Soften the Blow of High Deductible Health Plans

August 14, 2017
James Riviezzo

High deductible health plans hit patients' wallets hard, here's how to cushion the blow for your practice.

The medical staff was overworked, we were all treading water just to keep up. At first, the practice had steady positive financial growth. Years later, I was struggling to cover practice overhead month over month. Why was the practice falling behind? I learned the answer the hard way.

It seemed the harder we worked the less we were getting paid, in large part due to these three factors:

•Payers were increasing patient's deductibles.

•Balance billing patients was not working and accounts receivable were rising.

•Patients were getting frustrated with high out of pocket costs.

Conversations about money with patients are always awkward. Moreover, thanks to non-reliable insurance brokers and confusing marketplaces, patients are almost always unaware of what their true healthcare costs are.

The high deductible health plans from the insurance exchanges and insurance companies cost cutting is really hitting the patients hard.

When patients are unprepared to make high deductible payments upfront, this is how they react:

•Patients stop seeing their primary care doctors and start going to urgent care centers hoping to avoid paying their high deductibles.

•Patients avoid seeing the doctor at all and wait until it's an emergency.

•Patients seek out disorganized offices that are willing to bill them later.

It's much harder to set boundaries and financial policies if you aren't clear on your bottom line. Knowing your practice revenue numbers makes it easier to find the middle path when collecting upfront.

How unpaid patient balances affect your practice's cash flow.

On average, your practice will only make about $75 dollars for each office visit after all overhead costs if everything goes perfectly (which is rare). A third of that visit payment comes straight out of the patient's pocket.

So if they can't or won't pay, you end up working for free and then having to chase more patients with shorter visit times to make up for the loss.

How to properly collect a high deductible up front

Whether you're starting a new practice, getting your patient accounts receivable under control, or trying to improve cash flow, you'll need to help your patients pay their out-of-pocket costs upfront, and stay loyal to your practice while doing so.

A visit-based example:

A patient comes in for a visit. Eligibility verification shows that the unmet deductible is $3500 and we know that the service to be provided is not a 100 percent service covered service. We know that we are going to get hit with a high patient balance out of pocket. In this case, let's apply it to the new patient visit code for a level four visit (99204).

The Medicare allowable for the 99204 office/outpatient visit is going to be about $164. The actual insurance will vary based on the payer but this gives us a start. Expected visit revenue is $164 minus the co-pay of $25 leaves $139. The $139 is going straight to patient responsibility. No patient is going to be thrilled about paying $139 for an office visit. Especially if they have only paying their co-pay.

Here's an alternate route. Instead of asking for the entire amount, I like to collect against half of the insurance responsibility. That leaves you with collecting an additional $69. This brings the total collected for the visit to $94. 

On average, a patient visit will carry an internal cost of $85 in overhead. If you are collecting the $94, you reduce your financial risk because you are covering the cost of the visit without falling in the hole for the balance. From there, you agree to charge the remainder in 3 monthly payments of $24 with a credit card on file.

When patients prepay, they focus on the benefits they'll be receiving, which changes their perception of paying. Paying up front actually encourages patients to follow through with your health plan.

Three steps to implementing this in your practice:

•Clarify your financial policies so that they include collection of deductibles and co-insurance.

•Train your front office to "pre-code" & estimate each visit up front.

•Communicate patient costs ahead of time and offer options to pay.

Demystifying basic financial concepts like high deductibles and working with patients, will help you to feel empowered about managing the finances of your medical practice and collecting more for all your services.

About James: After owning a fast growth Primary Care Practice, over 10 years of training Physicians and Residents, and managing more than 50,000 patient experiences, James designed a system to help private practices thrive without the fear of payers or government intervention.