Chapter 13: Billing and Collections

SENDING COLLECTION LETTERS TO PATIENTS

SENDING COLLECTION LETTERS TO PATIENTS When patients continue to be delinquent in their accounts, medical office managers can send those patients letters stating the amounts owed and any requested payment terms. Some offices have their clinic directors or healthcare providers try to contact the patients. Whatever procedure an office follows, the medical office manager must be sure to consistently and carefully apply the same guidelines to all patient

SELECTING A CREDIT LIMIT TO EXTEND TO PATIENTS

SELECTING A CREDIT LIMIT TO EXTEND TO PATIENTS In terms of credit, medical offices should predetermine the amounts they are willing to extend to patients, document those amounts in policies, and apply the policies equitably. The amount of credit the medical office wishes to extend will vary from one office to the next. The important thing to keep in mind is that the amount must be the same for all patients; the medical provider or manager may not deem one patient worthy of a higher credit amount than others. This would be a violation of the Fair Debt Collection Practices Act.

Credit and Collections

Credit and Collections The best way to ensure patients pay their bills properly is to discuss the medical office's credit and collection policies before services are rendered. Medical office managers should discuss all fees and outline all payment policies. When patients arrange to make regular payments on their balances, for example, managers should provide written con- tracts that stipulate the payment amounts and due dates. Such contracts avoid confusion and reduce or eliminate patient questions. Patients who clearly under- stand fees for physician services are better equipped to make healthcare choices and to understand their bills. When a patient does not understand the fees they incur in the medical facility, this confusion can lead to nonpayment of a bill.

FORGIVING DEDUCTIBLES OR COPAYMENTS

FORGIVING DEDUCTIBLES OR COPAYMENTS It is illegal, and is in fact considered insurance fraud, for healthcare providers to forgive patients' deductibles or copayments. When patients cannot pay their bills and physicians agree to treat them for lesser or no fees, those patients must sign and date hardship agreement letters for their file. Hardship letters become part of patients' permanent medical records. Having a hardship letter on file allows providers to treat patients for reduced fee

Uncollectible Accounts

Uncollectible Accounts Some offices choose to write off accounts deemed uncollectible to maintain patient relations. Patients may have legitimate reasons for nonpayment, such as the death of a spouse or the loss of a job. When medical offices choose to write off patients' owed balances, which is legal, the medical office manager must send the patients letters to that effect. Copies of the letters should reside in the patients' files.

Use of Collection Agencies

Use of Collection Agencies When offices choose collection agencies to collect past due accounts, those companies must be reputable. Other medical offices are good sources for agency references. Collec- tions companies should actively pursue accounts, not harass or offend patients. Such agencies must also abide by federal guidelines for debt collection. The Fair Debt Collection Practices Act was enacted to eliminate abusive, deceptive, and unfair collection practices. This law applies to all consumer debt for personal, family, or household purposes. Once accounts go to collection agencies, offices typically write off the balances owed. Collection agencies typically charge percentage fees for their services. As patients' amounts owed increase, so, too, do collection agencies' fees. The standard rate is 33 per- cent of the amount owing. Therefore, if a patient owes $99 when the office sends the account to collections, the provider is paid $66 when the collection agency collects payment on the account ($99 − $33 = $66). Some collection agencies charge flat dollar amounts to collect accounts, which is most cost effective for large accounts. To maximize their collections efforts, medical offices can use multiple collection agencies.

Using Preprinted Brochures

Using Preprinted Brochures To further help ensure that payment terms are clear, many medical offices include impor- tant financial information in their office brochures and send these brochures, along with registration paperwork and fee and credit policies, before patients arrive for their first visits. Ensuring that patients are well informed helps avoid collection problems. Copayments, for example, should be paid at visit check in.

