Lending Money to Patients: Poor Time of Service Collections Hurts Your Practice in a Surprising Way

Too many practices are lending money to their patients.  Think your practice is not one of them?  If you allow your patients to carry a balance – for example, if you offer the convenience of billing for co-pays, instead of requiring good time of service collections – then you’re lending your patients money.  And, since most practices don’t have financiers on staff, it’s not likely that this is a good line of business for your practice.

You may think that you’re doing a good deed for your patients, making things easier for them.  But, too often this is the sort of good deed that never goes unpunished.

There’s often an unhappy transformation that happens between the time the patient is gratefully accepting your medical services at your office and when the bill for their portion of your fee arrives.  The gratitude all but disappears.  You’re no longer the compassionate caregiver who helped them with an urgent medical problem.  You’ve become an annoyance.  Your patient may even have forgotten the visit to your office that was so important to them when it took place – and now your bill is an unpleasant surprise.  The same person who gratefully accepted your convenient billing option is now annoyed to receive your bill!  You are now just another creditor, and people tend to resent their creditors.

I learned about this the hard way when I ran a small publishing business.  People often asked for payment terms for advertising purchases.  Since my clients were small business owners, too, I wanted to be nice and help them succeed.  I could have urged these clients to pay with a credit card.  After all, credit card companies are in the business of lending money – and I wasn’t (at least not intentionally).  But my clients really wanted to be billed – who wouldn’t prefer to pay later? – and I thought I’d be better off saving those credit card fees.

I also thought that they would feel even better about my product if I helped them buy it.  Instead, what actually happened was the customers transferred their annoyance with the bill they’d forgotten about to their views about my product, even imagining it was substandard in order to justify paying more slowly than agreed – or not at all.  I was surprised to learn that my happiest customers were the ones who paid me up front.  They didn’t have the annoyance of a bill –and our relationship wasn’t tainted by awkward collection conversations.  The customers who paid up front delivered most of my referral business.

When the bill arrives, the emotions aren’t so positive

We see this same psychological phenomenon happening with medical practices all the time.  When offered the option not to pay at the time of service, most people take advantage of it.  It feels great to put off paying.  But when the bill arrives, the emotions aren’t so positive.  And if the patient has trouble paying their bills, they’re going to feel bad about receiving yours.  That bad sentiment can easily spill over into the patient’s attitude toward your practice, even poisoning referrals. 

Many, if not most, of the patients who opt to be billed could easily pay with a credit card at the time of service.  Then if they need more time to pay, they can take more time to pay – they’ll just be receiving a loan from an actual lender, i.e., their credit card company, and not from your practice.  They won’t have to deal with the shame or inconvenience of calling your office to arrange a payment plan – they’ll simply manage their credit card payments as they do for other purchases.

Make it easy for patients who can’t pay in full with a check to pay with a credit card.  Shop for the lowest fees, but don’t let credit card fees deter you from offering multiple, easy ways to pay at the time of service.  The cost of collections alone typically far exceeds any “savings” from not accepting a credit card.  If patients leave the practice because they can’t pay or fail to refer you because of misplaced anger or embarrassment, the cost to your practice can be immeasurable.

For higher cost services or procedures, pre-authorized credit card payments allow your patients to pay you in installments but reduce your financial risk and your billing hassles; this approach can also allow patients to automatically pay for co-insurance or deductible amounts after their insurance has processed your bill.  For uncovered procedures and services, investigate medical credit plans like CareCredit that can help your patients pay over time – without turning your practice into an unintentional and inefficient consumer finance company.

Laurie Morgan is a management consultant with Capko & Company. She specializes in marketing, management and technology for medical practices and blogs about practice management issues at www.capko.com/blog. Laurie has a BA in Economics from Brown University and an MBA from Stanford. Her last article for Getting Paid was Confusion Over Patient Payments Reigns – And It’s Costing You Money.