The first few months of the year often are a trying time for physicians financially. Insurance deductibles reset, meaning practices have to collect from patients instead of insurance companies. And with the increase in high-deductible plans, the early-year cash crunch is becoming a bigger problem as more healthcare costs are pushed onto consumers.
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“No one has met their deductible on January 1,” says Mat Kremke, vice president of the American Osteopathic Information Association, an affiliate organization of the American Osteopathic Association. “Smaller practices especially feel the pinch as more people have high-deductible plans. It’s not that they aren’t going to get paid, but it’s a longer process than just collecting a copay.”
Patients are becoming the new payer, now representing 30% of a bill, up from 10% in 2008, says Jonathan Wiik, MSHA, MBA, principal for healthcare revenue cycle management at TransUnion, a consumer credit reporting agency. He says this shift has two effects: Patients are more likely to delay needed care because of higher out-of-pocket expenses and those who do seek care are frequently unprepared to pay their bills.
A recent TransUnion study found that 68% of patients who had a bill for less than $500 did not pay it in full in 2016. This is up from 53% in 2015 and 49% in 2014. “The end result being that physician practices will experience continued revenue leakage from bad debt and financially disengaged patients,” says Wiik, who is also the author of “Healthcare Revolution: The Patient is the New Payer.”
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With patients shouldering more of the financial burden, experts say physicians need to change how they approach money issues. To succeed, physicians not only need to continue looking for ways to reduce overhead expense, but also look at how they approach patient collections and to educate everyone in the practice regarding the financial challenges that loom ahead.
Tim Beechnau, DO, and Nick Beechnau, DO, a father-son team of primary care physicians in Ravenna, Michigan, have used a strategy of keeping their salaries low to allow the practice to weather the lean months at the beginning of the year.
“The first of the year is always tough, and we don’t look forward to it,” says Tim Beechnau. “We try to keep a nest egg to get us through it.”
By watching how much they spend in the early months each year, they know how much they need to save, and any leftover funds become a bonus. The Beechnaus’ practice also tries to get any bills paid at the end of the prior year, before the inevitable early-year lull when cash is tight.