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.
Self-pay best practices
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 www.athenapayerview.com. PayerView, a joint effort by Physicians Practice 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 www.PhysiciansPractice.com - 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:
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?
Ensure collection success
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:
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 email@example.com.
This article originally appeared in the July/August 2006 issue of Physicians Practice.