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Profit and Loss
O&P BUSINESS NEWS September 1, 2010

Patient Receivables Management, The difference between profit and loss

Poor processes, lack of training and a revolving door of administrative staff can lead to mismanaged and neglected patient receivables.

In last month’s issue of O&P Business News, we discussed how an increasing number of patients are reluctant or incapable of paying their rising out-of-pocket health care expenses, placing added economic pressure on the already strained health care facilities where they receive treatment.

  Cathie Pruitt
  Cathie Pruitt

Despite carrying the patient’s financial burden, according to our sources for this issue, health care facilities continually implement poor recovery processes. It is widely acknowledged among billing and collection agencies that the patient receivables side of the business ledger is often mismanaged and unorganized. This kind of poor handling can cost health care providers thousands of dollars in potential earnings.

Urgency to collect

Patient receivables often determine the difference between a practice losing money or a practice ultimately turning a profit, according to Vern Herrington, product specialist at Brightree Inc., a DME/HME billing and business management software company. Because of it’s pivotal effect on the well-being and security of business, patient receivables management has increasingly become a hot topic in many sectors of the health care industry.

  Vern Herrington
  Vern Herrington

Not long ago, many health care practices could afford to write off a small portion of neglected patient payments thanks, in part, to higher insurance company reimbursement rates. In today’s culture of declining reimbursement, that business practice has been completely modified if not ceased entirely. As insurance companies continue to reduce or significantly cut reimbursement rates, it has become unaffordable, to simply ignore patient payments, according to Herrington.

By the end of this year, about 35% of a provider’s total revenue will derive directly from patient payments, according to the McKinsey & Co. report, “Overhauling the US Health Care Payment System.”

Providers Unable to Calculate Patient Payment at Point of Service

A May 2009 survey by the health care communications company, NaviNet Inc., sampled 1,279 health care providers, medical billers and billing offices regarding patient payment management and credit card usage. Their findings indicate that nearly half of providers are unaware of the total the patient will owe to the facility at the time of services rendered.

According to the survey, 49% of providers stated they do not have the ability to calculate patient financial responsibility until after claims are submitted and processed. Because of this delay, 31% of providers disclosed that they lost revenue due to uncollected patient payments.

“It is absolutely crucial to be proactive,” Laura Smuch, front office manager at De La Torre O&P, said. “Once you have to start billing a patient and sending them two, three or four invoices, ultimately it could be money that you just never collect.”

Providers collect only about half of the balance due from patients, according to the McKinsey & Co. report, “Overhauling the U.S. Health Care Payment System.” The report also estimated that this translates to $14 billion to $30 billion in debt annually.

These numbers are cause for concern among health care providers as patient deductibles and copayments continue to rise, which as history has shown, will likely lead to more lost revenue in the future.

According to an HHS report conducted in 2004, only one in five people with health insurance provided through an employer had a copayment of more than $25. By 2008, that number rose to one in three people, according to a press release.

For more information:
 

Along with the growing problem of decreased reimbursement rates, the percentage of people with high deductible insurance plans is also on the rise, leading to costly out-of-pocket expenses for the patient and increased urgency among providers to collect those outstanding fees, according to Cathie Pruitt, president and chief executive officer of PrimeCare O&P.

“People with high deductible plans have increased tremendously in the past couple of years and that is going to continue to happen,” Pruitt told O&P Business News.

Up-front payment

“Finding a way to capture and recover that money becomes a challenge,” Herrington explained. “Whether it is O&P or another industry, many companies now have gone to collect a significant portion of their patient receivables up front as they are getting ready to provide services.”

Laura Smuch, front office manager at De La Torre O&P, explained that an administrative staff that gathers insurance information from the patient before they arrive will have a more efficient collection process.

“When we call ahead and gather that insurance information, we can then check and give them a pretty good estimation as to what their out-of-pocket expenses are going to be,” Smuch explained. “We have tools that we can use to go online ahead of time and check the patient’s benefits and what their expenses may be.”

