts far exceed income, it seems reasonably certain you won't get paid. It's up to you to decide whether you're willing to write off the visit."

Internist Jane Chretien agrees that the pay-up-front model is the best policy. "The way to get paid is: don't bill them," she emphasizes. "At our practice, patients pay as soon as they walk in the door."

Last year, Chretien and her partner, Audrey Corson, switched their internal medicine business to an all-cash/no-insurance practice. As a result, Chretien and Corson, who practice in Bethesda, Md., have been able to reduce what they charge for their services and eliminate the need for an office manager.

"We don't need anyone chasing the bills anymore," says Chretien. "There are no bills."

Think creatively

Industry experts say there is another way to encourage success with self-payers: create a comprehensive new-patient registration form. Keith Borglum, vice president of Santa Rosa, Calif.-based Practice Management and Marketing Consultants, suggests that practices be sure to get the patient's social security number and driver's license number. "This makes them pursuable," he says.

"A lot of the problem arises with repeat patients," adds Medlock. Often, staff will simply ask patients, "Is all your information the same as last time you were here?" to which they will almost always reply, "yes." But if things have actually changed, such as the person's employer or address, it will become exceedingly difficult to follow up if collecting payment becomes a problem, he says.

Medlock says another tack practices can take is to forge relationships with local banks that can quickly arrange to grant small loans to patients. He adds that there are many government programs for which financially troubled self-payers might qualify. "Keep a list up in the office that outlines the criteria for these programs," says Medlock. "Make sure staff can get to it easily."

Credit cards are also an option; Borglum explains that certain credit-card companies offer a pre-certified medical credit card. The patient needs only to fill out the application and, if approved, the company sends the doctor's office the credit card number, where it is kept on file. The patient can pay for visits in this way for up to a year.

Getting tough

If none of this is an option and a patient has shown up without cash, checkbook, or credit card, Borglum says you may have to gently put your foot down.

"Consider rescheduling their appointment, asking them to come back when they can afford to pay," he suggests. "This becomes a judgment call." If you do treat the patient, consider sending him home with a self-addressed, stamped envelope, asking him to put the payment in the mail when he gets home.

"If four to six days have gone by and payment hasn't been received, it's time to begin calling the patient's home," Borglum says.

Architecture can also be key. Doctors' offices need to be laid out so that patients cannot leave without passing by the collections window or desk, says Borglum. If they do get by it, he suggests placing a stop sign on the out door, indicating that the exiting patient needs to see the receptionist before hitting the street.

That one got away!

If things go awry and the patient leaves without paying, the collection process begins -- and it can be expensive. Some estimate that the average cost of processing a bill to self-payer is $8, and that on average it takes 2.5 statements to collect. That's $20 per patient. So, if each month a practice has 100 self-pay patients who don't pay up-front, the cost to the practice would be $2,000 per month. MGMA's Gans says that, on average, about 20 percent of what practices collect is spent on going after receivables.

"To get your money, you have to be consistent," says Medlock. "You have to make sure patients understand the urgency of the matter -- that they have to take care of the obligation they have created."

Borglum says he prefers using the phone because it's better for making patients face the situation, rather than sending them a letter they can simply ignore. But watch out for the Fair Debt Collection Practices Act, particularly if you use a collection agency (see "Keep It Fair," page 43). Among other things, the act outlines when it is acceptable to call a person from whom you are trying to collect a debt (not before 8 a.m. or after 9 p.m.); what constitutes harassment or unfair practices (threats of harm); and what is considered misleading representation (misstating the amount owed).

Each practice has its own policy on how frequently to call or write their nonpaying self-payers, but many will make three attempts via phone or send three letters. Offices tend to send out letters on a monthly cycle, but Borglum thinks it's better to do it even more frequently. "Every two weeks gets better results," he contends.

Industry experts differ widely on one's chances of getting paid by self-payers once they've left the office. Some say it's as low as 50 percent, while others, like Borglum, say it's much higher, around 95 percent.

After the 60-day mark, though, the chances drop to almost nil, Borglum adds. And, unfortunately, this is the time to consider moving the bill into the bad-debt category of your balance sheet.

Suz Redfearn can be reached at

This article originally appeared in the March/April 2002 issue of Physicians Practice.

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