The Importance of Collections / Avoid Writing Off Copays

Today's blog post comes from WebPT Co-Founder Heidi Jannenga, PT, MPT, ATC/L.

Today, copays are the norm, and they’re only becoming more costly. To top it off, many insurance plans—especially those that individuals and small businesses purchase (including HSAs)—have very large deductibles that patients must meet before insurance will pay for anything. While it’s obvious that these increased copays and deductibles put a burden on patients, they also burden physical therapy practices. How? Many practices don’t have the procedures in place for effective fee collection from patients—especially not in person. Instead, many are willing to simply write off cash collections when the patient doesn’t pay. But with declining insurance reimbursements, successful over-the-counter collections are more important than ever

What are the implications of not collecting?
In an APTA Podcast, Nancy White says, “studies show that the chance of collecting from a patient drops almost 20% as soon as the patient leaves the office.” Anecdotally, I think it's higher—especially after patient discharge. While some front offices may find it easier to simply mail a statement after the visit, there are usually hidden costs associated with this. In fact, according to Nancy White, there is data that indicates “it may cost between $5–$10 per patient to send and process each statement by mail.” Not to mention that when you mail statements rather than collect upfront, you’re decreasing your chances of receiving payment and there’s a self-made waiting period for any payments patients do send.

Collecting up front is also easier for the patient. A final bill for six visits is far more overwhelming (and appears much more difficult to pay) than paying for each individual visit at the time or service. There’s a reason infomercials always say the magical gadget is yours in six easy payments. Not to mention that in the medical industry—especially physicians’ offices—collecting copays before providing services is the norm.

If I don’t collect, can I just waive it all?
If your practice is struggling to collect, waiving copays and deductibles is not the solution. Why?

You Can’t Afford It
Consider this example from the APTA:

A typical outpatient clinic with two PTs and 1 PTA. Assume an average copay is $25. If each clinician sees 12 patients, that's $900 in copays that are owed to the practice that should be collected from patients that day. If the practice is open 200 days a year, this adds up to $180,000.

What practice can honestly afford to walk away from that amount of revenue? These are the days of decreased reimbursements! It’s absolutely critical that you collect the fees your patients owe. You shouldn’t be embarrassed or ashamed to collect fees. You’re providing a valuable service and the more you waive copays, the more you’re diminishing the value of your practice. And if you’re worried about losing physician referrals because you’re charging too much, don’t. If you have any kind of relationship with your referring physicians, discussing and overcoming the issue of collecting a copay should be easy. They’re in the same boat, after all.

Medicare Considers It Fraudulent
An even bigger reason why you should not waive copays and deductibles is that carriers could consider it fraudulent. Medicare and Medicaid don’t allow practitioners to waive copays and deductibles, because doing so misrepresents the true charge for your services. Although Medicare may permit waiving copays in very select circumstances, you should never assume that this will be the case. (And with third-party carriers, permission to waive is just about unheard of.)

Commercial Carriers View It as a HIPAA Violation
If you waive copays and deductibles for privately insured patients, you run the risk of a HIPAA violation or fraud accusation because you’re technically misrepresenting charges to the commercial carrier. For example, if you waive a $20 copay on a $100 charge, then you’re basically admitting that you value that service at $80. Thus, the carrier should actually owe you only 80% of $80 (not $100). To read about this in further detail and see another example, check out the APTA’s article on waiving copayments.

You’re Worth More than This
Most carrier contracts stipulate that the total amount of payment for service includes the insurance reimbursement and the copay amount. If you’re consistently waiving the copay, then you’re saying that your services are worth less than they are. Do you really want to represent yourself that way? I know I don’t—and more importantly, my business couldn’t run on that. When you waive copays, you’re devaluing yourself. Don’t do that.

What about financial hardship circumstances?
Even for patients with financial hardships, it’s best to avoid waiving copays. And declaring financial hardship is not just a matter of the patient stating “I can’t afford it.” Most carriers require significant documentation justifying the hardship. Here’s an example of a hardship letter from a PT practice. If you have hardship cases, here are some options that the APTA recommends in an article on waiving copayments:

“The first thing to do is check your provider contracts. Where it is not precluded by your payer contracts (for example, there may be a clause that says you will never charge that payer any more than you charge another payer), the best way to reduce the burden on these individuals is to charge them less. Remember though, even after you check your contracts and affiliations, if a person has a copayment, you must attempt to collect it. [For example], let's say you elect to only charge $20 for the visit. You must still obtain $4 (20%) from the patient. It's still a copayment, but it may be a more affordable copayment for that patient.

“Another technique that may be available, and again, check your provider contracts, is to offer services ‘pro bono.’ In some circumstances and under some plans of treatment, providing the service for free may be the most effective way of dealing with patients with financial restrictions. If the patient can pay his/her share of several early treatment visits, it may be administratively easiest to not charge them at all for the last several visits. In this manner, the patient is receiving a reduced billing for the entire episode of care.”

So, what do I do?
Develop procedures for collecting all patient fees (including copays, deductibles, coinsurance, and payment for noncovered services and supplies) at the time of service. Don’t be shy about it; this represents the value of your practice. Check out tomorrow’s blog where I’ll share several steps you can take to implement a plan for collecting patient fees.

No matter what, though, don’t sell yourself short; don’t jeopardize your practice; and most importantly, remember you’re running a business—you deserve to get paid because your services are worth it. People have no problem shelling out cash for gym memberships, personal training sessions, or special classes. Why would your services—services that tremendously impact and improve patients’ quality of life—be any different? It’s up to you to set the standard.

Effective collection keeps you in business, allows you to hire quality employees, and most importantly, enables you to provide exceptional patient care. We’re empathetic, caring, good-natured practitioners, but that doesn’t mean we should let anyone bamboozle us into predicaments where we endanger our license, our practice, or our profession.