One trend evident in all medical practices is the shift in payment responsibility from insurance payers to the insured patients. As employers modify coverage to contain their premium costs, healthcare providers are treating patients who have $2,500, $5,000 and even $10,000 deductibles. Physicians who have practiced for many years have instructed their collection staff with the phrase “take what insurance pays.” This brief instruction was understandable when the patient portion of the treatment was only a co-pay of $25. The additional charge to the patient’s insurance made it acceptable to extend professional courtesy to many patients. In the era of paper charts, physicians even developed a shorthand note of “TWIP” for this common habit. In the modern era of high deductibles, this habit, if not broken, will cause serious damage to the cash flow of a practice in three ways.
Decline in Cash Flow
The most immediate impact is a decline in cash flow, and since these patient payment dollars can be seen as the last dollars of revenue, the result on physician income will be dramatic. A practice which formerly collected $1,000,000 but loses 10 percent from failure to collect patient payments, will suffer a 20 percent or more decline in physician income. If practice overhead costs 55 percent of collections, there would have been $450,000 left for salaries, fringe benefits and bonuses to the doctors. If collections decline by $100,000, for continued write off of patient payments, the doctor income drops to $350,000, or a 22 percent reduction. This is an example of how daily habits can produce bad cumulative outcomes.
In addition to this drop in profits, the extension of professional kindness can diminish the collection enthusiasm among collection staff. Physicians are quick to instruct staff to extend special dispensation to patients who are friends or socially connected to the doctor. Collections staff tell us that the doctor refused to let them collect from people who attend their church, share a membership in a country club or social organization or have children who share activities with the physician’s family. When this group, who most likely has the greatest capability to pay for medical care, is excused from responsibility, the collections team is no longer as enthusiastic about collecting from the patients who have no social connection to the doctor. This additional loss of revenue is never known but can be significant.
Finally, affording patients the discretion to pay or not, fosters an environment in which the patients are more inclined to take the medical practice for granted. In our experience, patients who do not pay for their portion of care are also the ones inclined to “no-show” appointments, not follow clinical directions and to treat medical staff rudely. These are the patients we recommend be terminated, when possible, in their treatment. To indiscriminately extend professional courtesy, regarding patient financial responsibility, is cultivating a problem which could have been staunched by simply collecting what their insurance contract stipulated to begin with.
The four words “take what insurance pays” seem benign at first but can be lethal if used unchecked.