Note: The following article is a summary of one of our pieces of for-clients-only documentation as provided at one of our conferences. This version lacks the accompanying materials and peer interaction that the original presentation included. We have posted it here, however, for those practices who are starting from scratch or who just want to ensure they've thought of everything.

Writing a Financial Policy

Collecting money can be one of the least pleasant aspects of running a business. Everyone likes to earn money, but actually getting it into the bank can be quite a chore. The easiest and most effective way to collect money is to prepare a formal financial policy that is clear to your patients and to your staff. Your patients need to know that you are serious about collecting payment in full and on time. Likewise, your staff needs to know what is expected from them. An aggressive approach to collecting money is not contrary to developing good relationships with your patients. In fact, a collection policy that is clear to your patients and staff will lead to fewer misunderstandings and will allow you to spend less time worrying about money and more time focusing on the medical side of your practice.

What Is A Financial Policy?

A financial policy is a formal set of procedures that your practice follows with regards to collecting money. Ideally, it consists of two parts:

1. A written statement that is given to all patients and is posted (at least in brief form) at your check-out counter
2. A written statement that is given to all employees to describe the steps they should take to help collect money.

Why Develop A Financial Policy?

• Your patients should be formally advised of your payment terms to prevent excuses such as, "I didn't know that I had to pay today," and to let them know that you are serious about receiving payment in full and on time.
• A consistent approach will make your staff more effective when dealing with patients. Two staff people telling the same patient different things will create room for excuses and eventually lead to late payments, write-offs, and lots of headaches.
• Written guidelines will give your staff confidence when they're dealing with potentially delicate situations, and they give you more control over the collections process.
• A formal set of procedures will save time and prevent "reinventing the wheel'' each time a staff person confronts a difficult payment issue for the first time.
• Your staff should understand that salaries are linked to the financial success of the practice and that, through their collection efforts, they can have a significant impact on both.
• The bottom line: A proactive approach to identifying and resolving potential collection problems before it is too late will help you collect more money, collect it faster, and with much less hassle. You, your patients, and your staff will be happier!

What Should Be Included In A Financial Policy?

The first part of your financial policy is a written statement that is provided to all patients. It should include the following information:

• A description of your payment terms. If you expect payment at the time of service, your patients need to know this. Also discuss your policy in the event of a bounced check (Will you continue to accept checks from the patient? Will you charge a service fee?).
• A list of acceptable forms of payment. If you accept credit cards, ask for the expiration date and keep a signature on file. If you do not accept credit cards, consider using them in the future. Although you will have to pay a fee to the credit card company, you should receive payment quickly and you will not have to worry about bounced checks. If you have a signature on file, you also will get around excuses such as, "I left my checkbook and wallet at home."
• An explanation of your billing process, especially in the case of secondary insurance and other confusing scenarios. For example, some practices bill patients for unpaid insurance charges after 60 days. Many practices include an insurance coverage waiver which the patients need to sign. In a nutshell, the patient takes responsibility for any charges not covered by insurance.
• A definition of a copayment, including a statement explaining that copayments must be paid at the time of service according to the terms of the insurance plan.
• A description of your missed appointment policy, including how much advance notice you require for a cancellation and at what point you will charge the patientmdash;for example, after three missed appointments.
• A reminder that payment is required at the time of service regardless of who brings in the child for the appointment. Babysitters, grandparents, divorced parents, etc. must be prepared to make time of service payments even if they are not the account guarantor.
• The name and phone number of the staff person patients should contact if they have billing questions. Discourage patients from approaching their doctors about money matters.

NOTE: Many practices include an abbreviated version of the financial policy in a new client brochure.

The second part of the financial policy is a written set of procedures for your staff. Your staff must not only understand what patients have been told with regards to payment, they also must be clear about their roles in the collections process. The procedures governing behind-the-scenes tasks like processing bills and statements, and following-up with patients by phone or letter as well as steps to take during face-to-face encounters with patients should be clearly enumerated.

