You want to be patient friendly and profitable. Patients are incurring higher and higher out-of-pocket expenses. Balances are rising and aging. Solutions are elusive. But, payment plans are becoming a real option for practices that don’t want to demand up-front payment in full.
How can you provide payment plans that work for the practice while giving the patient some breathing room? Here are some starter ideas.
There are several ways to approach payment plan limits. Let’s talk about per-payment amounts first and then discuss maximum plan amounts.
Per-payment limits should insure that the practice break-even on the visit, or treatment being paid for, in the shortest amount of time possible. For example, if your break-even for a treatment is $93.00 and the billing is $453.00 then a four month payment plan covers the cost of the treatment the first month. Payments will be $113.25 so you will cover your cost and realize a bit of profit the very first payment. Any additional payments go directly to profit.
Another important number to consider is what your average patient can pay in a single payment. A rule of thumb to help you determine this amount: If you look over your billing and see that a high percentage of your patients pay bills of $150.00 or more within 60 days then it’s a safe bet that most of your patients can tolerate payments of that amount. Keep this number in mind when setting your payment plan policy.
For maximum plan amounts you’ll need your physician(s) to be involved. Payment plans are essentially low or no interest loans to patients. How much are your physicians willing to loan to patients for treatment? I realize that discounts and other circumstances come into play here but let’s keep it simple. Is your doctor or group willing to loan a patient $500 or $5,000 or maybe more? You will need to know that maximum number.
Once you have that number, you can then apply the first rule of recouping your costs in as little time as possible. The other factor that comes into play is maximum time. How long will you allow patients to make payments? This also depends on physician tolerance and should be cleared by them in your payment policy. The ideal is to keep the timeline short, no more than six months, even on high balances. The longer the payment plan, the less likely it will be paid out.
When you have these numbers you can then write up your payment plan guidelines and search for the best way to ensure patients make their payments. (We recommend technology that automates the payment plans.) We suggest that you educate your staff about your payment plan policy but not publish the details to your patients. If you publish, patients will tend to demand the maximum limits which may not be the best option for your practice.
If you allow exceptions to the policy, clearly state the process for requesting an exception. Authority to grant exceptions should be given to doctors, CEO’s, or top level managers only. A policy is only as good as its ability to be broken.
These ideas should get you started. One additional thing to note. Every practice is different. It has its own personality. Don’t try to copy what someone else is doing. It probably won’t work for you or your physicians. Do the work to know your patients and what it takes to make your practice profitable and you will create a great payment plan policy!