Collecting payment is hard work for small practices

Personally, I'm concerned about the financial stability of the small physician practices that struggle to cover their costs. Small practices should consider options such as electronic fund transfers or an employment model to streamline financial activities.

Personally, I'm a little more concerned about the financial stability of the small physician practices that struggle to cover their costs.

I've heard anecdotally that doctors are not the world's best businesspeople, but their operational costs do seem to be going up more than everyone else's. It takes true business savvy to work through the latest factors that are threatening the financial health of the small practice.

According to Ron Zant, managing partner with Physician Management Partners and a MANAGED HEALTHCARE EXECUTIVE editorial advisor, minimizing financial risk has become more of a challenge recently with the emergence of consumer-directed benefit plans-especially since most of these new plans aren't connected to real-time adjudication support. At the point of care, the staff has no system for determining the amount each patient owes, and the patient would be perfectly happy to leave without paying anything.

Every physician office has the standard placard that insists copays are due at the time of service, but maybe soon the signs will read, "If we can figure out your deductible, then if we can figure out your copay, it is due at the time of service."

Doctors can wait a long time to receive those outstanding-balance payments, and all too often, they end up writing off some of the unpaid amounts. Risk is highest at the beginning of the year when people are tapped out from the holidays and their Health Savings Accounts are empty.

"So who becomes the bank then?" Zant asks.


Zant says about 25% of small physician offices still use paper-and-pencil accounting methods and often receive insurer payments they can't reconcile. The burden then transfers to the patient who must account for what he or she paid as well as the insurer's benefit determination and payment.

"Nobody wants to see the patient caught in the middle, but collecting payment is a business-critical function," he says.

In addition to upgrading their accounting methods, smaller practices should look at the possibility of electronic fund transfers, both incoming from patients and insurers as well as outgoing payments to suppliers. Automated processes save time and money and might also allow for a reduction in office staff.

If all else fails, the final option to consider is an employment model, which is becoming more prevalent. Zant says the employment model can streamline accounting, billing, collections and other functions, but it also requires that doctors give up some control.

"If you want to make all the business decisions yourself, you have to work for it," he says.

Julie Miller is editor-in-chief of MANAGED HEALTHCARE EXECUTIVE. She can be reached at

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