Verifying Patient Identification

Verifying Patient Identification In 2008, The Federal Trade Commission (FTC) passed the Red Flags rule. The purpose of this legislation is to reduce fraud and identity theft. The Red Flags rule applies to any business or entity that extends credit. Healthcare offices that allow patients to be seen for care, without requiring payment in full for services at the time of service, are extending credit and must therefore abide by the Red Flags rule. In essence, this leg- islation requires the medical office to have a written program in place to verify patient identity, before extending credit. The easiest way to accomplish this is to require patients to show photo identification when they check in at the medical office. When new patients visit the medical office, receptionists must copy those patients' driver's licenses and insurance cards, front and back. Such documentation confirms patients' identities and can help the medical office manager track patients for collection purpose

When Patients File Bankruptcy

When Patients File Bankruptcy Patients who are unable to pay their medical bill may file bankruptcy. A Harvard study performed in 2005 found that inability to pay medical bills is the leading cause of bank- ruptcy filings, affecting nearly 2 million Americans each year. Depending on the type of bankruptcy the patient files, the medical office may or may not be repaid any of the amount outstanding on the patient's account. Since bankruptcy is designed to protect debtors from further collection activity, the medical office may no longer contact the patient for payment of his account once the patient has filed a bankruptcy claim. Patients may file bankruptcy in one of the five following types: 1. Chapter 7—All nonexempt patient assets are sold and the proceeds distributed to creditors. Secured creditors, like mortgage or car loans, are paid first; unsecured creditors, like medical providers, are paid last. This type of bankruptcy is considered complete in that most or all patient debt dissolves. If the patient's assets are less than their debts, the medical office may not receive any of the amount outstanding and may have to write off the patient's balance. 2. Chapter 9—Used for town reorganizations. This does not apply to medical bills. 3. Chapter 11—Used for business reorganizations. This does not apply to medical bills. 4. Chapter 12—Used by farmers who cannot meet their financial obligations. This does not apply to medical bills. 5. Chapter 13—Protects debtors from creditors while the debtors arrange to repay all or some of their debts over 3- to 5-year periods. When those periods end, the balances on most debts dissolve. With this type of bankruptcy, the medical office may receive a portion of the amount outstanding on the patient account over the 3- to 5-year period of time.

When a Patient Does Not Pay a Bill

When a Patient Does Not Pay a Bill When patients fail to pay their monthly billing statements by the due date, medical office managers should try to contact the patients regarding payment. Unless patients have instructed otherwise, it is legal to contact patients at their places of employment. Once managers reach patients, they should communicate the outstanding balances and ask when to expect payment on the balances. When patients agree to dates and amounts, managers should make notations in a tickler file. Serving as a reminder, a tickler file facilitates follow-up should payment fail to arrive when expected. Tickler files can be manual, such as index cards in a small box, or computerized. Many medical software programs have such reminder mechanisms. In addition to making notes in tickler files, managers should follow up with patients in writing. Letters should outline conversation details, including the amount owed on the account, the agreed-on payment amount and due date, and any follow-up actions in the event of nonpayment. HIPAA regulations prevent members of the healthcare team from leaving messages with live parties or on voice mail when those messages may violate patient confidential- ity. It is inappropriate, for example, to mention that a message is about a past due balance. An appropriate message is "This is Steve from Dr. Sutcliffe's office. I need to leave a message for Jorge Rodriguez to call me at (425) 555-9899." Document all phone calls in the patient's financial ledger.

When a Patient's Check is Returned by the Bank

When a Patient's Check is Returned by the Bank When patients write nonsufficient funds (NSF) checks that "bounce," most banks charge the medical office a fee. An NSF check is one that is written for more money than is in the checking account. If an office receives an NSF check, it can legally charge patients a fee in return. Most banks redeposit NSF checks only once, so when checks cannot be redeposited, medical office managers must contact the patients to inform them of their checks' return and communicate the fee charged by the office. In such conversations, managers should determine the dates by which patients will send replacement payments. At the end of the interactions, managers should make any relevant notations in the patients' billing ledgers.

Account overpayments

Account overpayments can occur for a number of reasons, including when patients pay on their accounts and their insurance policies pay unexpectedly high amounts or when patients have multiple policies that together pay more than owed. When overpayments occur, careful review is needed to identify the party who should receive the refund. The refund may be due to the patient, or it may be due to the insurance carrier. The medical office manager should determine the correct amount to return and the correct person or company owed the refund. When posting the amount of the refund to the patient's account, the medical office manager should note the reason for the refund, as well as the person and address to whom the refund was sent. A letter from the medical office manager should accompany the refund so that the recipient is aware of the purpose for the refund check.

