As medical groups continue to struggle in today’s complex and changing healthcare business environment, there is a rise in the number of these groups submitting bankruptcy filings across the country. These bankruptcies are not the result of malpractice suits in favor of the plaintiffs and have little to do with medicine or the business of healthcare.
A case in point is this 2015 tale told by Bradford Botes, a bankruptcy attorney in Birmingham, Alabama:
“I filed bankruptcy for a physician with a six figure income. The problem was that this physician followed the American Dream and tried to start his own practice. He signed a lease for office space, financed the purchase of expensive equipment and sunk all of his hard earned savings into the new practice.
“Now this man was a very good doctor. He was good at diagnosing illnesses and kind to his patients. He just wasn’t a very good business man. Poor decisions were made and the practice eventually failed. After time, the doctor found work with another practice but by that point he had a million dollars plus in debt. The companies that leased him office space and financed his equipment had filed lawsuits against him and there was simply no way that he could pay everyone. After much prayer and deliberation, he made the decision to seek bankruptcy relief.”
Like many others, this doctor’s ability to service his debt was impacted by a change in the amount and source of revenue from which he could operate his practice.
In the past, practices could expect unds to arrive every two weeks in the form of payments on insurance claims, representing 85% of a medical group’s revenue. Changing regulations and shrinking reimbursements from those insurance companies, a byproduct of the regulatory shifts, as well as their high-deductible health plans (HDHP), have caused things to go from consistent to sporadic, which directly affects cash flow for practices.
Healthcare is a Business
HDHPs have shifted financial responsibility to where it sits equally with the insurer and the patient. Half of a medical group’s revenue now has to be collected from patients and they naively believe their doctor can’t possibly be hurting financially.
That view can be perpetuated by doctors and administrators. “It’s a profession, not a business,” they say. Not really. It is a business that provides a professional service, and employing smart business management practices today can mean the difference between continuing and closing.
The one word that needs to be uppermost in the mind of every employee of a medical group is “collections,” particularly patient collections. Getting reimbursements from insurance companies requires less effort, time and money than getting payments from a patient. The insurance company may balk at a CPT code or something that can be addressed quickly, but a patient may just choose to sit on your bill. They may not understand what they are being charged for, think the bill is too high or may not have the means to pay. Setting the expectation of payment from the patient or, even better, getting some payment from a patient right away, is critical. Otherwise, you can watch your cash flow go negative quickly
Get Paid Now
One way to accomplish this is collecting at the time of service and not just the copay. That’s not collected for your benefit; it’s for the insurance company. A medical group needs to know what the patient’s health plan covers and what it allows in terms of reimbursement before he steps into an examination room. So, on the way out, collection can be made along with the answers to the predictable set of questions from a patient.
Don’t let the patient exit without asking for what’s rightfully yours. If a patient is unable or unwilling to pay right then and there, set up a payment plan. If there is a hardship situation, collaborate on a plan that is fair for all involved. Studies have shown that if people pay something meaningful during a visit, there is a much higher propensity to pay the full amount of the bill.
Bill the Smart Way
Beyond instituting payment plans or collecting payment at the time of service, be sure you’re billing patients in a way that makes it easy for them to pay. More likely than not, your medical group is not savvy about billing. Bloomberg recently reported the number of medical bills sent through the U.S. mail has increased while payments for all other services have decreased dramatically. It cited a study by PwC that medical payments are the only category to register an increase in paperwork since the start of the 21st century. Paper-based billing is a costly, time-sucking, error-prone process that is not what your patients want.
Patients want to get and pay their bills electronically. According to Deloitte, that’s the preference of 7 out of 10 healthcare consumers, while other studies suggest more than 90% want to handle their doctor bills in that manner.
Paper statements create a payment cycle of three months or more. Let’s walk through that. If you don’t collect at the time of service, 30 days pass before sending the first statement. That won’t be due until day 60 and, as is the norm, the patient has an issue with the bill or the act of paying, so another statement is sent. By the time any payment is received at least 90 days have passed. The Medical Group Management Association has found that to be the case in studies its done over the last several years. This pattern repeats itself for nearly all patents billed with paper statements. Using this method a medical group’s accounts receivable can become astronomically high very quickly. Remember, bankruptcy is often a result of unmanageable debt.
Make it Easy to Pay
Aside from thinking medical groups don’t “need” their money, patients are less likely to pay bills they do not understand. Because multiple parties contribute to their creation, and other parties furnish partial payments, healthcare bills are the ultimate amalgam of invoices. Almost three out of four consumers who participated in a 2013 study conducted by Citibank said if they understood a bill, they’d pay it right away.
So, along with a practice’s bills taking the slow way to get to the patient, those statements exacerbate the situation by being utterly incomprehensible, extending the time to pay even further.
You can go paperless and thereby produce bills in less time, with less cost and fewer errors, and in the form patients prefer. This approach allows you to link the time of service capability seamlessly so everyone knows who has paid what and when, and clarify the patient’s remaining financial obligation.
Putting these business practices and capabilities in place are not difficult or costly undertakings that require extensive user training or interruption to your group’s daily routine.
The biggest hurdle to overcome is your own complacency.