Addressing Patient Financial Hardship at Your Medical Practice

I recently met with a physician who specializes in retinal surgery. In reviewing his office financial policies, we discussed Patient X. She had a procedure performed several years ago for which she fully paid. Since that time, she comes to his office regularly for treatments that are necessary to retain her sight. She does not pay for these treatments and refuses to arrange a payment plan. The doctor keeps sending her bills knowing they will not get paid, but continues to provide services because: (a) he wants to be sure she is cared for; (b) his practice is otherwise very financially successful; and (c) it takes less time to see her than to “deal with” her.

In reviewing the practice’s financial policies, it was apparent this client often provided free or discounted services to uninsured patients or those who could not afford to pay their full deductible. This is a charitable and increasingly common occurrence across the country as physicians are faced with patients who need healthcare services but cannot afford to pay for them. However, not every practice can afford to be as generous and there are some legal limits to being benevolent.

It is important for practices to establish policies to distinguish who is able to pay for healthcare services. As charitable as physicians want to be, the law does not allow routine write-offs of co-pays and deductibles without risk to the physician for violating payer contracts or federal and state laws. If patients have insurance, the practice must document that financial hardship actually exists and should record any fees that are waived. Also, hardship should be assessed regularly, as a patient’s financial condition may change.

When documenting financial hardship, the questions are not always easy or comfortable, but it is recommended that the practice gather income tax returns, 1099s, and W-2s, as well as the following information:

1. The patient’s household income and any garnishments that affect such wages;
2. Income from other sources, such as Social Security, unemployment, pension, rental income, investment income or family support;
3. Assets such as investment(s), home ownership, cash in bank accounts and other personal property (cars, expensive jewelry or valuable art); and
4. Expenses such as: housing, utilities, food, child support payments, etc. Expenses related to credit cards and nonessential items should not be taken into consideration in this assessment

Every practice must have a policy in place on how to handle patients who do not pay. Simply billing patients month after month with no collection effort is senseless. Follow-up phone calls to determine why payment has not been made and an active process to establish payment plans is recommended. In addition, carrying over uncollectible accounts receivable or writing-off such amounts as bad debt without any effort to collect is a poor business practice and should be discussed with counsel.

When it comes to uninsured patients who are willing to pay for services, offering a cash or “prompt pay” discount may be possible, as long as you are cognizant of these payer contracts to which you are obligated to offer your “lowest rate.” Additionally, no practice should have multiple fee schedules or it may find that payers adjust the practice’s “usual and customary fees” to the lowest fee schedule amount.

Unfortunately, the current healthcare system is simply not geared toward encouraging or allowing physicians to provide the free or highly discounted care they would like to provide to patients. Also, be aware that simply providing free care (and not documenting it) may seem like a compassionate idea, but can create liability issues for a physician that should be avoided at all costs.

For my practice clients, I always recommend keeping the name of local clinics handy and trying to provide free drug samples when possible. If a patient is simply one you cannot afford to keep, you may need to terminate that patient from the practice. In such case, be sure to provide ample notice, a list of alternative providers and continued care during the notice period in order to assure the patient’s medical needs are met. See my earlier blog on terminating patients for more information.

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