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Rehab Management
October/November 1999
Volume 12, Number 6
By Kenneth J. Kroopf, JD
How to develop an effective and realistic plan
for your practice
to collect complete payment for services provided.
DEVELOP AN AGGRESSIVE COLLECTION PLAN
AVOIDING CLAIM DENIALS AND
DELAYS
ACCEPTING PERSONAL INJURY
LIENS
You already possess the skills, education, and
experience to help alleviate pain and strengthen and maintain healthy
bodies. But are you managing your office efficiently and economically?
Are you maximizing your profits? The goal in every practice should
be to establish a positive and realistic plan to ensure 100% payment
for all services provided.
This plan must include an internal organization that establishes
a clearly defined statement of each staff member's duties and responsibilities.
The owner of the practice, alone or in conjunction with the office
manager, should assume the leadership position and establish and
implement a plan that requires the staff to work as a team to collect
the maximum dollars available.
DEVELOP AN AGGRESSIVE
COLLECTION PLAN
Begin the collection plan by identifying the source of income that
is derived from a cross-section of patients. The duties and responsibilities
for collection of this revenue should be delegated to the staff
member who is best qualified to achieve the objectives. For example,
it is logical for the person who is responsible for scheduling the
appointments to collect any co-payments either at the check-in time
or when the next appointment is scheduled. After the source of income
is identified, and the appropriate staff person is assigned to collection
of the accounts, the plan should include adequate documentation
and a timetable for review and follow-up. The office manager should
review the status of accounts receivable regularly.
The principal theme for each office should be to develop an aggressive,
but professional approach for the collection of accounts receivable.
The key to a successful collection program is the proper education
and training of staff, and the timely and efficient implementation
of a plan of action.
The next step is to designate a staff member to interact with the
patients in an effort to collect all of the available funds at the
first level. This staff person will usually approach patients to
remind them of their co-pay responsibility, if applicable. This
person can also arrange a payment plan to facilitate payment in
those cases where there is no insurance or the deductible has not
yet been met. The essential role of this staff person is to approach
the patient in a dignified, confident, and professional manner.
Patients must clearly understand their primary obligation to pay
for the professional services rendered. The office cannot afford
to employ a shy or insecure person in this very important position.
If the first level staff person is not completely successful, the
office manager must employ more stringent methods of collection.
If there is some difficulty in communicating with the patient, then
the office manager should exert his or her best efforts to encourage
the patient to come into the office. If the patient refuses to come
in (e.g., she has completed treatment and will not return for a
meeting) and mutually acceptable arrangements cannot be made by
telephone, the next step is to send a professionally drafted letter.
Although this method is less personal, it is important to communicate
with the patient in the most timely and effective way possible.
The goal is to remind patients of their primary obligation to pay
for the services, even if there is insurance coverage. Your office
may be processing the claim for insurance payment as a courtesy
to the patient, but at the same time, the patient should begin to
make payments. The letter should establish a deadline for the patient
to respond in person, by telephone, or by mail.
If the first communication by mail is not successful, a second and
more forceful letter must be sent as a timely follow-up to the first
letter. The second letter should state that a letter was previously
sent, no answer was received, and a copy of the first letter is
enclosed. This letter must contain language that the failure to
respond will result in referring the matter either to a collection
agency for processing or to an attorney, or it will lead to the
filing of a small claims lawsuit. Once the decision is made to select
one of these more aggressive means of collections, several matters
should be considered in determining office policy. Consider the
repercussions of these aggressive methods of collection and balance
the impact on the goodwill that has been generated in providing
services to the patient. There are many special circumstances that
should be considered on a case-by-case basis, such as the patient
may be unemployed, recently widowed or divorced, elderly, or on
the brink of bankruptcy. Nevertheless, it should be the patient's
responsibility to bring these special circumstances to the attention
of the staff and request a special payment plan.
