Co-pays And Cash Flow Small Steps Can Produce Big Returns For Physician Practices

Medical practices face a number of revenue and cost challenges annually, many of which they have little direct control over. Recent examples include declining reimbursements, inflation, and malpractice insurance premium increases.
There are, however, some internal steps that, if taken simultaneously, can have a significant, immediate cash-flow impact and can mitigate the impact of negative external factors. One often overlooked area is patient co-pays.

Depending on specialty, most doctors see anywhere from 3,000 to 5,500 patients per year. Assuming an average of $10 per co-pay, this translates to $30,000 to $50,000 per year in cash collections per doctor. It is surprising to see how many practices still mail bills to a large number of patients for co-pays, not to mention some that actually waive the co-pays, which is in violation of most third-party payer agreements.

In a group of four doctors, a 20{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} failure rate to collect co-pays can cost the practice $32,000 or more annually. Even if the practice later bills the patient and collects the co-pay, it still loses. Estimates show that it costs as much or more to bill a patient and collect a co-pay as the amount of the co-pay itself.
The following steps can make a significant contribution to cash flow at virtually no extra cost.

First, make an assessment of the co-pay ‘failure rate.’ This is the percentage of co-pays that are not collected at the time of visit. It is relatively easy to determine the extent of co-pays collected. One way is to review monthly billing and accounts receivable reports for co-pays that have not been collected. Another is to compare patient-appointment logs to daily cash collections. Although some patient visits are part of a global arrangement, some payers allow you to charge co-pays for certain pre-operative, post-operative, and prenatal services. Checking on this can generate new revenues previously not collected or billed for.

Second, once you make an assessment of the co-pay collection failure rate, whether that’s 15{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}, 20{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}, or whatever, advise all doctors and mid-level providers of the financial impact. When doctors realize that closing the gap can translate to a substantial year-end bonus, you will get their buy-in.

Third, educate your patients, post your payment policy in the waiting room, and document it in your practice brochure. Receptionists and appointment schedulers should be continually aware of the need to collect co-pays. When scheduling appointments and calling patients to confirm appointments, the caller should automatically remind patients of the co-pay requirement at the time of visit.

Fourth, for patients who show up without their checkbooks, the practice should have a credit card facility to accommodate them.

Fifth, front desk support staff tend to have a higher turnover rate, which requires continued training and monitoring. Therefore, written procedures would be helpful. They serve as a training tool, a job description, and a way to assign responsibility. An example of a standard written procedure is asking a patient, “how will you be paying your co-payment today?” This elicits a much more positive response than, “would you like to make the co-payment today?” Once you have determined the co-pay failure rate, communicate this with the support team and set a goal to close the gap. Monitor performance monthly at first, then quarterly. This will serve as a basis for personnel performance reviews.

Finally, track monthly and year-to-date co-pay collections, and communicate this with all physicians, extenders, and support staff. Don’t forget to reward the appropriate personnel.

James B. Calnan, CPA is partner-in-charge of the Health Care Services Division of Meyers Brothers, P.C., in Longmeadow; (413) 567-6101.