How to collect past-due payments from patients without scaring them away

Key Points

Arden, NC-Some physicians' offices have gone sign-crazy, said practice management consultant Deborah Keegan in Arden, NC.

And, if medical bills go unpaid, the penalty just might be a sheriff's deputy knocking on a delinquent patient's door to seize a car. It happened to a Massachusetts woman because of a disputed charge of $290.20 from her OB/GYN. In another Massachusetts county, car seizures triggered by medical debt became so rampant that the local sheriff decreed that his department would no longer execute them.

Physician groups are adopting tougher collection tactics, largely in response to tough times. What compounds their problem of skimpy third-party reimbursements and rising overhead is having to depend on patients for a bigger portion of their revenue stream-a result of the rising number of uninsured and the growth of high-deductible health plans. Many patients can't pay their bills, and the proverbial bad apples won't.

And they're making more calls to collection attorneys like Michael Herrin in Memphis. "The amount of money they want me to pursue is constantly going down," said Herrin. "The threshold used to be $1,500. Now they're giving me $150 accounts."

Harsh collection tactics are likely to alienate that vast majority of patients who wouldn't dream of stiffing anybody. But even legitimate ones can damage the physician-patient relationship if they're not carried out in a positive, friendly way.

Fortunately, you'll have less need of collection agencies if you educate patients about their financial responsibilities in the complicated world of health insurance. There are far more confused patients than deadbeats.

Not all patients are freeloaders

A smart medical collections policy is based on goodwill. At least initially, assume that every patient is a responsible patient, not a potential freeloader. Attitude is everything, said Cincinnati practice management consultant David Scroggins.

"Some practices distrust every patient," said Scroggins. "It's almost as if patients are evil. It's easy to fall into that trap, because some aren't paying their bills."

Scroggins stresses the importance of making distinctions. Eighty-five percent of patients faithfully pay up once they know what they owe, he said. It's the remaining 15% who are problematic.

"You'll want to keep most of this group as patients," said Scroggins. "They need lots of reminders, but they're not trying to cheat you. The trick is following up without offending them.

"Then you have your deadbeats. We're going to send them to the collection agency and small-claims court. We don't worry if they leave the practice.

"The trouble is, you don't know what category an individual patient belongs to at the beginning. So you need to assume every patient intends to pay until proven otherwise."

This benevolent spirit argues against hectoring new patients with a long list of penalties and signs galore at the receptionist's counter. "They might think your only motivation is financial," said Keegan, who co-authored The Physician Billing Process: Avoiding Potholes on the Road to Getting Paid. A patient-friendly mindset, however, doesn't preclude strong collection measures. You just have to take the sting out of them.

Your financial policy can still state that co-pays and other balances are required at the time of service. But it also should thank patients for timely payment, and explain that you must make ends meet to stay open for their sake, said Keegan. The same approach applies to potentially threatening clauses, such as reporting debtors to a credit bureau.

"You can add something like, 'We're in the business of caring, but we also have a business to run,' " said Keegan. "Why use harsh language when you can get the same results with gentle language?"

The kindest thing you can do is help patients avoid innocent mistakes that make them a target of collection measures. Attorney Michael Herrin said many delinquent patients would have paid their bills early on if they had understood how their insurance plan worked.

"With 95% of insured debtors, the first words out of their mouths are, 'I have insurance. It should have paid for this,' " said Herrin.

It behooves physicians, therefore, to have a front-desk staff member discuss the particulars of their coverage with new patients (and refer them to the insurer for more detailed information). Patients should be warned that their plan may not cover the entire bill-or any of it, in some cases. It's also a good idea to show patients how to decipher an explanation-of-benefits form and find out what, if anything, they owe.