Published 8/1/2009
Jamie McDonald; Craig Mahoney, MD

Managing revenues—during a recession and after

How to improve your cash collections

The recent economic downturn has several implications for orthopaedic surgeons. Generally, the health professions, including orthopaedic surgery, have been somewhat immune to variations in the business cycle. Recent information, however, points to a decreased rate of elective surgery.

According to a report from the American Hospital Association (November 2008), one third of hospitals have seen a moderate to significant decrease in elective procedures. This year, The New York Times reported a 50 percent decrease in elective procedures in New Jersey and Georgia. Ambulatory surgery centers have also been reported to have been less busy in some markets.

Patients with private insurance have seen a rise in their financial responsibility related to their medical bills. Insurers have increased copayment amounts, deductibles, and co-insurance percentages to maintain their profitability. In such an environment, the patient balance component—the part of the bill that the patient is responsible for—is more important than ever before.

Elective procedures performed on privately insured patients represent a significant portion of the bottom line for most orthopaedic groups. If this population pays more out of pocket for their health care, collecting payments in an efficient and timely manner is vitally important.

Before the patient arrives
Insurance information should be validated before the patient’s visit. To achieve this without irritating referral sources, contact each new patient directly to obtain the minimum criteria required to verify their insurance—insurance identification, subscriber name, and date of birth.

Payor information for current patients should be in your system from their last visit. Unfortunately, this information is not always up to date due to employment changes, a change in Medicare eligibility, a new insurer for the employer’s plan, and other reasons.

Using the batch verification method is an easy way to verify coverage for several patients simultaneously. This is typically available as an application from your practice management software vendor or an electronic claims submission clearinghouse. The application submits information to various payors’ Web sites and returns a report to you.

For example, each day, your office submits information on all patients who have a scheduled visit on the following day. The clearinghouse tells you whether the patient has insurance and, depending on the carrier, can also tell you about patient copayments, co-insurance, deductibles, and lifetime maximums.

Your staff should also check whether patients scheduled for a visit have a receivable balance. The billing department should thoroughly review any account with a balance for accuracy. Once they correct any inaccuracies and ascertain the balance, they can enter dollar amounts and dates of service into a Patient Balance Notification (PBN) form.

The PBN form enables the practice to determine what action should occur when the patient arrives. For example, Iowa Orthopaedic Center uses three simple designations: FYI, Collect, and Financial Counselor.

The FYI designation is generally used for patients who recently incurred a deductible or co-insurance bill. In most cases, the patient has not even received a statement from us. Providing this kind of information at the clinic visit allows the patient to settle the bill that day, resulting in increased cash flow.

“Collect” is used when the patient has a small balance and has already received one or two statements from us.

Patients who have large balances or who have ignored more than two statements should be ticketed with a trip to the financial counselor.

When the patient arrives When patients arrive at the clinic front desk, they should be asked for an insurance card so the card information can be compared to the billing system data. Update the information in the system if needed. Patients who don’t provide insurance information should be considered self-pay.

After patients complete the necessary demographic and patient history forms, they should receive the PBN form. Explain to any patient with an FYI that this is simply a balance notification form, that a statement has not been sent yet, and that the patient is under no obligation to pay today. You are simply providing the information for patients who would like to pay their balances.

Inform patients with “Collect” notices that they have a balance due and full payment will be expected before they leave. If they offer to pay immediately, accept the payment; if they begin to dispute the amount, refer them to the financial counselor. Coach your staff on how to defuse a combative patient situation, and let patients know the financial counselor will help clear up any misunderstanding.

Direct patients with the “Financial Counselor” designation to a private office. These patients should always see the counselor before they see the physician. Often, these patients have either ignored the bill or are having financial difficulties.

In some cases you may be able to obtain full payment by having a frank discussion with the patient. Patients who have ignored smaller balances should meet with the counselor to discuss immediate payment, or a payment plan. The financial counselor should be nonthreatening but firm and very clear about expectations surrounding the payment plan. The goal is to collect any outstanding receivables as quickly as possible.

Patients with large balances, regardless of whether or not they have been ignored, should routinely be seen by the financial counselor. In many practices, the patient simply receives a statement with little communication occurring on how to pay that balance. Discussing the issue when the patient arrives at the clinic can at times lead to a better understanding of the amount owed, a mutually beneficial payment arrangement, and an increased chance of your receiving payment in full. The goal is to keep a positive, long-term relationship with every patient.

Our experiences
We reviewed our collection process in 2007. We felt that significant financial gains could be realized by using the above protocols.

A more focused effort was made in validating insurance information prior to patient visits, using our practice management software clearinghouse. We began using the PBN form when appropriate, which has helped improve collections on the date of visit. Our front desk staff and our financial counselors are much more comfortable with these protocols. The process has improved communication between the business office and patients, reducing the number of uncomfortable interactions, especially when patients are carrying a large balance.

By using these techniques, Iowa Orthopaedic Center was able to significantly improve daily collections—collecting as much cash by September 2008 as we had in all of 2007. The average daily collections from all locations have risen approximately 36 percent, resulting in an additional increase to cash flow of approximately $500,000 annually.

By refining the steps in collecting money from patients at the point of service, we were able to significantly improve our daily collections. In these challenging economic times, it pays to collect as much of the patient balance component of the bill as possible.

Jamie McDonald is director of operations and Craig Mahoney, MD, is an orthopaedic surgeon at the Iowa Orthopaedic Center.


  • Copayment—the payment that is the direct responsibility of the patient assessed to a specific patient-physician interaction.
  • Co-insurance—similar to a copayment, but typically assessed on an annual basis.
  • Deductible—the amount of money that the insured needs to pay before any benefits from the insurance policy can be used.

A patient with a deductible and co-insurance would have to pay a predefined amount initially, and a percentage of any charges after the deductible is met.