Charging Interest on Medical Accounts

Charging Interest on Medical Accounts Medical providers who wish to charge interest on past due balances must be sure to check the laws in their states. Any changes in financial policy, including the decision to charge interest on accounts, requires providers to post written notices in prominent office locations at least 30 days before the financial changes occur. It is important to note that those bills patients receive that are accruing interest will typically be paid before those bills that are not accruing interest. To be paid in a timely manner, it is advisable for the medical office to charge interest on outstanding accounts.

Collecting from Estates

Collecting from Estates Sometimes patients die with balances owed to a medical office. Providers may choose to forgive the balances if the deceased was unmarried, for example, or lacked assets. When providers choose to pursue the amounts, however, medical office managers should send statements to the deceased's estates in the following format: Estate of [patient's name] c/o [name of patient's spouse or next of kin] Patient's last known address. In return, the person handling the deceased's estate should contact the medical office to arrange for payment. If the office receives no response, the medical office manager can contact the County Recorder's Office in the Probate Department of the Superior Court in the county where the deceased resided. This office should provide the name of the estate's executor. If the office receives no response from the estate's executor, the medical office manager should gather the proper forms from the County Clerk's office to file a claim against the estate for the amount owed. In general, medical offices have from 2 to 36 months to act. While a claim remains outstanding, the manager should continue send- ing the estate's executor monthly billing statements.

Collecting from Patients

Collecting from Patients Medical offices should request certain pieces of information on their patient registration forms to make tracking patients, and therefore debt collection, easier. For example, offices should request patients' employers' names and telephone numbers, as well as the names and numbers of emergency contacts who do not live with the patients. Emergency con- tact information helps provide options when patients' accounts become past due and medical office managers cannot reach patients at home. Each state has a statute of limitations that sets the maximum time in which healthcare providers can collect patient debts. Because Medicare and many managed care insurance companies prohibit providers from billing patients until insurance companies have issued explanations of benefits outlining the amounts patients owe, it is crucial to bill insurance providers soon after the service is provided so that the patient portion can be billed in a timely manner.

Collecting from the Patient in the Office

Collecting from the Patient in the Office Asking patients to pay while they are in the office is the most effective way to collect payment. When patients with past due accounts are due in for appointments, medical office managers should ask the receptionist to see those patients before those patients receive treatment. In private areas out of other patients' hearing range, the managers can then remind the patients of their balances due. When patients cannot provide payment in full, the managers should make other arrangements. Those arrangements should always include a commitment from the patient to the amount of payment and a date by which the patient will make that payment. After the conversation, the medical office manager should ask the patient to sign a contract that outlines the agreement mad

Collection Policies and Working with Managed Care

Collection Policies and Working with Managed Care Some medical offices collect entire visit fees from patients the first time they are seen in the office for care, but this practice is not common. Some managed care plans strictly govern how much money, if any, providers may collect from patients at the time care is rendered. When offices participate with Medicare, for example, providers are not allowed to charge patients for covered services at the time of service. Instead, those providers must bill Medicare and then bill the patients for the portions Medicare states those patients owe. When speaking with patients about fees or payments, it is important to remember that people tend to associate payment with value. When medical office managers act embarrassed about fees, fail to ask for payment, they give the impression that the physician's services lack value.

Dismissing a Patient from Care due to Nonpayment of a Bill

Dismissing a Patient from Care due to Nonpayment of a Bill When patients are chronically late with payments or refuse to pay at all, providers can dismiss those patients from care via certified letter. Providers must give patients at least 30 days to receive care, but after that period providers are no longer bound to provide treatment. Physicians who do not honor this commitment may be sued for patient abandonment. Patients should be dismissed only after physicians' have given their consent and signed receipts verifying that patients received their certified letters have been filed in those patients' permanent medical records.

