Practice Management Articles

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Finance Charges & Sending a Patient to Collection
Lynn Ballard

Is it ethical for a medical practice to assess an interest or finance charge on delinquent patient accounts? This is a question that I hear frequently at Practice Management Institute programs.

The only way that a medical practice can survive is by putting money on the books by providing the medical service with follow-up on the accounts receivable collection. Many times the patient will have payment assistance from an insurance company, and will then have a remaining patient balance for which they will be responsible.

According to the American Medical Association (AMA) policy, E-6.08 Interest Charges and Finance Charges, the application of such interest and finance charges are appropriate and allowed under specific guidelines. All state and federal laws and must be followed in regard to billing practices, i.e., informing the patient of the additional charges and the percentage, etc. It should be noted however that the AMA does discourage what they call "harsh" collection policies. It is also encouraged to use "compassion and discretion" in hardship cases. Medicare even allows for writing off of unpaid balances in financial hardship cases. See Medicare guidelines for specific instruction.

Per the AMA, it is at the physician's discretion whether to charge interest on unpaid medical balances. The specific amount of the finance charge or billing fee must be reasonable. The patient or guarantor must be made aware of the office billing guidelines in regard to a reasonable finance or interest charge. This information must be provided prior to the services or the charges being made on the patient account.

This can be accomplished in several ways such as a practice brochure, or financial policy agreement given to patients. The physician may even choose to post a sign in the reception area.

It is suggested within the AMA's policy that the physician review all accounting/collection policies and never allow a patient account to go to collection without physician knowledge. A review of the patient's chart should also be accomplished for risk management purposes.

Hopefully, physicians will become more aware of their outstanding accounts receivable and allow for assertive collection practices when accounts become delinquent. I also suggest that the physician decide that it is appropriate to refer the patient balance to a collection agency. It would be appropriate to notify the patient one last time, via phone and/or mail (one letter certified and one regular mail) providing a specific deadline date and time to have the full payment into the office, cash, certified check or money order. Instruct that failure to do so will result in the account being turned over to collection and the patient will be fired from the practice.

At that deadline, with no payment it would be necessary follow through and turn the account over to the collection agency as well as fire the patient from the practice. Failure to do so would be considered harassment of the patient.