Small physician practices have begun to dread the first financial quarter of the year. It’s the time when many large bills come due, like medical malpractice insurance. Meanwhile, it’s become an incredibly lean time for cash flow, as patients work off their skyrocketing deductibles. Many practices find they are sending out bill after bill or grappling with patient payment plans that bring in revenue at a slow trickle. It has become unsustainable for small physician practices to essentially act as lender to their patients, while coping with their own expenses.

A key stumbling block is the historic culture around medical payments. Patients wait for bills and then pay in small installments. The result is mounting accounts receivable, especially in those first few months of the year when many patients are footing the whole bill to meet their deductible. Doctors have typically just put up with late payments, but as slim margins threaten the financial solvency of small, independent practices that can’t rely on a hospital’s deep pockets, the time has come for healthcare consumers to view care delivered like any other purchase—with payment due at or before the time of service.

Ripping off the Band-aid

Once a patient leaves your office, your chances of collecting payment drop by a whopping 62 percent.

During the first few months of the year especially, delayed payments often become non-payments. At our small rheumatology and orthopaedics practice, we made a decision: we needed a way to change the default from non-payment to payment by instituting automatic processes at the point of care.

We established a “credit card on file” policy, which requires new patients to give the practice a credit card number on file before the first visit. With existing patients, we put up a sign explaining the new policy and talked them through it. We started first with our smaller rheumatology practice and then expanded it to our orthopedics patients.

We put some limits on how the credit cards could be used. For patients with private insurance, the limit is $500 per swipe, so if the total bill is $1500, the bill would be paid off in three months. This is a big improvement from some of our previous payment plans, which were collecting $100 per month. For Medicare patients, a single-swipe limit it $200, which covers their deductible. We do not require Medicaid patients to have a credit card on file, since they do not have deductibles.

A little push back, and some relief

Our doctors were wary of instituting this policy, fearing patients wouldn’t accept it, but for the most part we have been pleasantly surprised. We send each patient a receipt after we run their card, and in some cases, we get calls from patients who are shocked that their cards have been charged. However, once we explain that this is instead of receiving a bill, and that they no longer need to mail us a check, some patients, especially older ones, have felt relieved by the simplicity of the new process, and have accepted it.

We have had a small number of patients ask to speak to the doctor to try to get around the new policy, but overall, physicians have been very consistent in conveying our message–that we need to get paid promptly so we can continue to deliver high-quality healthcare and meet our own financial obligations. Getting patients to adapt to payment at the time of service was not as big of a hurdle as we expected. While some patients were initially leery of giving out credit card numbers due to privacy concerns, we allayed their worries by explaining the numbers were masked by our technology.

While we have lost a few patients due to this new policy, ultimately, they were patients we simply couldn’t afford to keep due to late or missing payments.

Little investment and big return

The technology we used to implement our credit card on file policy is part of a credit card functionality from Easy Pay Solutions that is fully integrated into our practice’s Aprima EHR. Adding this feature didn’t cost us anything additional, and the process is integrated into staff workflows for patient pre-registration and intake. Now, instead of manually charging each card, the whole process is automated through Aprima. Going through the charge list takes less than an hour! The new policy has saved additional time and money by reducing the number of patient statements we send out.

Now for the impact on accounts receivable—it’s quite dramatic. As of March 21, we have seen a 53 percent decrease in total accounts receivable year over year. When it comes to the patient portion of the financial responsibility, the amount in 91 to 120 accounts receivable has declined 73 percent since this time last year. This improvement gives us more certainty around our financial picture going into the second quarter and allows us to pay our own bills with confidence. Our doctors have been skipping down the halls.

How to change the payment culture at your practice

This time of year increasingly inspires fear in the hearts of physician practice managers, due to the 50 million people with high-deductible plans who are still paying 100 percent out-of-pocket to meet the deductible.  The goal is for patients to prioritize medical payments, accepting that they must be paid upfront, just like they would pay for groceries or clothing. One strategy is to adopt a “credit card on file” system:

  1. Be committed to developing the expectation that the providers need to be paid, that they are not a bank, and patients must be compliant with the providers’ payment terms
  2. Take time to educate and coach patients on the change. One suggestion is for patients to establish one credit card for medical bills. Printing a year end statement can be an easy way to keep track of expenses for tax purposes
  3. Consider technology that fully integrates with EHR workflows so that productivity is not impacted
  4. Adding a credit card on file policy requires the full support of physicians and staff, to limit exceptions to the rules

It won’t happen overnight. But it is possible to deploy easy-to-use technology to change the payment culture, decrease accounts receivable and reduce the administrative burden on your practice.

Amy Rogers, CMPE, of Orthopaedics & Rheumatology of the North Shore