Medical Bill Collections: How Far Should Doctors Go?
by Applied Medical Systems
With hospitals in the hot seat for aggressive medical bill collections, now is a good time for physicians to review how they deal with unpaid patient bills.
By Katherine Vogt, AMNews staff. Sept. 27, 2004.
Some stories about medical bill collections resonate like well-spun Hollywood scripts. The victims are everyday people who are arrested, forced into bankruptcy or thrown out of their homes because they couldn't afford to pay their bills for life-saving medical care. The villains are hospitals or physicians who hungrily pursue every dime they are owed.
Those familiar with medical bill collections know that this kind of drama is an exaggeration of what typically occurs when patients don't pay what they owe. They also understand that collection drama happens more commonly because physicians and hospitals must balance their need to recoup financial losses with their missions to treat patients charitably and engage in fair business practices. It can be a delicate line.
With scores of recent lawsuits accusing hospitals of overstepping that line by aggressively pursuing outstanding patient bills, some physicians and hospitals are re-examining their debt collection practices to ensure that they stay on the good side of consumer watchdogs.
Consultants and other observers say that while physicians won't likely face the same kind of legal action that has put hospitals in the hot seat, the lawsuits serve as a wake-up call that physicians should put policies in place that clearly define their collection practices, as many hospitals are now doing.
They recommend that the policies define the collection process from the time of patient preregistration and intake to when final delinquent payment notices are sent or when a collection agency becomes involved. Such detailed policies could help physicians deal with what can be a very sensitive issue.
"The whole area of collection is one of the most problematic for practices," said Kenneth T. Hertz, an Alexandria, La.-based consultant. "The reality is that most of us don't feel comfortable asking other people for money, so we don't, or we don't know how to do it."
But it is something that practices have to do to stay afloat, said Dieter Krantz, administrator and chief financial officer of the Prescott Valley Primary and Urgent Care Clinic in Prescott Valley, Ariz. "We have to collect from both [insurers and patients] to make sure the practice stays financially viable," he said, "Most people who want to pay don't complain. They understand that you need to pay your bills."
Create a Medical Bill Collections Policy
Not having a clear policy or a clear understanding of collections got some hospitals into trouble. Rick Wade, senior vice president of communications for the American Hospital Assn., said some of the backlash against hospitals surrounded a practice called "bodily attachment," which has been used in extreme cases and involves issuing an arrest warrant for patients with delinquent debt. But he said some hospitals didn't even know that collection agencies used this tactic. Since the controversy erupted, he said, more hospitals have re - examined their agreements with collection agencies.
After learning that there were wide discrepancies in how hospitals were collecting debt, the AHA developed collection guidelines that were issued in December 2003. They advised hospitals "to be certain they knew exactly and precisely about the agency used to collect the debt," Wade said, "and to be certain that whatever they did reflected on the reputation that the institution wanted to have in the community." The guidelines emphasized having a process in place to examine the patient's financial condition, he added.
Though the dynamics of collection are different for hospitals, which tend to have larger bills to collect and greater patient volumes than physician groups, Wade acknowledged that other health care entities might be able to learn from the examination of hospital collections.
"There are lessons here for everybody in health care about what the expectations of the public are about how we handle these things," he said.
Richard L. Clarke, president and CEO of the Healthcare Financial Management Assn., said physicians and hospitals could benefit from communicating with each other about collections practices and challenges.
"Clearly they cannot coordinate their policies [out of legal concerns over price-fixing], but I think they should talk in a legal way about what each is doing. If a hospital determines that a patient can't pay, then the physician won't likely get paid by that patient, either," Clarke said.
Hertz said physicians tend to be less aggressive than hospitals in collection practices. He said that is due to both a fear of getting sued and a lack of training of front-office staff. "Collecting from an insurance company is one thing, but collecting from an individual is different," he said.
He said physicians might be able to find training programs from collections experts to help their staffs learn the best ways to collect from patients.
Michelle Durner, president of Applied Medical Services LLC, a multiservice practice management and consulting firm in Durham, N.C., said it was critical to train the office staff to collect insurance co-pays or other upfront payments while the patient is still in the building.
"A lot of physicians don't have their office staff trained adequately to get their money when the patient is there," Durner said. Many physicians have signs saying payments are due at the time of service, "but once the patient gets out the door it's easier to ignore those statements," she added.
