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Patient payment plans and payment options: What works, what does not
by Karen Zupko
As deductibles and co-insurances remain high, patients continue to shoulder more of their medical bills than ever. When it comes to paying for surgery, physical therapy and injections, many patients can’t afford to pay their portion of an orthopedic surgery bill all at once.
Maybe their credit cards are maxed out or they’ve recently lost their job. Perhaps the amount of their take-home pay isn’t sufficient to pay the amount of their outstanding deductible in one lump sum. Consider the head of household for a family of four who earns the U.S. median income of $60,336 and needs a total knee replacement. If he has a high deductible of say, $3,000, he’ll likely need options for paying over time.
Most patients want to pay their physician, but it’s got to be proactively discussed and they need to have options. Your collections strategy must include payment options and payment plans and, in our experience, there are effective and ineffective ways to offer both.
Say “no” to endless statements and internally managed payment plans.
Things that don’t work
Let’s start with a few things that don’t work.
Some practices establish a payment plan “only if the patient asks,” opting instead for the passive technique of sending patient statements for months (and sometimes years), hoping patients will pay. The truth is, only a small percentage of them will, especially once their balance is 120 days old or older. Most likely, the rest of the balances will be sent to collections or written off as bad debt. Add to this the staff time and mailing costs of endless statement sending, and you’ve incurred a lot of expense for little return.
Many practices do offer patient payment plans proactively, which we advise, but make the mistake of asking the internal billing staff to manage them. Staff typically do this manually, by charging patient credit cards or sending statements for the agreed upon amount each month. They also make sure patients don’t default on their agreement and follow up if they do.
What happens when patients decide not to fulfill their payment agreement? Because the practice is acting as a bank for patients, it absorbs the default as bad debt.
There are several reasons why we don't recommend internally managed payment plans:
- Few practice management systems have automated payment plan management. The result is the staff are performing all these tasks manually, by making lists or spreadsheets and reconciling them to the calendar and payment agreement. This is very time consuming.
- The time required to manage payment plans keeps staff from performing higher-return tasks, such as denial management. Your billing team’s time is better spent chasing reimbursement on a denied claim than managing payment plans.
- Most staff aren’t trained or comfortable following up with patients who haven’t paid. They don’t prioritize the task, and delinquent payment plans often languish until they are written off or sent to collections.
- You are a physician practice, not a bank. You don’t have the resources to finance patient surgeries or chase down delinquent patients.
Proactive payment options, plans
The time to talk about payment plans and options is before you render services and not just surgery costs. The patient’s portion of an office visit copay plus images and possibly an injection can easily be several hundred dollars. Consider too the patient's portion of physical therapy. Copays are commonly $30, $40 or $50 per visit. If the surgeon recommends therapy 3 days a week or 6 weeks for patients with high-deductible health plans, it’s easy to see why so many patients become “non-compliant.”
The first step toward offering payment plan options is to have a time of service collections protocol in place for office services and surgery, and communicate the essentials to patients when they make their first appointment. Practices that collect unmet patient deductibles and co-insurance for office visits and services advise patients of this when they call. They also provide new patients with an estimated dollar amount range the patient should be prepared to pay at the time of the visit and the practices explain payment and payment plan options to patients.
If your practice hasn’t yet moved its collections front, use our free Ultimate Guide to Time of Service Collections to get started.
Second, provide a written cost estimate to patients recommended for a procedure, physical therapy or injections. Explaining the costs upfront allows your team to identify patients who can’t pay in full and need more time paying their share. That’s the team’s opportunity to discuss these two types of payment plans that do work:
1.Recurring payments on a credit card. This is how many Americans pay their gym membership, wireless bill or online subscription fees. It requires that you use a recurring payment feature in your practice management system or an online third-party service to facilitate the automated transactions.
Resist the temptation to “save money” on the processing fees by asking staff to maintain patient names and credit card numbers on a spreadsheet and run the cards each month. This practice is not payment card industry-compliant, and it puts your practice at risk for identity theft, which occurs regularly in health care organizations of all sizes, and often by staff. A printed list of patient names and credit card numbers simply makes it easier.
2.Patient financing. The days of physicians offering unsecured, interest free-loans (also known as internal payment plans) are over. Patient financing options are a must for a modern practice. Most patient financing companies have deferred interest 6- and 12-month options, as well as longer-term financing. They pay the practice the amount the patient owes in just a few business days less a service fee. The financing company assumes all the default risk, as well as the logistics of collecting from the patient. The money is off the accounts receivable report and there is no staff time required. It is a no brainer for the business-minded physician. CareCredit, WellsFargo and GreenSky, are three company examples.
Unfortunately, data from our 2019 AAOS workshop pre-course survey indicated only 25% offer a patient financing option. We often hear physicians say they don’t offer patient financing because of the service fees. This is a flawed argument when you consider the poor performance of internal payment plans and the need for patients to have multiple financing options, which your practice can’t efficiently provide or manage because it’s not a bank. “Saving” the 8% service fee only to lose 100% of the unpaid receivable when the patient doesn’t pay, isn’t wise. In addition, when you add up the staff time, statement mailing costs and overhead trying to manage payment plans on your own, it is not worth it.
In the end, you’ll risk absorbing the bad debt that occurs with many high-deductible health plan patients, and you can't repossess a titanium hip.
Disclosure: Zupko reports she is president of KarenZupko & Associates Inc., a practice management and education firm that has advised physicians on the business of medicine for 35 years. Her firm has developed and delivered the AAOS coding and reimbursement workshops for more than 25 years.