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Patient Payment Plans

Patients now carry more of the financial responsibility for their care — with medical facilities and providers becoming creditors.

After reading this article you will understand how to:

  • Determine protocols for the timing, duration and application of fees for patient payment plans
  • Recognize the parameters to develop forms, templates and other materials to assist employees in discussing payment plans with patients
  • Identify options to assist patients seeking financial aid to pay medical bills
  • List outsourcing opportunities for patient collections and payment plan administration

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As we continue to recover from the 2008 recession and Americans increasingly carry more financial responsibility for their own medical care, physicians find themselves extending credit to patients. Often referred to as "payment plans," these loans can amount to thousands of dollars. Historically, patient financial responsibility represented only a small minority of a practice’s revenue.

Today, as patients owe more — both in terms of individual amounts and the percentage of your practice’s total accounts receivable — collecting from patients has become a high stakes game. Instead of leaving the process — and your bottom line — to chance, act now to develop an effective payment plan process for patients who need help paying what they owe you. Here’s where to start:

Determine the protocols. It’s critical to set boundaries for payment plans. These parameters include the amount that can be converted into a loan, the minimum payment, and the maximum timeframe for repayment. Help the employees handling these plans by developing a grid that displays how much should be collected upfront and per payment period. These sums can be a percentage of the entire bill, or fixed amounts determined within a range; for example, collect $50 for all bills less than $250, $100 for bills between $250 and $500, and so on.

If you are not charging monthly interest on unpaid balances, round off odd amounts to make it easy for the patient to remember the amounts they owe each month. If the patient owes $153.73, for example, include an additional $3.73 on the initial invoice so that the remaining monthly payments are $50.

Script for success. Develop and train your employees on effectively administering payment plans, commencing with the most important question of all: "How much more time do you need?" When a patient reveals that they can’t pay, don’t just automatically set them up on your "standard" payment plan. Often, patients will suggest a timeframe that is shorter than you anticipated. After asking the important question about timing, you can then establish a plan based on the patient’s own parameters (unless, of course, they do not comply with yours, in which case, you’ll need to inform the patient of your minimum requirements).

Consider extending discounts. Before you place patients on payment plans, offer a discount for paying the self-pay balance in full — you are usually better off avoiding the costs of additional staff time, processing and other expenses of administering a payment plan. Although there is no industry standard, most practices offer discounts ranging from 20 to 30 percent for payment in full.

Recognize the plan. Simply setting up a payment plan without an initial payment — well, it really isn’t a plan. An initial payment is essential to a plan, whether it’s initiated in a face-to-face meeting with one of your employees or over the telephone.

Automate the process. Manual processes — logs, forms and weekly reviews of payment plans — are resource-intensive, and often get delayed or even botched as other priorities in the business office are addressed. Automate the payment plan process by contracting with a vendor that offers the ability to record, store and process credit and debit cards securely online. Readily available from many banks and other third-party vendors, this relatively new service allows an employee to collect the credit card information from the patient, and establish the parameters — the amounts and timing — of your payment plan in terms of debiting the card. Most products also automatically transmit receipts for payments to the patient (or guarantor).

Go online. Making payments to physicians is a laborious process in the first place. Medical practices are one of the only businesses that still transmit paper statements (and expect to receive paper checks for payment). Avoid payment plans altogether by making it easier for patients to pay in the first place. Migrate to online billing because it has the potential to not only enhance collections, but also to slash your costs to create and mail patient statements.

Determine available resources. Contract with a professional medical lender should you not wish to administrator payment plans in-house. Consider also opportunities that may be available to your patients, including medication assistance programs, community grants and Medicaid eligibility. If you do not have the resources to help patients seek out financial aid for their medical bills, consider partnering with your hospital or a community agency. Even if these sources do not pay the bill in question, they may relieve the patient from another financial burden, thus freeing funds to pay you.

Match payroll timing — not tradition. Historically, payment plans have been established with monthly transactions. Instead of sticking to "well, that’s the way we’ve always done it..." consider twice-monthly or even weekly payments. This pattern is often more palatable for patients, who appreciate the smaller amounts as well as the more relevant timing of the requested payments.

Monitor plans. Most practices are satisfied if the plan is created, but don’t have a successful strategy to ensure that the plan is actually carried out. It’s difficult to effectively monitor payment plans when they are buried amongst your many self-pay accounts. Bring them to the forefront by creating a separate financial category ("PP" for payment plans as opposed to "SP" for self-pay, for example). Pulling the PP accounts on a separate business office report each month allows you to more precisely monitor these outstanding balances. If you don’t have enough staff to monitor the plans, consider contracting with your collection agency to perform the task on your behalf. If the patient misses a payment, his or her account can be seamlessly turned over to the agency for its typical bad debt process.

Not all patients with outstanding balances are good candidates for payment plans. When patients are unwilling to set up a plan for an outstanding balance, turn their accounts over to your collection agency or a company that specializes in early-out collections. Also known as "pre-collections," early-out collections are actions are initiated after an account becomes past due but before it becomes seriously delinquent.

Pearl 11/01/14

Contracting with an early-out collections company may be a great option to supplement your efforts to collect from patients. Historically, practices had only the option of managing the process in-house or outsourcing bad debt — typically as a last-ditch effort — to a collection agency. Vendors specializing in early-out collections offer a middle-road approach that allows practices with limited internal resources to transmit accounts that are outstanding but still collectable.

Pearl 11/08/14

Transparency Pay-Off
Patients often don’t pay their bills because they don’t understand them. Educate patients about their financial responsibilities by itemizing charges, discussing the cost of a procedure in advance, and insisting on upfront payment—either in full or in the form of a deposit—when services are scheduled. Physicians also can help by openly discussing fees in advance of treatments. Telling patients what to expect helps them to plan ahead and, one hopes, pay more promptly.

Pearl 11/15/14

With Interest
When payment plans involve a financial change or interest added to the unpaid amount, physicians must comply with applicable state and federal laws. At the federal level, Regulation Z, also known as the Truth-in-Lending Act may apply.

While not regulating pricing, Regulation Z does mandate that the potential for additional charges (such as interest) to be levied must be disclosed to the patient before the service is rendered. Consult with an attorney when creating your patient financial policy disclosure statements. The American Medical Association concurs with this approach: "The patient must be notified in advance of the interest or other reasonable finance or service charges by such means as the posting of a notice in the physician’s waiting room, the distribution of leaflets describing the office billing practices, and appropriate notations on the billing statement."

Pearl 11/22/14

Bimonthly Payments
Most Americans are paid every other week, or twice monthly. Mirror this standard human resources protocol by creating payment plans with installments required at the same timeframe—bimonthly. Patients will consider these more frequent, but smaller payments a benefit of your plan. Medical practices which have converted to this protocol have ascertained a higher compliance rate.

United States