Also critical is training office staff to get thorough and accurate information about the patient during preregistration, registration or intake, Durner said. That information should include the patient's address, phone number, Social Security number, employer name and anything else that might assist in tracking down the patient later if he or she is delinquent on a bill.
At the same time, she said the staff should verify all insurance information, including the co-pay amount due from the patient.
Ken Morgan, executive vice president and partner of the Hales Corners, Wis.-based firm Zimmerman LLC, has consulted for hospitals and physician practices. He said the information garnered during patient intake also could help them understand the patient's financial condition.
"That patient intake process -- whether it's with physicians or hospitals -- is critical because at the end of the day we want to make sure we understand whether or not that patient can pay," he said. That could be useful if the patient later fails to pay.
Physicians also should ensure that their staffs are prepared to talk about payment plans when patients come through the doors, said Hertz and others. For example, if a patient comes in with an outstanding account balance, the staff should have a policy on how to handle that situation.
By letting patients know about payment plans and providing them with as much information as possible in advance of the service, Hertz said physician practices can help ensure more collections. After all, he said, most patients want to pay their bills.
Providing clear information on billing statements can make it easier for patients to realize that they can find a way to pay, said Sandra Williams, Durner's colleague and CEO of Applied Medical. "Say on your statements that you're willing to accept payment arrangements or Visa or MasterCard," she said.
Many practices will send out statements every 30 days as they wait to be paid, and some will persist at this for months, perhaps adding late charges during that period. AMA policy says while it discourages harsh collection practices, physicians who have had problems with patient payments may add interest or other reasonable charges to delinquent accounts.
Durner said if a practice still hasn't been paid after three statements and a phone call, it's not likely to get any money from the patient without taking more drastic action.
In this situation, some practices turn to collection agencies for help. But Hertz said that decision should be weighed carefully.
"I recommend that each practice review the patient account before it is turned over to a collection agency. Make sure there are no extenuating circumstances and really try to get an understanding before turning it over," he said.
Indeed, AMA policy encourages physicians to review accounting and collection policies to ensure that no patient's account is sent to collection without the physician's knowledge.
Although tactics such as wage garnisheeing or putting liens on patient's homes have been criticized, Hertz said it is possible to find collection agencies with less aggressive techniques.
In choosing an agency, he said practices should research the firm's techniques, check its references and determine whether it has been the subject of complaints. He said they also should consider how productive the agency has been with collections.
Morgan said some physicians might be reluctant to use collection agencies for fear of patient backlash. "Physicians may choose to not use an agency because they may be sensitive to the impact it would have on their patients," he said. Hospitals have a different, less personal relationship with patients and therefore might be more inclined to use those services, he added.
The six-physician Prescott Valley Primary and Urgent Care Clinic is a primary care practice that has used collection agencies, though not a lot. Its administrator, Krantz, said only about 3% to 5% of the practice's patients are delinquent on their bills. About 20 or 30 patient accounts are sent to a collection agency each quarter.
Krantz said the practice put controls in place to restrict the agency from using certain tactics. "They have to ask us whether we want to go past letters and phone calls. And they have to ask if we want to get an attorney involved," he said, adding that they have never yet had to go that far.
But Krantz said that long before the collection agency is brought in as a last resort, the practice has worked to collect that bill through its efforts to get payments at the time of service.
"Always try to collect up front as much as you can," he said. "Then the patients -- particularly if they haven't seen the doctor yet -- have the best incentive to pay."
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ADDITIONAL INFORMATION:Correcting collectionsAMA policies on collections:
The AMA encourages physicians to review their accounting and collection policies to ensure that no patient's account is sent to collection without the physician's knowledge. The AMA also urges physicians to use compassion and discretion in sending accounts to collection, especially accounts of patients who are terminally ill, homeless, disabled or impoverished, or those with marginal access to medical care.
Although harsh or commercial collection practices are discouraged, the AMA says a physician who has pro blems with delinquent accounts can choose to ask that payment be made at the time of treatment, or add interest or other reasonable charges to delinquent accounts. Physicians who add an interest or finance charge to accounts not paid within a reasonable time are encouraged to use compassion and discretion in hardship cases.
The AMA encourages physicians who sell their practices or contract out billing services to establish a mechanism for continually reviewing the collection methods and procedures of the billing entity.