Here are some suggested areas to focus on when developing policies and procedures for your staff.

• Staff should be instructed to collect time of service payments and any prior balance that appears on the encounter form. Remind them that the more money they collect at the door, the fewer bills they will have to process and mail later. Moreover, $5 copayments add up quickly, especially in the case of large families who regularly visit your office. Multiply 10 visits by 10 families, and you suddenly have a $500 balance. Many practices have found that they increased time of service collections by collecting copayments before the visit instead of after. If the patient does not have the co-payment and the appointment is not urgent, it can be re-scheduled for later in the day, giving them an opportunity to return with the copayment.
• Bills and statements should be mailed on a timely basis. The sooner you send out bills, the sooner you will receive payment from patients who intend to pay and the sooner you will identify problems. Assign a certain day when processing always occurs to help prevent delays. Consider using cycle billing to decrease the time lag between a patient's visit and receipt of the bill. (With cycle billing, you send bills to anyone who has not been billed or who has had a visit since the last billing cycle.) You also can add messages to your statements; for example, include credit card information lines that the patient can complete right on the statement and mail back to you. Many practices tell us that handwritten notes on overdue bills also are quite effective, sometimes more effective than printed messages.
• Assign the task of processing bills and statements to a specific person so that everyone understands whose job it is.
• Aging reports should be reviewed on a regular basis to identify problem accounts as soon as they become past due.
• Develop a set of letters and phone call scripts to be used when following-up on late payments. You need to determine at what points to suggest a payment plan, to discharge a patient, and to turn over accounts to a collection agency. The series of letters and phone calls should reflect this progression and should include specific information about balances due, recent payments and, in the case of budget plans, minimum monthly payments and deadlines. Again, the task of sending the letters and making phone calls should be assigned to a specific person or persons.
• Make the most of face-to-face encounters with your patients:
  • Instruct your staff to always assume that payment will be made by asking, "How will you be paying todaymdash;by cash, check or charge?"
  • Include copay amounts and prior balances due on the encounter forms. Instruct your staff to read this information and to request payment upon check-out.
  • Prepare responses to the most frequent excuses. Have role-playing "practice sessions" to help your staff become comfortable with asking someone for payment and learning how to deal with difficult situations.
  • Offer to hold or entertain a baby to make it easier for patients to write a check.
• Decide on a Professional Courtesy policy and stick to it. This should be a well thought out policy. Since anyone with a family requires the services of a pediatrician, this is probably a frequently requested discount, but rarely do pediatricians benefit from providing Professional Courtesy.

How To Make Your Financial Policy A Success

Putting your financial policy in writing and posting an abbreviated version in your office is a good first step. To guarantee your success, however, you must discuss the policy with your patients. At this time you can discuss in more detail information that is specific to each patient, such as copayments and secondary insurance. You also can ensure that you have all necessary insurance and personal information. For example, in the case of divorced or working parents, you may want to find out in advance if the person normally bringing in the child for appointments will be the person responsible for payment. Remind the patient that payment is expected at the time of service from whoever brings in the child for the appointment.

You should consider additional discussions with families expecting a baby or facing other major medical events. First-time parents, especially, may not realize how many check-ups and immunizations their baby will need. A letter or handout listing the appointments needed during the first year, along with the associated costs, may encourage some patients to plan ahead or to make arrangements with you up-front for some kind of payment plan.

Your financial policy also requires the cooperation of your staff and the doctors. The role that the doctors will play needs to be determined to ensure that they do not contradict the rest of the staff. Ideally, doctors are not involved in collection matters. When approached by patients, they should request that the patient discuss financial matters with the Office Manager or to whomever you have assigned this responsibility.

Your staff also needs to understand the huge impact that they can have on the financial success of the practice. Collecting money should be considered just as important and just as routine as scheduling appointments and printing encounter forms. Set goals for the staff, such as increasing the number of copayments collected at the time of service by a certain percentage. Consider giving small bonuses when goals are achieved. Also discuss the status of collection efforts at staff meetings so everyone is aware of their progress.

