When patients don’t pay – to collections or not to collections

Episode 21: When Patients Don’t Pay – To Collections or Not To Collections?

In our last couple of episodes, we’ve talked about the shift we’re seeing to more services that you provide that wind up as the patients’ financial responsibility, and the best strategies for collecting that money. Today, we’ll talk about when patients don’t pay.

First, when a patient has an outstanding balance that they owe you, it’s important to make a distinction: there are some patients who are not able to pay – I recommend that you be compassionate, creative, and generous with those folks. Almost all of them want to pay in some way. Then there are the other type, those patients who are choosing not to pay. Those folks should be held responsible and may need to be reminded that they owe you for the service you provided.

First off, using a collection agency is entirely your choice as the business owner. There is no requirement anywhere that you ever send a patient to collections, and you don’t have to if you don’t want to. We have worked with many medical groups who choose never to send a patient to collections, and they have that in their policies. Whatever you decide, make it a clinic-wide policy, and be consistent.

I always encourage our clients to bill fairly for what you have done, and to have an expectation that patients who can pay, will. You provide a service that has tremendous value, and it’s okay to be paid for it. If you need to hear my encouragement in that conversation again, please revisit Episode 11 for Bring Home the Bacon.

I hear from the folks on our revenue cycle teams that there are a few different personalities when it comes to the patients who don’t want to pay:

1. The Complainer – nothing is ever right, there was always something wrong, and they shouldn’t be charged full price, or come to think of it, anything at all.
2. The King or Queen of Discounts – these patients are seeking a discount…or something for free…every time.
3. The Threatening Patient – they have their lawyer on speed dial and will sue if the charges for the visit aren’t written off. And, oh by the way, there was something wrong with the care or the diagnosis.
4. The Confused Patient – wasn’t my insurance going to cover that? I thought my copay was it. They really don’t expect to have to pay any more than that. In our last episode we talked about how many of us – myself included – don’t really know what our health insurance benefits structure is, so some of us fall into this category accidentally, but a few actually take that conversation all the way to the billing office.

I’m being a bit facetious here but believe me when I say your billing team has heard it all and then some. One note about patients who will ask YOU directly for a discount – I highly recommend that you refer all questions about charges and money to your billing department. You can keep the clinical relationship separate from the business one, and you can tell your patients that if they approach you with financial questions. It’s best to have very clear, written policies, and stick to them! You can find our favorite set at the Medical Money Matters Podcast Toolkit here.

In working to collect patient due balances, we recommend sending out 2 outbound statements and then make 1 outbound phone call to the patient about the balance that they owe. If they don’t respond after that, they’re not gonna.

We highly recommend at that point that you send a soft collections notice from a collections agency – this has more bite than a colored statement with SECOND NOTICE stamped on it from your office. They’ve been ignoring you. They will continue to do so, no matter what colored statements or fancy stamps you use.

Soft collections programs are very effective and low cost. This won’t impact your patients’ credit scores. This usually consists of a series of notices that are emailed or mailed, along with a number of outbound phone calls coming from the collection agency. This typically gets the attention of the lazy bill payers, and can be very cost effective at collecting those balances.

If your patient does not respond to the soft collections attempts, the next step is to send them to hard collections. This will impact your patients’ credit score and should be utilized for those patients who are refusing to pay, but have no other complaint or communication with you. The collection agency will typically charge you 30 – 50% of the amount of the outstanding balance as the price for their service.

Once you have sent a patient to hard collections, you are faced with a couple of questions: First of all, do you discharge the patient from the practice, or allow them to return? Some groups will terminate the patient from the practice, and some will allow them to remain as patients, but with the stipulation that they will pay cash at the time of service for all future visits.

The second question is do you charge a fee for them to return? You have put in a lot of time and effort into collecting their old balance, and that carries a cost. We have seen clinics charge as much as $150 – 200 as a “reinstatement fee” for patients who’ve been sent to hard collections, but have subsequently paid their balance in full. This has the patient making a different level of commitment to come back to your office. Please be sure to check debt collection laws in your state before implementing any new collections policies, and be sure you are compliant with the Federal Fair Debt Collection Practices Act as well.

We encourage our clients to define what they consider to be a “Small Balance” in their Accounts Receivable. Is it anything less than $50? $100? Best practice is to write it off after the clinic outreach and not send them to soft collections, but to note the account for the outstanding balance amount and collect it before scheduling another appointment. You’ll want to be sure to script your staff for this.

For those patients who cannot pay, we recommend that your office creates a sliding fee scale, or in many cases, you can use the system from your local hospital. Most hospitals have them already in place, and if a patient qualifies for their plan, they should qualify for your clinic’s too. Some groups just use that determination instead of creating their own system.

If the patient has a large balance, we always suggest that they look to national groups like Care Credit or that they use a credit card to pay your bill.

I want to say a word or two about payment plans. Payment plans are interest free loans that you are granting and I want to remind you that you are not a bank. And, I know, sometimes this is the best way to get patients to pay. We recommend that your team set up payment plans for no longer than 6 months, and no less than $25 per month. Otherwise, you’re just throwing good money after bad with the amount of staff time this will consume.

I’ve said it before, I’ll say it again: please be sure that your front office has a policy of collecting payments from patients AT THE TIME OF SERVICE! This is the least expensive, most effective time to collect money from them – not three to six months later when they hardly remember why they saw you in the first place. And, if you’re not collecting money in terms of copayments, coinsurance, deductibles or a deposit, please please please get some form of payment on file, along with their authorization to use it. This will help tremendously down the road. It’s time for our industry to stop being apologetic about collecting money.

Join me for our next episode, where we’ll visit with employee retention expert, Joe Mull and we’ll learn about how scripting and training, along with supporting our teams makes for excellent employee retention. Joe’s new book, Employalty hits the market next month and I’m very excited to learn more from him about our most important resource: the human one.