 


 

According to the McKinsey & Co. report, the probability of providers collecting patient payment declines dramatically once the patient walks out the office door following treatment. According to the report, a provider generally collects 95% of patient payment only when it is received prior to treatment. That percentage plummets to 18% of the full payment, if it is collected 1 month after receiving treatment.

“The more you get up front, the better,” Smuch said. “At De La Torre, we offer discounts for private sector insured patients who are able or willing to pay up front for services not covered by insurance.”

Open communication

Pruitt explained that according to a report by CMS, between the years 2000 and 2007, patient out-of-pocket expenses increased by 95%.

By now, most patients understand that they are responsible for some out-of-pocket expenses, according to Smuch. Many times, patients ask her about their expenses before visiting with the health care provider.

Although most patients anticipate out-of-pocket expenses following such a drastic increase, the question becomes how much of the bill is their responsibility?

“We do have some walk-in patients and if they have a fracture and go to the doctor’s office, most likely they do not know if they will be coming in and needing a walking boot, for example,” Smuch said. “They are not prepared and if they have no coverage for something that will be a high-ticket item, that can be another challenge.”

These conversations between patients and front office staff are becoming more and more common according to Herrington. He explained that patients should be directed to their insurance providers if they have questions regarding their coverage. They should not wait to speak to the administrative staff at a practitioner’s office as there are so many variances among health care coverage.

“Patients have a variety of insurance policies whether it’s Medicare, Medicaid or company-provided commercial insurance and most of the policies out there have limitations,” Herrington said. “Unfortunately, it is the health care provider who has to explain those limitations. Those discussions should have already taken place by the time the patient needs services. Patients often assume ‘coverage’ means unlimited benefits, rather than making a point to be aware of the details of their insurance coverage. When they actually need those services, it is an unpleasant surprise to learn of the servere restrictions on them.”

A patient who makes these assumptive errors of anticipating a smaller copay or deductible may not have the necessary funds to pay for services ahead of time. These kinds of errors can potentially cost the provider hundreds of dollars.

“They can not afford avoid those conversations anymore,” Herrington explained.

Proper training

“There is this collision of cultures,” Joyce Perrone, practice administrator at De La Torre O&P and consultant for Promise Consulting Inc. explained. “As health care providers, we want to help people, but at the point of service, sometimes it is difficult for the staff to reconcile this with asking for payment for those services.”

Smuch agreed with Perrone’s assessment and said this conflict between goods delievered and reconciling money owed to the company is compounded by the reality of today’s economic uncertainty.

“It is a difficult job that is learned over time,” Smuch said. “I think great leadership and the proper training would certainly benefit any practice.”

Great leadership, however, involves more than just training your staff to properly bill patients and follow billing procedures. Business owners must show that they value their staff and appreciate the work they are doing.

“If you take care of the employees on the administrative side, then you will see an improvement,” Pruitt said. “If they feel valued and well paid, then you are going to have a lot better luck with collection and recovery.”

An appreciated and properly trained staff will work harder and ultimately bring in more patient receivables for the company, according to Pruitt.

“The administrative staffs are the people collecting the money and I think they need as much training as they can possibly get,” Pruitt added. “They will have the tools to manage how they talk to the patient and go the extra mile for the company.”

A cohesive unit

In her work, Perrone has uncovered one common problem that plagues most provider’s offices — a lack of cohesion among staff.

The administrative staff at any provider’s office must be a well-organized unit and they must work well together. While the practitioner may be recognized as the face of the company, the support staff is the heartbeat, according to Perrone.

Administrative staff will work with patients and implement payment agreements in order to ease their financial burden. A trained, experienced and consistent staff likely has a collection and recovery system in place that plays to their strengths.

A practice with a revolving door of administrative staff members lacks unity and structure that could lead to the mismanagement of payment collections. This kind of collapse of cohesion is sure to also effect other administrative systems within the office environment, as well.

“We encountered a person who did not collect anything from the patient and over time that caused a problem,” Pruitt explained. “We were shocked by that.”

This is only one example of how poor processes have the potential of costing health care practices thousands of dollars. Imagine the true loss a problem like this could incur if left undiscovered. Situations like this can be avoided with the right training, processes and personnel in place.