In the absence of a special circumstance, should the office policy
always dictate the referral to a collection agency first? The answer
depends on several factors, such as the amount of the debt, the
fee to be charged by the agency, the aging of the account, and the
anticipate turnaround time for payment. If the attorney's fees are
comparable to the fees charged by the collection agency, an attorney
letter may be more convincing.
The most effective method may ultimately be the filling of a small
claims lawsuit. This is the most dramatic approach, but it is also
the most direct method for obtaining a judgment. In California,
the filing fees are nominal. You can file a small claims lawsuit
for $24. For an additional fee of $6, the court will serve the claim
by certified mail. There is a limit of $5,000 per claim, which means
that the small claims court lacks jurisdiction to render a judgment
in excess of $5,000. You can waive the excess amount over and above
the sum of $5,000.
The advantage to proceeding in small claims court is that the individual
owner or office manager proceeds against the patient and no attorneys
are permitted to represent either side. The court date is generally
scheduled shortly after filing the claim. The hearing is informal
and generally lasts about 5 to 10 minutes. The decision of the judge
usually arrives within 2 weeks.
Once you have obtained the judgment, you have the option of recording
an Abstract of Judgment in the county recorder's office in any county
of the state. The Abstract of Judgment becomes a lien on any real
property owned by your patient and payment will be made to you on
the judgment when the patient either refinances or sells the property.
You also have the option of ordering the appearance of your patient
into court to answer questions under oath as to the identity and
location of their assets. You may have the opportunity to obtain
part of her salary or money from any of her bank accounts. Realistically,
many judgment debtors will satisfy the judgment before it becomes
necessary to utilize any of the above described post-judgment collection
remedies.
AVOIDING CLAIM DENIALS
AND DELAYS
The basic mathematical maxim that gross income less expenses equals
profits is easy to understand. If your expenses are fixed and you
have exhausted all reasonable ways in which to reduce expenses,
then the only way to increase your profits is to increase your gross
income. The goal in each office should be to develop a positive
working formula to help increase your profits by generating more
income. To generate more income from treatment, consider the following
formula:
Process. Process each and every claim completely, accurately, and
in a timely manner.
Response. Respond in a timely manner to each and every communication
from payors, patients, and referral sources.
Organize. Organize all charts, files, and records.
Follow-up. Design a tickler system for timely follow-up.
Interact. Communicate on a regular basis by mail, phone, email,
or fax.
Track. Be persistent in tracking payment from payors and patients.
Regular office meetings should include a review of this formula.
The staff must be constantly reminded of the importance of this
plan. Once the staff has been introduced this formula and it has
been into the usual course of business, the next step is to identify
why claims are being denied or delayed for processing by insurance
carriers. The failure to obtain payment from these payors or the
delay in receiving payment results in lost revenue and profits.
Consider the costs incurred by the average practice from additional
operational costs for the staff to continually review explanations
of benefits, generate revised bills, mail or fax information to
payors, communicate with other staff members, and wait for payment.
The objective should be to identify the primary reasons for the
denial or delay, determine how to avoid these problems, and implement
a plan of action. Some of the reasons for denial or delay are: medical
review, medical necessity, prescription was not sent, no preauthorization,
wrong date of injury on documents, chart notes were not sent with
the billing, delay in processing the billing, policy limits have
not been met, deductible has not been met, wrong code on the billing
statement, incorrect policy number, treatment exceeded pre-approved
time frame, billed the wrong insurance company, or no coverage.
ACCEPTING PERSONAL
INJURY LIENS
If you have a practice that already caters to personal injury patients
or you are considering an expansion of your business into that area,
there are some important factors to consider. From time to time
you may be asked to take a lien, which means that you will wait
to be paid for some or all of your services until your patient's
case is settled or resolved by judgment. Before you make a decision,
consider the following:
i . Do you really want to be the banker? You are loaning your patient
money by providing professional services on a delayed payment plan.
Are you planning to add interest or finance charges to the bill?
Can you afford to provide these services without partial payment?
