What's the best way to manage patient balances effectively?

Having worked with a lot of practices that have very large patient balances we are routinely asked the best way to manage patient AR. In a nutshell, these balances typically exist because patients with balances have not been asked for a payment prior to coming in for an appoitment and/or a payment plan has not been implemented for those who are unable to pay their bill at time of service. The problem is often compounded by not having any mechanism in place to administer these plans if a one has been developed.

Absent a sound financial policy, the practice will end up spending resources post service on collection efforts or ultimately end up having these accounts written off as bad debt because no-one ever explained payment options to the patients.

So what's the answer? One solution is to develop protocols for patient payment plans that include acceptable payment thresholds that are clearly communicated to patients before services are provided. An example might be for charges in the $400 - $500 range that 50% is paid in the first month, with 25% in the second and the remaining 25% in the third. The goal should be to collect all patient balances due in six months or less.

Once payment plan agreements have been created, staff should be given the autonomy to implement and administer the program. The physician should not have to approve each payment plan that is negotiated; instead, a formal structure and policy should be implemented. For example pre-approve a sliding scale i.e. for amounts up to $300, payments made in $100 increments and paid within three months, for amounts of $900 paid in $150 increments over six months etc.

Patients who are set up on a payment plan should be asked to sign the payment plan agreement indicating their understanding of the terms of payment. Should the patient miss a payment the practice should immediately make follow up calls.

We don't carry balances on anything else without at least making regular monthly payments so why should it be any different with medical services that have been provided to us? Following through with this and determining which patients should be on payments plans, ideally before service is rendered, gives practices far greater control over accounts receivables and smooths cash flow.