Maintaining Patient Relationships While Managing Overdue Balances

When managing patient balances in your medical practice, deciding between offering a payment plan or sending the account to collections depends on various factors such as the patient’s situation, your practice’s financial needs, and the relationship you want to maintain with patients. Below, we explore how to approach this decision to achieve the best outcomes for your practice and your patients.

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1. Payment Plans

Offering payment plans can be beneficial for both your patients and your practice, especially if patient balances are significant.

Advantages:

• Maintains Patient Relationships: Offering a payment plan demonstrates empathy for the patient’s financial situation, which can help maintain trust and loyalty. Patients are more likely to continue their care with your practice if they feel supported.
• Higher Likelihood of Payment: Patients are more likely to pay if given the flexibility to spread payments over time, especially if they’re dealing with financial hardship. This can result in more consistent cash flow.
• Avoids Collections Fees: Sending an account to collections often involves fees (sometimes up to 30-50% of the total owed), which means you’ll recover less of the outstanding balance compared to a payment plan.

Considerations:

• Administrative Work: Offering and managing payment plans can require more administrative oversight, including following up on missed payments. You’ll need a system in place to track payments and handle any delays.
• Time Frame: Set clear guidelines for the duration of payment plans (e.g., 6-12 months), and require regular payments. This ensures that the debt doesn’t linger indefinitely.
• Interest or Late Fees: Decide whether to charge interest or late fees for missed payments, and ensure that these policies are clearly communicated upfront.

When to Use Payment Plans:

• The patient expresses willingness to pay but needs more time due to financial constraints.
• You want to preserve the patient-provider relationship and encourage ongoing care.
• The patient’s balance isn’t so large that it would pose a significant financial risk to your practice if paid over time.

2. Sending to Collections

Sending patient balances to collections should generally be considered a last resort, but it may be necessary in certain circumstances.

Advantages:

• Focus on Core Operations: Handing off unpaid balances to a collections agency frees up your staff from chasing payments, allowing them to focus on patient care and other important tasks.
• Maximizes Debt Recovery: Collections agencies are experienced in recovering overdue balances. If the patient is unresponsive or unwilling to set up a payment plan, sending them to collections can improve the likelihood of recovering at least part of the balance.
• Establishes Firm Payment Expectations: When patients know your practice may send unpaid balances to collections, they may be more motivated to pay on time or engage in a payment plan.

Considerations:

• Patient Relationship Damage: Sending a patient to collections can damage the relationship, leading to lost future business and negative word-of-mouth. Patients who feel stressed or embarrassed may seek care elsewhere.
• Fees and Reduced Recovery: Collections agencies take a percentage of the recovered amount, which means you’ll collect less than what’s owed. Depending on the agency, these fees can be substantial.
• Credit Score Impact: Sending a patient to collections can negatively impact their credit score, which could be viewed as overly harsh for patients with financial challenges.

When to Send to Collections:

• The patient has failed to respond to payment reminders and offers for a payment plan.
• The outstanding balance is significant and poses a risk to your practice’s financial health.
• You’ve exhausted internal efforts to collect the payment, and the patient has been uncooperative or non-responsive.

3. Hybrid Approach: Gradual Escalation

You don’t have to immediately choose between a payment plan or collections. Instead, you can implement a step-by-step process:

1. Initial Billing and Reminder Notices: Send regular bills, with polite reminders as the due date approaches. Include clear instructions on how to pay, and offer the option to contact your billing department for a payment plan.
2. Offer Payment Plans: If the patient doesn’t pay after a few reminders, reach out to offer a payment plan. Be proactive in discussing their financial situation and customizing the payment terms to their needs.
3. Escalation Notices: If the patient fails to respond to the payment plan offer, send a notice explaining that the balance will be sent to collections if unpaid within a specific timeframe.
4. Final Step: Collections: If the patient is still unresponsive or refuses to pay, send the account to collections.

Key Considerations for Your Practice:

• Set Clear Policies: Establish clear policies on when to offer a payment plan and when to send accounts to collections. Communicate these policies upfront to your patients during the intake process.
• Use Technology: Consider using automated billing software or practice management software that offers payment plan management and reminders. This can reduce administrative burden and ensure consistent follow-ups.
• Patient Communication: Educate your patients about their payment options early on, including the availability of payment plans. Transparent communication can help prevent accounts from becoming overdue.

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Effectively managing patient balances requires a thoughtful approach that balances financial health with maintaining patient trust. Offering payment plans can foster loyalty and ensure a steady cash flow, while sending accounts to collections should be reserved as a last resort. By implementing clear policies, leveraging technology, and communicating openly with patients about their options, your practice can reduce overdue balances while maintaining healthy relationships with your patients.