Fee Schedules

Fee Schedules In 1993, U.S. Congress passed the Omnibus Budget Reconciliation Act (OBRA) in part to require that physician reimbursement for Medicare services be based on a fee schedule. Fee schedules set maximum amounts for services using the resource-based relative value scale (RBRVS), which is designed to reduce Medicare costs and establish a national standard for physician payment. This national standard is itself based on the Current Procedural Terminology (CPT) codes used for patient visits. Medicare service fees are calculated based on the five following factors: ■ Service intensity ■ Time needed for the service ■ Skills needed to perform the service ■ Practice's overhead ■ Practice's malpractice premiums. Physicians' fees are adjusted according to a geographical practice cost index (GPCI), which factors in the differing healthcare costs across the United States. Together, these factors determine a healthcare provider's relative value unit (RVU). The RVU was devised by the Centers for Medicare and Medicaid Services (CMS) as a way for physicians to create a fee schedule for the services they render. RVUs take into account three factors: how much work by the physician is involved in performing the service, the type of expertise the physician needs to have to perform the service, and the cost of the physician's malpractice insurance policy. Each year, Medicare assigns a national conversion factor that is added to the RVU. The national conversion factor is a number released by Medicare each year that deter- mines fee schedules for all healthcare services. The national conversion factor is multi- plied by the physician's RVU for any given service or procedure to determine the allowed fee for that service. For example, imagine CPT code 99205 has an RVU of 4.78 for a healthcare provider practicing in the Los Angeles area, and the national conversion factor is 37.5623. This would make the Medicare-allowed charge for this service $179.55 (4.78 × 37.5623 = $179.55). Because most health insurance plans base their fee schedules on the Medicare fee schedule, the Medicare allowed charge is typically considered the maximum charge any insurance plan will allow for any given service or procedure.

Introduction

Introduction Omnibus Budget Reconciliation Act (OBRA) legislation passed by Congress in 1993 to calculate healthcare service fees by formula fee schedule list of services and their fees national standard point of reference for developing charges for health care services used throughout the United States geographical practice cost index (GPCI) Medicare system of adjusting fees based in the county in which the healthcare provider practices relative value unit (RVU) numeric value assigned by Medicare to formulate fee schedules for healthcare providers In today's healthcare setting, the vast majority of patients do not pay for their care in full at the time of service. Many patients have health insurance carriers who will pay a portion of their bills, but the patients are responsible for the rest. Most patients will be expected to pay deductibles, copays, and a portion of the costs of services. The medical office manager should stay abreast of the accounts receivable in the medical office. The management of the amounts owed to the medical office is vital to the practice maintaining a steady cash flow for services rendered.

Managing the Accounts Receivable

Managing the Accounts Receivable Any successful medical office must manage its accounts receivable (AR), which is the money owed the office from all sources, including patients, insurance companies, work- ers' compensation, Medicare, and Medicaid. AR management, which entails documenting how much money is owed the office, by whom, and for how long, is a weighty task and so must be done regularly and thoroughly. With the decline of manual billing systems in the medical office, computerized sys- tems have become the norm. Although computerized systems vary, most allow the medi- cal office manager to: accounts receivable aging report documentation of the money owed the medical office and how long accounts have been outstanding (AR) money owed the medical practice ■ ■ ■ Post charges and payments to patient accounts Print insurance billing forms and patient billing forms Create aging reports (documentation of the money owed the medical office and how long the account has been outstanding) that detail the amounts owed by patients. Most medical billing programs offer a wide variety of reports. Such reports can list infor- mation like all patients with birthdays in any given month or all female patients over age 40 who have not had mammograms in the past year. Billing systems with basic features like reports are affordable for most medical offices. Higher-level features increase the price of a system. Some systems, for example, offer inte- grated electronic appointment books. Others send insurance claims electronically and receive insurance payments electronically. Some systems even allow remote access, which means healthcare team members can access their billing system when out of the office. To ensure that the office receives the software package it needs, the office manager should research a number of options. Online, the website www.2020software.com lists the most popular medical billing programs on the market and allows users to order demo CDs of programs at no charge. The aging reports mentioned earlier are important to AR management for a number of reasons. When physicians wish to take business loans, for example, banks will request docu- mentation on AR accounts. Some malpractice insurance companies examine physicians' AR before extending policies. Physicians with high or old AR are considered greater risks to insure. The most effective way to collect money on past due accounts is to speak with patients while they are in the office. When face-to-face communication is not possible, the next most effective method is calling patients, but from private office locations to safeguard patient confidentiality. Medical office managers making such calls must pay strict attention to the law regarding collections and document all calls and conversations, as well as any patient messages, in patients' financial records.

