Thomas Wallin, M.D., is chief executive of an eight-physician OB-GYN group in Lemoyne, Pa. Although the practice is busy and successful, Wallin says it often struggles to meet payroll and even had to establish a line of credit several times in recent years.
"It was something we didn't like to do, but we had to do it," he says.
Like many other physician practices, Wallin's group is handicapped by slow and late payments from third-party payers. Many managed-care companies are battling their own financial problems and are auditing and downcoding more and more physician claims. It's not uncommon for groups to wait 90 and even 120 days to be paid. As a result, some groups are getting more aggressive with their collection policies, even dumping payers that are consistently late.
A delay of "just a couple of weeks can make a big difference in how you pay the payroll," Wallin says. "It gets a little harder to keep the balance up there when things start coming in late."
According to the Medical Group Management Association's 1998 cost survey, about 30% of multispecialty groups' and 25% of family practice groups' accounts receivable are unpaid at 120 days. In addition, according to the Englewood, Colo.-based MGMA, multispecialty groups were able to collect only 69% of charges in 1997. They wrote off the rest as bad debt and uncollectible, or as the result of discounted payments from managed-care companies and Medicare.
Another recent study by Hales Corners, Wis.-based Zimmerman and Associates, a healthcare receivables consulting group, also reports that physician groups are waiting longer than ever for payment. The percent of accounts receivable unpaid at more than 90 days is at an all-time high-38% this year, up from 35% in 1995. On average, physician groups wait 77 days for payment.
David Rogers, M.D., a gynecologist in solo practice in Allen, Texas, says at least 30% of his claims are unpaid at more than 120 days, and 10% are six months old.
"We have just had to tighten our belts," Rogers says. "My income is down; my expenses are up. My personal income is down probably 40%, directly related to poor reimbursement. I have dipped into my retirement account and paid the penalties and taxes on that just to keep things going."
Sherry Migliore, a consultant with the Pennsylvania Medical Society and a former practice administrator, points to managed care's financial problems for the slow pay. "A lot of managed-care companies, in my estimation, are holding on to the dollars as long as they can," she says. "I think some of that may have to do with (their) profitability issues in the last couple of years."
Late and slow payments have gotten so bad in Texas, that the Texas Medical Association set up a hot line that hears and tracks physician complaints about slow, late and no payment.
"Look at HMO income and loss figures for the last few years," says Teresa Devine, director of healthcare financing at the TMA. "They've been losing money, and one of the ways they try to deal with their cash-flow concerns is to take a harder look at claims as they're processed."
Devine says some local carriers have found a way around a state law requiring managed-care companies to pay claims in 45 days. "A couple of carriers are actually cutting the check for claims and then telling physicians we've processed the payment but are waiting to audit it, hoping that will give them more time," she says.
Michael Zimmerman, executive vice president of Zimmerman and Associates, says another reason bad debt has been on the rise is physicians' reluctance to write it off. "Physician practices are run in a more entrepreneurial way," he says. "For them to write off an account, they take it very personally." Many businesses write off accounts receivable sometime after 120 days.
Rogers says his office rarely gives up on a claim. "We have some claims that we've gotten paid on that (were) 2 years old. If it's a managed-care claim, we just keep appealing until we get paid."
While physicians may repeatedly appeal to managed-care companies, they often let patients get away with not paying, says MGMA consultant Darrell Schriver. He says many managed-care enrollees don't think they have any financial responsibility.
"Groups aren't looking at that patient responsibility like they used to two or three years ago. They're letting that slide," he says. "If Mrs. Jones comes in and has an outstanding balance of $200 or $300, a lot (of groups) are not as aggressive in collecting the old balances as they should be."
What each group must do, Schriver says, is figure out how much it can afford to have outstanding, then plan its collection policies accordingly. Schriver says practices should aim to keep the percentage of accounts receivable unpaid for more than 120 days down to less than 20% of their total practice.
Zimmerman says, "The safest place to be is in the 30 percentile; anything over that, you just can't afford to do it."
Migliore warns the farther out your accounts receivable get, "the less chance you're going to get that money back. We advise practices to put in very specific collection policies to follow. I always recommend that the practice put a written policy in place that identifies what procedure to follow after 30 days, 60 days, etc."
David Marcus, a Nashville, Tenn.-based consultant who conducts seminars on "slow pay, low pay and no pay" for the TMA, says carefully monitoring all claims will help. "You need to be (monitoring) carefully how your payments are going, and then you need to be talking to your payers ahead of things getting bad."
Marcus also advises looking at all payers and getting rid of the "ankle biters-the payers that produce $30,000 worth of revenue and $75,000 worth of trouble. Get them out of your practice."
Rogers began doing that in his practice about three years ago. "Each year we say we're going to figure out our lowest, slowest paying plan and drop whichever one that is," he says. "Groups ought to consider paring down their managed-care clients. Keep the good plans, and get rid of the ones that don't pay. They're the problem."
Rogers also suggests turning to employers to speed up the collection process. "I would say to the employers that these claims are not being paid," he says. "The company you contracted with isn't paying us, and we may have to stop seeing your clients. They usually get involved then."
Migliore says enlisting the patient's help could speed the process. When she worked as a practice manager, she would send notes to patients after 60 days to let them know their insurance company had not paid their claims. "A lot of times the patient is very surprised about that, and sometimes they'll call the company."