How do medical practices get paid? That’s an easy question – or it used to be. Many of us can remember the time when over 90 percent of medical practice revenue came directly from payments made by health insurance companies. Since this revenue stream was so predictable and such a majority of cash flow, it was not uncommon to view payments from patients as just something extra and not as revenue to build budgets around.


With so much of the cash flow dependent on insurance payments, medical practices became experts in getting that money. Highly trained medical billers and knowledgeable care providers learned complex coding rules, medical necessity and even coverage limits. And when they followed these rules, the payments came. These payments sustained the medical practice’s business. But that’s all changing now.

It is anticipated that almost one-third – about 30 percent – of medical practice revenue this year will not come from insurance payments, but instead from the pockets of patients. With the increase in high-deductible, consumer-driven health plans and an increase in patients that do not have medical insurance, a larger percentage of medical care is the patient’s responsibility. What does this mean for the medical practice?

First, this revenue trend requires medical practices to view patients as paying customers. They should closely watch and manage patient-due receivables and implement plans to collect money from patients. Patients will need to be educated on how much the office visit may cost and have the expectation set that a payment will be required either before or at the time of service. Those experts researching patient payment habits have concluded that the odds of collecting patient payments before or at the time of visit are pretty good. But, if a medical practice takes the “bill the patient later” philosophy, they will likely face less than a 40 percent chance of ever seeing that money.

Secondly, medical practice managers need to understand their patients’ financial situations. They need to answer questions such as “Is the patient covered by insurance today?” or “Is there a copay?” and “Has his or her deductible been met?” Luckily, today’s cloud-based technology tools help answer those questions in seconds and better equip medical practice staff to proactively collect payments immediately. It is cheaper and it improves cash flow if a practice collects money ASAP versus chasing it down after the fact.

Lastly, successful medical practices will closely monitor patient accounts receivable. Perhaps it doesn’t need to be said, but a growing patient accounts-receivable bucket is not good for the practice. It often results in taking earned revenue and giving up on ever collecting it. And no longer is it acceptable to rationalize that writing off bad debt is a charitable thing to do because the patients don’t have insurance. The majority of them do have insurance and elect not to pay or don’t fully understand their responsibility for paying. In the end, closely monitoring this revenue stream is vital. Defining acceptable aging thresholds and setting goals – even incentivizing staff based upon those goals – will help practices receive the money they are due.

Admittedly, collecting money from patients is a sensitive undertaking. After all, most medical practices are in business to help people. However, it is still a business and it is unwise to gamble with neglecting the changing business realities. Paying attention to the details – and now the growing patient responsibility trend – will yield a good return and create a strong, sustainable platform from which to deliver patient care.

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