HSA collection strategies: Learning how to ask for payment

As more patients enroll in health savings accounts, physicians might find that they need to adjust their practices to the new business realities of consumer-driven health care.

By Jonathan G. Bethely, AMNews staff. May 15, 2006.

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Family physician Donald L. Copeland, MD, of Cornelius, N.C., is spending a lot of time these days talking to younger doctors about how things used to be, like how doctors collected from their patients before the patients left the office. Now that those days appear to be coming back, thanks to the rapid growth of health savings accounts, he's finding some very willing listeners as physicians try to figure out how to adjust to life in a consumer-driven health care environment.

The younger physicians don't have much experience with in-office collection, which is what Dr. Copeland had to do when he started practice in 1965. Of course, they didn't call it "consumer-driven health care" back then. In 1960, a few years before Dr. Copeland started practice, 60% of health care costs were paid directly by patients, out of pocket. Forty years later, with managed care limiting in-office patient payments mostly to co-payments, that number was down to 15%, said Greg Scandlen, director of the Center for Consumer Driven Health Care, part of the pro-market Galen Institute of Alexandria, Va.

Soon enough, Dr. Copeland believes, that percentage will be going up. "Most of their patients will be paying cash," the 72-year-old Dr. Copeland said of his younger colleagues. "They're not near anywhere ready. ... They don't even know what they're charging patients. They don't know what's going on in the business office."

Dr. Copeland does have more than charity in mind when he's talking to doctors. He also wants to start up a network of HSA-accepting physicians called HSA Healthcare Inc. But his belief that now is the time for physicians to get their business practices ready for HSAs is being sounded by different voices throughout health care.

Why now? Because although the number of patients moving to HSAs is growing quickly, it's still a tiny percentage of most medical practices -- so there's time to work out the kinks of how to adjust your business procedures.

"The wise thing to do is get out in front of this as quickly as possible," said Anthony Cirillo, a Hunterville, N.C.-based consultant to physicians and hospitals.

The good news for physicians concerned about adjusting their business practices for consumer-driven health care is that many have the technical tools -- credit card readers, computers -- necessary to check on how much their patient owes, and to collect it. The bad news is that most practices don't have the policies and strategies in place to use those tools effectively.

Getting technical

Experts say physicians need to adjust their policies and strategies because in a consumer-driven environment, eventually it will be patient payments, not insurer reimbursement, that will determine a practice's cash flow. So failing to collect the correct amount in a timely manner can put a big crimp in practice operations.

The first thing experts say practices must do is to make sure they have equipment in place to determine payment. Not many practices need to buy and install a credit-card reader, necessary to get payment from patients' HSA-linked cards; various surveys show more than 90% of practices have them. But even those practices already well-computerized need to find a way to connect to health plans' systems to find out as quickly as possible how much the insurer is paying for the procedure and how much money is left in the patient's deductible and HSA.

As of yet, few plans do real-time claims adjudication, in which the process is started when a patient walks in and finished before a patient walks out. But there still are ways to get the information. Karen Smith, MD, a solo family physician in Raeford, N.C., has her staff run a check on a patient's insurance 48 hours ahead of the appointment to confirm the deductible level, or any other payments a patient might owe.

Dr. Smith said that hasn't "mastered solving [the] problem" of patient collections -- for HSAs or other plans. But she said her practice has been able to "lay the basis" for handling patient bills in an HSA environment. She also said any initial investment in a new computer system, which she pegged at between $30,000 and $60,000 for a solo physician, can be paid off quickly thanks to better collections. For that reason, she said, her system was paid off in 18 months.

Getting information on a patient's insurance coverage and bill as quickly as possible is generally considered a good idea in any practice environment, but it's even more key for HSAs, experts say. Physicians' "biggest fear is that [HSAs] will inflate their accounts receivable," said JoAnn Laing, president of Information Strategies, a company serving as a consultant to physicians and hospitals on consumer-driven health business issues. "If they don't manage [HSAs] well, they will have accounting problems."

Adjusting your collecting

But experts say no amount of technology will help if a practice doesn't get into the habit of collecting up front from patients -- and letting them know as soon as possible what they're expected to pay.

Experts say physicians -- who are pretty much used to being told by insurance companies what they're going to charge -- need to start thinking about what they would charge for common procedures and services to cash patients. Although most practices have fees that they charge uninsured or cash patients, consumer-health advocates say practices need to go one step further and actually post those fees. That way, patients in high-deductible plans know right away what they will pay.

Of course, some HSAs are linked to PPOs or other plans that do not permit doctors to set their own charges unilaterally -- one of the reasons real-time claims adjudication is being rolled out.

In any case, experts recommend that practices work with all of their patients to educate them that payment is to be expected at the time of service -- whether it's a co-payment or real-time claim. If your practice doesn't have this policy already, they say, it will take some time for patients to get used to it.

Experts recommend mailings, electronic and otherwise; signs around the office; and discussion between staff and patients to let them know of your policy. "The key is to have a well-trained, patient and understanding staff," Laing said.

Given that in many cases neither the patient nor the practice might know the exact charges, Laing recommends that practices ask patients for the authority to deduct charges from their HSA debit cards, thus saving the hassle and higher cost of mailing bills.

And if a patient happens to have a high outstanding balance that isn't covered by the debit card, the practice can work with the patient on how to deliver future payments, experts say. In all of this discussion, consultants say the key is to work with patients in a firm but understanding tone, and to be ready to answer questions about billing.

"There's going to be more communication" over billing in an HSA environment, Laing said.

Dr. Copeland, 72, now semi-retired and working part-time in a public health clinic, is spreading this message of preparation to any colleague willing to listen. Like the AMA and other supporters of consumer-driven health care, he believes that HSAs can usher in an age of greater patient-physician communication and greater transparency over who is being charged for what.

"The HSAs can only work if there's education" of physicians and patients, he said. "There's a big education gap. What I do when I talk to [physicians] about what is an HSA. ... Patients need to understand how to use an HSA."

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