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Chiropractic News

February 2011

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When all else fails

What you should know about using small claims court

By Kenneth Martin, DC

No one likes to get involved with the legal system, but some incidents may require you to in order to collect what you are owed for services rendered. Be sure to conduct research and consult with legal counsel before using small claims court, but the following guidelines can provide a sense of how the system works and when it is the appropriate remedy to a payment dispute.

The three most common scenarios to a collections problem are:

  1. The patient simply refuses to pay;
  2. The patient believes his or her insurance will pay in full, then refuses to pay the difference when it doesn’t; or
  3. A personal injury case (with or without an attorney) will not settle for a proper amount.

In all three cases, the process of using small claims court is similar. The preparation and notification beforehand, however, varies with each scenario.

Refuses to pay. If the patient has no valid reason for withholding payment, then look at the amount of money involved. If the total owed is less than $500, small claims court may not be the best remedy. Remember, most malpractice claims are instigated by disputes over money or payment.

Going to court over a small amount of money could end up costing you more than you stand to collect. A collection agency may be best when pursuing smaller amounts.

Secondly, what actions have you already taken to collect the fees? Sending a bill each month is not enough. You should also send a personal letter asking for payment; then send a follow-up letter with stronger wording; and if necessary send a final notice.

Thirdly, a phone call may be warranted if you have a good relationship with the patient. It is possible he or she has become unemployed, lost benefits, or experienced some other hardship. You may need to re-evaluate whether there is anything you can collect.

Insurance not paying. Then there are those patients who thought their insurance would pay 100 percent of the bill, but in fact they are liable for a balance. In this day and age, co-payments and deductibles tend to be high and the patient is often left owing some amount.

These cases can be handled in a number of ways, but some steps are essential.

  1. When accepting new patients' insurance, inform them at that time that insurance is an agreement between them and the insurance company, and they are responsible for any amount not covered by insurance.
  2. Make sure your outgoing bills detail the amount insurance has paid and the amount still due. Sometimes billing twice a month is better, as most people are paid twice a month. You are more likely to receive payment if you alert patients immediately when insurance is not paying, rather than allowing their bills to get large.
  3. Collect the initial visit amount from the patient until you can verify his or her insurance coverage. Many insurance carriers will say there is coverage, but fail to inform you the deductable has not been met. Collecting for the first visit at least reimburses you for the initial examination and testing.
  4. Have the patient speak with the insurance adjustor if the payment is not sufficient. This makes the insurer the bad guy.

Personal injury cases. Personal injury cases can be difficult. When an attorney is not involved, and an insurance company won’t pay you directly and will only pay the patient, tell the patient in advance of care that he or she will be responsible for the entire bill, regardless of what the insurance company does. Many doctors lose money when payment is sent directly to the patient, leaving the doctor to try and collect from the patient later.

Some carriers pay the doctor directly. It is up to you to find out from the insurance adjustor what procedures are being followed. If you get written notice from the carrier that they are paying you directly, there should be no unpleasant surprises later. Many carriers prefer to wait until the end of a case to pay, and then may balk at payment if they feel your bill is too high. A written notice helps bind them to pay

you.

When an attorney is involved in a personal injury case, you should have a signed lien from the patient, which is sent to the attorney for signature. Personal injury liens contain language that specifies a doctor’s fees are to be paid regardless of the outcome of the case or settlement amount. The courts have determined that even if an attorney does not sign and return the lien, it is still valid if he or she is aware of its existence.

Patients should be made aware that they are responsible for the full amount of the bill, and any arrangement they make with the attorney of record is between them. Your bill is not contingent on any such agreement, and will remain open until paid in full.

The attorney is required to pay you from his trust account at the settlement of the case. You are not required at any time to reduce your fee or make a reduction settlement. If you elect at your own discretion to make an agreement with the attorney to reduce your fee, and the attorney does not accept your offer of settlement, then the full amount of the lien is considered due and payable.

Some attorneys will try to “strong arm” you into taking less, because the case settled for a smaller amount than expected. However, the size of the settlement should not impact your fee if it is reasonable. If you cannot come to terms with the patient or the attorney at the outcome of the case, you may need to go to court.

Using small claims court

If any of the above scenarios apply and you want to proceed to small claims, you need to do some preparatory work first. Make sure everyone involved has received a copy of the entire bill, including any payments made. Notices for payment should be sent out at 30-, 60-, and 90-day intervals before any action is taken.

At the end of 90 days, a 10-day letter of demand should be presented to the patient, with notification that your next action will be small claims court. If there is no response to the letter, you can proceed. If the patient calls and wants to make payments, you should accept that and not use small claims.

To file a claim, go to the court closest to your office and make a small claims declaration and request for a hearing. A court fee may be charged to set up the date.

You must then have the patient served with the court papers. Usually, a sheriff’s office does this and you must go to the office directed by the court and provide them with the papers to be served. A small fee will be charged depending on how far the deputy will have to travel.

When your court date arrives, have your entire bill copied for the court, and any paperwork or agreement that has to do with collection of unpaid amounts. Let the judge know you provided a service for which the patient is unwilling to pay. If an attorney was involved, show your compromise offer was refused. Most judges will issue an immediate order for payment in your favor, as they hear these kinds of cases frequently.

The court should also reimburse you (by adding on to the amount due) for all court costs if you are successful. Don’t misuse the small claims procedure by taking all overdue bills to court, but don’t be afraid to use this option when the conditions warrant it and all other attempts to obtain payment have failed. Prepare properly and you should have a successful outcome.

Kenneth Martin, DC, has been in practice for more than 32 years with two practices in San Marino and Temple City, Calif. He can be contacted at 626-286-8200, bacdoc@juno.com, or through www.drkennethmartin.com.

DISCLAIMER: The author is not engaged in rendering tax, legal, or accounting advice. Please consult your professional advisor about issues related to your practice.

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Refusal to pay

If a patient refuses to pay your bill, find out:

  • Why they don’t want to pay?
  • Did they receive good service for the cost?
  • Are they looking to sue you?
  • Did you cause them any harm?
  • Are they destitute?
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