“There are companies that have high turnover in staff with a lackadaisical attitude toward collecting and recovering money for the practice,” Pruitt explained. “It’s a high level of complexity to have a fully wholesome environment, where people are completely integrated into the company and doing the best they possibly can. Only then will you get the best outcomes.”

An absence of chemistry among staff makes an already complicated job much more difficult. Consistency among all members of the team is vital but difficult when team members are coming and going frequently.

“Because our employee turnover is so low, we have longevity and a continuity that many other companies do not have. High turnover is a problem we hear a lot. The problem is definitely out there,” Smuch said.

Process development

Staff leaders who are not satisfied with their patient receivables management capabilities should immediately begin laying the groundwork for change. These processes take time to develop, not to mention to train to other members of the staff. These initiatives can not be established overnight.

One way companies learn to streamline patient receivables management is to create a patient care coordinator position, according to Pruitt. Patient care coordinators fill a role similar to that of case managers within the facility in that they work with assigned practitioners to control a smaller group of patients.

Prevention, Enforcement and Follow-Up

SCORE, Counselors to America’s Small Business offer additional guidance on how to collect payments.

Step 1: Prevent late payments

SCORE advises establishing a standard payment policy. Once that is in place, make your patients aware of the policy before you render services. In addition, if you accept credit, develop a written credit policy. Give patients copies of these documents for their records. These actions will avoid confusion once it comes time to collect payment.

Step 2: Enforce what you preach

No one wants to be ‘the bad guy’ when confronting a patient about money owed. Take a different approach. If you have met your obligation, the customer should do the same. While this is possibly the most unpleasant part of the job, it is also the one that will keep your business afloat.

Step 3: Ask questions

When you enter into a confrontation regarding late payment, do not assume the patient is in the wrong. Hear him or her out and find out why they have not met their obligation to pay. You will find that while policies are black and white, the situations you come across with individuals will be different shades of gray and need to be considered on a case-by-case basis. Whatever it determined, make sure you both walk away from the conversation knowing the terms of the agreement reached.

 

“The administrators who are in the billing department are teamed up with the practitioners,” Pruitt said. “If I am in the billing department and I am the patient care coordinator, I may have two or three practitioners who are assigned to me, along with their patients.”

The patient care coordinator would have regular meetings with the practitioners to review their patient cases. They would then relay the payment information to the patient to keep them informed about the process as well, according to Pruitt.

“Not only is the patient informed on the cost aspect, but they know that they are being taken care of and that makes it easier for them when they have to pay the large expenses due to their policy,” Pruitt explained. “This way, the patient is not finding out their deductible is $2500 or $5000 at the end of the process. A lot of people do not realize that when they sign on for these high deductible plans that it is cheaper for their monthly payment, but then on the back end, it will severely cost you.”

Smuch’s facility has implemented a system that includes giving a ‘noncovered co-insurance deductible form’ routinely to every patient with private sector insurance — whether they have out-of-pocket expenses or not. The form lists the specific item for which the patient is being billed and what the patient’s insurance reimbursement currently is, including co-insurance and deductible, if applicable.

Other process suggestions include prioritizing accounts in chronological order or from high dollar to low dollar amounts. Perrone, however, is not keen on the idea of her staff prioritizing her accounts in dollar amounts.

“Do I work less hard to collect $50 as I do $100?” she asked. “Generally, you are going to go after those big ticket accounts, but is it harder to collect ten, $100 payments or one $1000 payment? That one $1000 payment will take a lot more time and energy. If you have the right processes in place, you should be collecting those $100 payments all the time.”

As long as your staff is approaching billing and patient receivables in a serious manner, the provider’s patient receivables management should improve over time.

“There are several different ways to incorporate process development, but it is essential to have a written flow in place and the people who are part of that process help develop that flow. It must be organic and grown from within the company, often with the help of a trained facilitator,” Perrone said. — by Anthony Calabro

For more information:
  • Pavlou SZ. Put it in writing to ensure copayment receipt. O&P Business News. 2010;19(9): 36.
  • The McKinsey Quarterly. Overhauling the US health care payment system. Accessed Aug. 2, 2010.