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The Practice Administrator: Collections and the Revenue Cycle


People know that when they go to Lowe’s or Target, they have to pay or they don’t get their product … this mentality doesn’t exist for physicians’ services.

We recently employed a credit agency to handle our outstanding debts. At first, we had resisted working with a credit agency; we were concerned about the negative reaction we might receive in our small town, and believed, naively, that we could handle revenue collections ourselves. After a year of toiling, we’ve realized a few important things about collections in relation to our practice and patients, and we think we’ve made the right decision. 

First, I want to make a distinction here that we are talking about patients who won’t pay as opposed to those who can’t pay. We don’t refuse to see someone if they can’t pay and have a medical need and we never “force” anyone to pay who can’t pay. But we do have to pay the light bill, and, like most practices, we were leaving a good amount of our accounts receivable out there because we didn’t have an agency do it.

Why don’t people pay when they can? People know that when they go to Lowe’s or Target, they have to pay or they don’t get their product. Even visits to the dentist or vet are expected to result in a bill. But this mentality doesn’t exist for physicians’ services; people have far less concrete expectations about paying their doctor.

In general, consumers are confused about what their part is and what their insurance company provides. In our practice, the “payment” relationship is between the patient and their insurance company, and, with the exception of most Medicare patients, a patient’s financial responsibility is not always clear to her. We try to help educate our patients about it, but we can only do so much. Unfortunately, physicians’ offices are considered the bad guys for sending information about patient billing responsibility, but we are just the messenger.

Unfortunately, the downturn in the economy has definitely impacted our revenues, even where we are in Texas, which has been more insulated from the downturn. For example, the companies that are here often have healthcare contracts that are negotiated on global basis, that need to be more cost effective and thus increase the patient’s co-payments or deductibles.

In our year of trying to handle collections we discovered certain risk factors can indicate a possible future issue with collections. Emergency hospital cases are a good example. In our practice, we collect everything we can at the time of visit but in some cases it is impossible. But for emergency patients, we sometimes never see the patient again and they don’t pay. There are even some cases where we do see the patient again but they still don’t pay. We’ve also found that the risk of non-payment rises with any increases in patient deductibles, co-payments, and co-insurance due to the economy and to corporations renegotiating insurance coverage due to rising costs. Finally, if a patient’s check bounces, there’s a good chance we’ll need to turn it into a judge for failure to pay.

Seeing all this, and faced with a general rise in the number of statements due to patients not paying when originally seen and a desire to establish a better policy to help our revenue cycle, we decided to try a collection agency.

How has the transition to a collection agency gone? The price is relatively cheap at less than $15 per account, and our practice management system works well with “handing off” to a collection agency. Because we’re a business, and we want to stay in business for our patients, we think it’s been a good move.

For more on Derrick Berger and our other Practice Notes bloggers, click here.

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