Of the many financial challenges facing physician groups today, cash shortfalls triggered by problems collecting from self-pay patients can be among the most trying and potentially destructive. 

The growth of high-deductible health plans, including health savings accounts (HSAs), is pushing primary payment responsibility toward individuals and away from insurance companies. That means that unless practices develop air-tight procedures to get paid in a timely fashion, they run the risk of serious revenue gaps.

“It used to be much easier to predict cash flow when you knew that the insurance company would be paying the full allowable in the vast majority of cases,” said Laura Penton, a revenue cycle management consultant with McKesson Business Performance Services (McKesson).

“But now the tables are turning and it’s the patient who more and more is responsible for the bulk of the physician fee,” she explained. “So it is imperative that you develop processes that will reduce the likelihood of slow-pay or no-pay. Otherwise, your practice will be put at risk, given the growth in high-deductible plans.”

Rising Patient Contributions

High-deductible insurance plans and health savings accounts have become more prevalent in recent years as employers shift a greater portion of healthcare costs to employees. The plans, which stress preventive care, also are intended to engage enrollees in the stewardship of their own health by creating financial incentives to use healthcare resources wisely.

According to a recent survey by the Kaiser Family Foundation, the average annual worker’s contribution to health premiums for family coverage increased by 81% from 2004 to 2014, from $2,661 to $4,8231. America’s Health Insurance Plans, an industry group, reports that about 17.5 million people are now enrolled in high-deductible plans or health savings accounts, an increase of nearly 12% since 2013. Since 2011, the number of high-deductible plan enrollees has increased at an average rate of about 15% per year.2

Penton said collecting from self-pay enrollees can be especially difficult for specialties like pathology and radiology, since they may not have direct contact with the patient. In addition, widespread assumptions that doctors are making a great deal of money and that medical practices somehow don’t face the same kinds of operating expenses that other businesses do contribute to sluggish payment, she said.

Pre-visit Eligibility Checks

According to Penton, the first line of defense against self-pay shortfalls is pre-visit eligibility verification. Practices can implement automated processes that will scan schedules two or three days in advance, then query clearinghouse databases to determine the patient’s level of coverage and deductible. This kind of functionality increasingly is found in practice management applications, she added.  

Once the query identifies those patients who are not covered or who have high deductibles, staff should contact the individuals before the clinical encounter to determine if their insurance has changed. If so, a new eligibility check can be performed. If the patient does not have coverage or has a high deductible, staff should establish clear expectations about the amount the patient will likely be required to pay upon presenting for care. Since the nature or extent of services may not be known ahead of time, providing the patient with an anticipated range of payment may be required.

Practices should also develop payment plans that allow individuals to pay a balance due over time. Penton said a general rule of thumb is to collect 50% of the amount up front, then establish a payment schedule for the balance over a four-to-six month period. Patients who are unable or unwilling to pay at the time of service for elective or routine care may need to reschedule their appointment, per the practice’s guidelines, Penton said.

Communication is Key

Communicating early and often with patients about their obligations is important not only for those who have high deductibles but also for out-of-network patients who may be responsible for the full service amount. Increasingly, Penton said, some providers are opting out of insurance networks due to dissatisfaction with reimbursement rates. These groups will typically submit an out-of-network claim on behalf of the patient to the individual’s insurance company. But it should be made clear to the patient up front that the carrier may not pay any of the amount due and thus the individual will bear full financial responsibility for the service.

Penton added that establishing a patient portal that can enable online payments is another important tool for practices. Anything that makes it more convenient for patients to pay should be pursued, she advised.

Ultimately, avoiding the pitfalls of patient self-pay requires that groups pay close attention to patients’ coverage and then pro-actively address potential problems.

“Success comes in knowing your practice and patient mix, establishing good relationships with carriers, and setting clear financial expectations with patients upfront,” she said.

1“2014 Employer Health Benefits Survey – Summary of Findings,” The Henry J. Kaiser Family Foundation, Sept. 10, 2014, http://kff.org/report-section/ehbs-2014-summary-of-findings/
2“New Census Survey Shows Continued Growth in HAS Enrollment,” press release, America’s Health Insurance Plans, July 9, 2014, https://www.ahip.org/Press-Room/2014/HSA-Census-Survey/


About the author

McKesson Business Performance Services offers services and consulting to help hospitals, health systems, and physician practices improve business performance, boost margins and transition successfully to value-based care.