Offering a Professional Courtesy

Offering a Professional Courtesy Physicians who treat other physicians for free or at greatly reduced fees extend what is called professional courtesy. Such courtesy is also extended to family or friends of the physician, to the family of other physicians, or even to such professional associates as the physician's attorney or accountant. Even if the physician is treating the patient at no charge, a complete patient medical record must be kept in the medical office for that patient. In cases of professional courtesy, accurate patient charts are vital to avoid the appearance of fraud or impropriety. Medical office managers should have any patients in these situations sign professional courtesy agreements, such as "I understand Dr. Jones is giving me a professional courtesy discount for services rendered." Medicare prohibits physicians from billing for the treatment they provide their relatives or household members. Immediate relatives include the physician's spouse, parent, children, siblings, grandparents, grandchildren, stepparents, stepsisters, stepbrothers, and stepchildren. Household members include anyone living in the same home as the physician, like a nanny, maid, butler, chauffeur, medical caregiver, or assistant. Borders, people who rent rooms from physicians, are not considered household members.

Participating Provider Agreements

Participating Provider Agreements Most patients with private health insurance are covered by managed care plans. As a condi- tion of participation, managed care plans credential healthcare providers and require those providers to apply. When providers agree to participate in managed care plans, they agree to accept predetermined fee schedules. Some managed care plans also dictate the type of medications providers can prescribe and the types of specialist referrals those providers are allowed to make. Participating provider agreements range from several pages long to small-book size. Though it may be time consuming, physicians and their medical office managers should read their agreements in full. Once providers have signed with plans, they are obligated to see patients with that coverage for the agreed-on fees, which may be lower than providers are willing to accept; hence, the need to understand the managed care agreement in full. The best way to review participating provider agreements is with a highlighter. Medical office managers should highlight all areas of interest or concern, especially any details about fee schedules or provider care restrictions, and then review the highlighted areas with the physicians. Objections to any item may be grounds for declining plan participation.

Patient Billing Statements

Patient Billing Statements Medical offices should set aside a day each month to send patient billing statements to patients with balances due, preferably after the first of the month when rent and mortgages are typically due. Patient billing statements that arrive mid- to late month are more likely to be paid in a timely fashion. Nearly every medical office sends monthly billing statements to patients with outstanding balances. These billing statements must be Health Insurance Portability and Accountability Act (HIPAA) compliant and sent on or near the same day each month. In order to be HIPAA compliant, the statement must be sent in a security envelope (one that does not allow for the contents to be viewed without opening the envelope). Although patient billing statements are one means of securing patients' payment, collecting any payment due at the time of an office visit is far more cost-effective. Monthly billing statements have been shown to cost about $8 per month per bill. To provide an incentive to pay, healthcare providers can offer discounts, called cash discounts, to patients who pay their bills in full. However, to avoid being considered a form of fraud, such discounts should not exceed 5 percent of total fees. Billing statements should offer patients the option of supplying credit card information for payment of their bill. Many medical offices today include a payment feature on the clinic website, allowing patients to pay their bill online via credit card or direct transfer from their bank account

Small Claims Court

Small Claims Court Small claims court is yet another option for collecting on past due accounts. To pursue a small claims suit, the patient's balance owing must fit the "small claim" criteria in the state where the provider's office is located. Depending on the laws in the states where medical office managers work, those managers may be able to file claims online or through the mail. Some states require claims to be filed in person at the local county courthouse. All methods incur a cost at the time of filing. Notice of the suit must be served on the patient by someone outside the medical office. Often, offices hire companies specializing in this task. When small claims cases enter court, someone from the medical office must appear to testify. The office representative will need a copy of the patient's account ledger and any documentation proving the healthcare provider treated the patient. Any signed docu- mentation indicating the patient agreed to pay any outstanding bill is also important to bring. Typically, in small claims court, the healthcare provider's office need only prove that the patient was treated and that the patient knew of the charges for the service. Pro- viders often win judgment in these cases, and patients are ordered to pay their bills. When patients fail to pay their ordered amounts, physicians may opt to garnish those patients' wages. In states with community property laws, patients' spouses are also responsible for the bills. As a result, spouses' wages can also be garnished. To act appro- priately, medical office managers must check the laws in their states.