As health insurance costs shift away from payers toward patients in the form of higher copays and deductibles, physicians must have a firm grasp of their practices’ cash flow if they want to survive in a changing industry.
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Experts agree that as patients are expected to pay more, the risks of a cash flow shortage for a practice increases, because consumers aren’t as reliable as insurers when it comes to payments, and some patients can’t pay the full bill— or any part of it—on their own.
Consumers pay more than twice as slowly as commercial payers, and rank medical bills seventh in importance, behind cell phones and internet providers, according to research from global consulting firm McKinsey & Co. Medical providers are often the last to be paid, assuming there is any money left at the end of the month. Data from the National Center for Health Statistics indicate that 25% of families have an unpaid healthcare bill, 20% are paying a medical bill over time and 10% have a medical bill they cannot pay at all.
“Consumers opt for the lower-priced insurance with the high deductible, because they are optimistic they won’t have to use it,” says Andrew Graham, MBA, president and chief executive officer of Clinic Service, a Denver-based healthcare consulting firm. “When the deductible shows up, they are shocked. They don’t always understand the deductible requires funding on their end.”
Practices are especially vulnerable to a cash crunch in the first few months of the year when deductibles reset, shifting the entire payment burden onto the patient. With the trend of rising deductibles and more patient payment responsibility expected to increase, practices must be more vigilant about cash flow to enable them to get through the lean months and ensure they have enough cash to operate throughout the year.
“Cash flow has never been more important than it is now,” says Graham.
Collect more cash from patients
One of the easiest things a practice can do to increase collections is make it easier for patients to pay by whatever method they have available at the time of the visit, says Mat Kremke, MBA, vice president of the American Osteopathic Association (AOA), who works with physicians to better manage their practices.
This includes accepting credit and debit cards, cash or check. Practices should invest time upfront to know what insurance the patient has and what the copay will be, whether it’s through a third-party or by assigning staff to look up the data before the visit.
Practices can also keep a patient’s credit card on file along with an agreement that the practice can use it for billing. But Kremke warns that there are specific rules for storing this data that come from the card issuers, including tracking system access and regularly testing security.
John Kulin, DO, FACEP, chief executive officer of The Urgent Care Group in Philadelphia, says office-based physicians can use some of the same strategies urgent care centers use to collect from their patients. Urgent care centers have to collect up front or risk never being paid because of the episodic nature of patient visits.
For instance, Kulin installed a system that scans a check to the bank and treats it like cash, eliminating the problem of bounced checks. He also suggests offering a discount for paying at the time of service to entice people to pay and lessen the workload for the billing department.