Will your patient be required to pay out-of-pocket charges? Have
you thoroughly reviewed all available insurance coverage and billed
it in a timely fashion (e.g., process any payment as soon as possible
since you may be competing with other providers for limited funds)?
ii. Determine if the claim is valid. If your patient was in an automobile
accident, ask for and review a copy of the police report. You can
get an idea of who was at fault and whether the parties involved
have insurance. You can then explore whether your patient has coverage
that will pay all or part of your fees before you agree to accept
a lien.
iii. Communicate with your patient's attorney. You do not want to
take a lien unless your patient has secured the services of an attorney
whom you can trust and who has agreed to take the case on a contingency
(essentially the attorney will not be paid until the end of the
case). You will need to establish whether the attorney will do everything
possible to ensure that you are paid the outstanding balance due
on your bill. Traditionally, the patient's attorney will attempt
to negotiate a discount of your fee at the end of the case. Find
out if the attorney and other lien holders are discounting their
claims proportionately. You should not be required to accept a discount,
but from a practical standpoint, you may want to consider a small
discount so the matter can be concluded. You also want to be assured
that your patient has an attorney that will exert his or her best
effort to settle the claim as soon as possible, rather than prolong
your waiting period. You should have a carefully and thoroughly
drafted lien agreement that covers all of the essential terms. The
patient is primarily and ultimately responsible for payment of your
bill, regardless whether his claim is successful.
If the patient has other outstanding obligations, in addition to
the personal injury claim, the lien should include all outstanding
amounts. Even if the patient changes his attorney, the new attorney
should be bound by the original agreement. This means that your
office must be in regular communication with your patients and update
their progress. If you require partial payments or co-pay, this
must be clear in the agreement. You must be paid out of the proceeds
of the settlement or judgment before patient is paid.
Be sure that the patient's attorney agrees in writing to be bound
to an attorney fee provision that requires that the losing party
pays all attorney fees. Make sure the patient and the attorney sign.
If your patient changes attorneys, ask the new attorney to sign
the lien.
One of the most critical areas in evaluating the loss of revenue
to a practice lies in the failure to properly identify the applicable
insurance coverages available and the failure to submit timely claims
for benefits. When patients complete their first visit paperwork,
it is important to make a determination of which insurance coverage(s)
apply. For example, the patient may inform you that he was injured
on the job and so you believe that his workers' compensation insurance
will cover the treatment. However, on further examination, you ascertain
that your patient was injured on the job, but the injury was caused
in part or in whole by the actions or conduct of a third person
who was not the employer or a coworker. Perhaps your patient was
driving a car while on an errand for his boss and he was rear-ended
by another car. In this case: both workers' compensation and auto
insurance may become available to pay your fees. It may be important
for you to understand whom you will bill and whom you must bill
first (e.g., workers' compensation, auto or medical payment, or
private health plan).
There could be a dispute between your patient and the employer about
workers' compensation coverage. The employer may take the position
that the patient was going to or from work, deviating from the work-related
route, or that the patient is an independent contractor. Under those
circumstances, there may not be workers' compensation off coverage.
In that instance, you may want to bill the auto insurance to payor
or the private health insurance plan. Be aware that there are some
insurance policies that require the patient to exhaust any applicable
health insurance benefits before auto medical payment is available.
In order for you to achieve the best financial results in your practice,
it is important to maintain the same professional standards in the
management of your business that you do when you render professional
services. Do not relinquish complete control of your business affairs
to your staff. Become an integral part of your business plan of
action.
Assume the role of captain, especially at the regular office meetings
when the plan of action is reviewed. If you make a conscious and
dedicated effort to utilize and implement a well-thought-out plan
to maximize your profit potential, you will make more money faster
with less stress.
Kenneth J Kroopf is an attorney with a civil practice in Monterey,
California
Email: Thekroopfs@msn.com
Web site: www.kroopf-law.com.
REHAB ECONOMICS VOLUME 7, NUMBER 6
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