Constantly remind your staff and yourself that uncollected money is money that cannot be used to give raises, to buy a computer system, or to pay for continuing education and other fringe benefits.

In Summary

In summary, an effective financial policy consists of three steps:

1. Prevention:

   The first step is to prevent collection problems before they occur by communicating your financial policy to your patients and to your staff.

2. Identification:

   The second step is to identify accounts as soon as they become past due by regularly reviewing aging reports processed by Partner.

3. Action:

   The third step is to take prompt and continual action against overdue accounts.

Example Financial Policy Patient Handout

NOTE: We recommend that a lawyer review your Financial Policy before it is implemented.

Example Billing And Collection Letter Series

The timing and wording of communications with patients should be based on a number of factors, including the size of the balance, the payment history of the patient, and the philosophy of your practice.

Here are some sample formats and ideas which you can tailor to fit the particular needs of your practice and your patients. You may choose to add additional letters or phone calls or to extend the time between communications. The key is to stay in constant communication with overdue accounts rather than "waiting until tomorrow" or assuming that they will have to be written off.

Example Letter 1

     Dear Ms. Jones:

     Your account balance of $340.50 is now overdue.  Please send your payment 
     to the above address at your earliest convenience. 

     If you have questions, you can reach our bookkeeper at xxx-xxxx 
     between 8:00 am and 5:00 pm weekdays. 

     Sincerely, 

     XYZ Pediatrics


     ___________________________________________
     Date of Last Payment: 12/1/01
     Personal Balance:     $340.50

                 Current     30.....59     60.....89     90.....119 
     Personal    $ 40.00       $100.50       $100.00        $ 60.00
     BCBS VT     $  0.00       $ 35.00       $  0.00        $100.75

Example Letter 2

     Dear Ms. Jones:

     Despite several communications, we have not received payment for your 
     overdue balance in the amount of $340.50.  Your account is now seriously 
     past due.  

     Please send your payment to the above address or contact our 
     bookkeeper at xxx-xxxx if you have questions.   We will contact you 
     by phone if we do not hear from you within 7 days.

     Sincerely,


     XYZ Pediatrics

     ___________________________________________
     Date of Last Payment: 12/1/01
     Personal Balance:     $340.50

                 Current     30.....59     60.....89     90.....119 
     Personal    $ 40.00       $100.50       $100.00        $ 60.00
     BCBS VT     $  0.00       $ 35.00       $  0.00        $100.75

Example Letter 3

     Dear Ms. Jones:

     We have made all reasonable attempts to work with you to reduce 
     your seriously overdue balance with XYZ Pediatrics.  You have not 
     met the terms of the payment plan that we agreed upon.  
     Professional services have been provided to your family in good 
     faith and payment of your account will protect your status
     as a family in good standing.

     We must hear from you within 15 days of the date of this letter.
     Our bookkeeper is available on weekdays between the hours of 8:00
     am and 5:00 pm.

     Sincerely,


     XYZ Pediatrics

Example Letter 4

     XYZ Pediatrics

     CERTIFIED MAIL RETURN RECEIPT REQUESTED

     Dear Ms. Jones::

     You  have  failed to  pay or  satisfactorily  reduce your
     severely delinquent balance  despite our many efforts to work with
     you. Therefore, XYZ Pediatrics will no longer be providing
     medical care for  your children.  You should place your family
     under the care of another physician as soon  as possible.  You may
     contact XYZ Pediatrics or the  County Medical Society for a
     referral to a new physician.

     When  you  have   selected  another  physician,   please  send
     us  a   signed authorization so that we can provide a copy of your
     childrens' medical charts or a summary of its contents to the new
     physician.

     XYZ Pediatrics will  remain available to  treat your children
     for a  short time which will be no more than XX days  from the
     date of this letter.  Please make the transfer to a new physician
     as soon as possible within that period.

     Sincerely,

     XYZ Pediatrics