The Necessity of Collecting Toward Annual Deductibles at the Time of Service

It’s that time of year again. Every January, the vast majority of patients with health insurance have new deductibles to meet. Many providers do a good job of collecting toward annual deductibles and I applaud them for doing so. I’ve studied the data going back many years and the trends are unequivocal. Those clinics who consciously collect toward deductibles have much smoother and more predictable cash-flow early in the calendar year than those who don’t. Instead of receiving the insurance payment within 30 days of billing, we still have to wait the 30 days for the insurance to adjudicate the claim and then we bill the patient for the amount that was applied to their deductible. Many patients don’t pay their first statement so what would otherwise be a 30 day collections cycle can easily become a 60 or 90 day collections cycle or worse if the patient is non-responsive. This is exacerbated by the fact that deductibles are getting increasingly larger as employers shift more of the cost of health insurance to their employees in order to help offset the exponentially rising premiums. To be clear, billing patients for any amount they owe that wasn’t collected at the time of service is a big part of the service we and presumably most medical billing services provide to our clients. But the more proactive you are in collecting toward annual deductibles at the time of service, the more fluid, consistent, and predictable your cash-flow will be.
How much do I collect?
First, you have to accept the fact that you may not always estimate the patient’s responsibility correctly and that’s okay. You may occasionally collect too much and end up having to issue the patient a partial refund. While that may be burdensome, it’s better to collect too much and have to issue a refund than to collect too little and never successfully collect the rest of what you’re owed.

Second, there are on-line tools that you can use to estimate the patient’s portion. Some commercial insurance carriers offer this and there are also products available for purchase. Some work better than others.

That said, you can easily develop your own estimator for free in Microsoft Excel using simple formulas to calculate the patient’s responsibility using your contractual rate for that payer and CPT code(s). For specialties that use few CPT codes, this is a very practical approach. For specialties that use dozens of CPT codes, it may be a little daunting but the approach remains sound. If nothing else, come up with a default amount to collect upfront based on your average reimbursement per visit and collect that amount from all patients with unmet deductibles. You will obviously have to reconcile these amounts with what the patients actually owed you once their claims are adjudicated but the fact that you collected a reasonable estimate upfront means that you’re less likely to have uncollectible bad debt or material cash-flow woes.
Don’t forget about verifying eligibility and coverage
Likewise, many patients change insurances this time of year. It’s always important to verify a patient’s eligibility and benefits but it’s especially important this time of year as, again, this is when a patient’s insurance is most likely to change. In order to further stimulate your cash-flow during this challenging time of year, I urge you to proactively verify coverage for all patients not just new patients. Billing the correct and current insurance the first time will obviously only help to speed your collections.