Are you prepared when the payer doesn’t pay?

Those of you practicing in California during the summer of 2009 likely remember all too clearly when the state of California issued IOU’s for health care services you provided. This came to mind this past week when an insurance company in my state was “outed” for delaying over 300,000 claims to providers since Jan 2011 when they took over the state employee health care plan.

Given the current economic and health care crisis, I fear we may experience more situations where payment is not forthcoming, or significantly delayed. While there are many ramifications, the issue we need to discuss today is this: are you prepared for slow-downs or lapses in getting paid in your practice? And what can you do to get prepared?

To begin with, take a good look at the mix of payers you work with in your practice.  How many are commercial insurances and how many are Medicare and Medicaid or other state plans, and even cash? And even if you have a big percentage of commercial payers, you’ll want to make sure that you have different payers in that group. You want to make certain that in the event something happens to one of your main payers your practice will be able to continue.  Remember your mothers advice…“Don’t put all your eggs in one basket!”

Once you know your breakdown by payer, you’ll calculate what percentage of your patients are covered by each payer. With this information, it’s time to play some “what ifs”. To do this, calculate the percentage of income you receive from each payer. Set up a spreadsheet and enter your data and you should be able to run some scenarios to see how your income and practice might be impacted by the loss of one or more payers.

Next, you’ll want to come up with some possible responses to the loss of a payer regardless if it’s a slowdown in payment or a complete loss of that payment source. Ask yourself how you would handle this right now? What resources do you currently have at your finger tips to help you deal with such an event?

Do you have cash reserves your practice could draw from? Or do you have an established line of credit you could fall back on? If your answer is “No”, ask yourself what contingency plans you need to put in place to be prepared?

As a practice owner you must be monitoring your accounts receivable (AR). Work closely with your billing person to make sure it’s watched daily. Know the average length of time it takes for you to get paid from your payers. And if payments are not coming in as expected does it just involve a few claims or does it involve numerous patient and claims?

If you run into problems with receiving timely reimbursement, check with the payer to see if there is an issue. Make sure you document who you have spoken with and what their response is. You will need this later on when you follow up with them.

Depending on the size of the problem, you may want to let your patients know what is going on. Often times the plan members can do much to move the process along.

Unfortunately, there is no such thing as free health care. Without income you simply cannot run your practice and provide services for long. Obviously the last resort may be to no longer accept plans that don’t provide timely (and competitive reimbursement). There may come a time when you have to rethink which payer you can and cannot work with.

This is a situation we don’t like to think about. However, it’s happened before and it will likely happen again. Being prepared for cash flow disaster, just like being prepared for natural disaster, can help your practice get through potential rough spots, survive and thrive.

(c) Barbara C Phillips, NP

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  1. Very important topic. As an NP in private practice for ~ 20 years, having a varied payer mix has been essential to staying in business. However, these days the ‘slow downs’ or out-right denials look very intentional and even ‘engineered’. Why is it illegal to ‘defraud an inn keeper’ but ‘ok’ to not pay your provider? One of my patients works very hard for her income and has two separate commercial health plans (hers primary, husband’s secondary). Her primary insurance company has assured her that I will be paid for services rendered and yet I still have not received the ‘check in the mail’. Without a direct denial of the primary insurance (they say they will pay, but don’t… at least not for 3 months) I am not permitted to bill the secondary insurance. It would be cruel to make my patient pay out of pocket. I would rather sue her insurance company. Certainly I would feel like a small David dealing with Goliath. I’m not sure my state’s insurance commissioner is the first stop to deal with this. Would litigation be the solution here? (not my patient, sue her insurance company).

  2. I have said for years that the payers are not friends with the provider. Their business model is really about keeping as much money as they can and to deny services. This has been documented time and time again. It may take a class action lawsuit to ensure providers get paid for the work they do. (It’s also unfortunate we have providers send in fraudulent claims – it does not help those of us providing honest services!).

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