The lot of a doctor of chiropractic is not an easy one.
On one hand, it doesn’t take many non-paying patients to create trouble for a cash-based practice. But then, an insurance-based practice—or even a blended practice— must be concerned not only with the financial situation of patients but also with third-party payers.
There are always patients who disappear and providers who go out of business without warning (often without paying their bills). In these cases, it is often too late to collect anything.
If you or your practice’s manager are vigilant about outstanding accounts receivable and the financial status of those you deal with, however, many losses can be averted. There are also strategies for dealing with really troubled patients and payment providers before you have to take the dreaded final step of “firing” them.
Signs of trouble
It’s far easier to take a proactive approach by avoiding the types of patients who tend to spell trouble. Staying alert to signs that insurance companies or longtime patients are having financial problems and taking quick action when their payments are slowing down can ease many potential hazards. In other words, exposure to the credit troubles of everyone the practice deals with should be minimized before credit is extended, as well as during the course of the professional or business relationship.
Anyone building a chiropractic practice or in need of revenue may be tempted to take on every patient who shows up. Unfortunately, that can be a mistake that all too often leads to collection problems later. The solution: Vet patients carefully.
Although a credit check is important, it’s not a failsafe measure. Things can still go south quickly, so minimizing exposure to a patient or a potential payment provider’s credit troubles requires you to exercise due diligence. In other words, minimize exposure to the credit trouble of others in the beginning and at every step of the relationship.
That can be as basic as paying attention to the comments of patients whenever money is discussed. A patient who begins discussions by offering half of a proposed fee is a warning sign.
Perhaps the patient or potential patient cannot afford the quality or the timing of the service.
Due diligence also means staying on top of paperwork. It is all too easy to fall behind on billing in the midst of busy periods, but letting it slide for a month or two will put your practice at risk. Before you know it, the practice is owed $5,000, $10,000, or more.
To avoid this problem, establishing regular routines for billing that reflect the patient’s preferences, such as sending a bill every two weeks, might be a good strategy. If patients start taking longer than usual to pay, it will be readily noticeable.
Staying alert for signs that a patient’s (or third-party payer’s) financial situation may be changing can also help protect your practice. If, for example, a patient ignores or doesn’t return phone calls it may mean nothing. However, if three or four calls have been ignored and the last payment was late, it could mean they can’t afford your services, but haven’t gotten around to telling you.
Indications of possible trouble include:
- Requests for fee changes with or without changes in the number, frequency, or types of services performed. Patients who don’t understand the true value of the services you perform are often reluctant to pay in full, even if they aren’t in financial trouble, so they should be screened out from the beginning.
- Negative publicity or press, especially delinquent tax notices.
- Rumors, particularly those involving slow payments to others.
- Deteriorating economic situations or employment
- Third-party contacts regarding the practice’s payment experience with a patient.
- Lack of focus by the patient and an inability to fulfill payment plans or promises.
When payments lag
A number of strategies should immediately kick in whenever financial troubles appear imminent, including:
- Cashing checks promptly and keeping records of when checks are received.
- Making future services contingent on payment for the new services and some reduction in past-due payments that are “contemporaneous exchanges” are immune from preference challenge by a bankruptcy trustee.
- Without evidence that payments were for new services, rather than the old balance, courts tend to apply payment to the oldest charges, exposing the payment to recapture.
- Don’t let the threat of a patient filing for bankruptcy deter a lawsuit—if the debtor is believed to have assets from which the claim can be satisfied.
- Talk to a collection attorney about your rights to a pre-judgment attachment.
- Don’t hesitate to accept a payment because it is possible that it may be refundable as a “preference” should a bankruptcy occur. It is never wrong to accept money genuinely owed to your practice; it is also not wrong for the soon-to-be-debtor to pay it. It simply may be recoverable by a trustee.
Remember the old saw about possession being nine-tenths of the law? Possession of the funds may not be forever, but it does give a practice negotiating leverage in a suit in a bankruptcy case to avoid the transfer.
Fighting the good fight
Most chiropractors and practice managers are aware contracts and payment terms should always be in writing. Unfortunately, this alone may not protect your practice if a patient or third-party payer runs into financial problems. Few troubled debtors are likely to begin paying simply because there is a contract.
Being dependent on one or two sources of income can put any chiropractic practice at risk if payments from one of them slows or dries up. Even a practice whose plate is full might be well advised to continually look for new patients. Make sure there is a constant inflow of patients so that, if one fails and isn’t able to pay on time, potential problems are avoided. It also provides more time and a financial cushion to work things out with a troubled patient.
The first step in turning troubled cash patients into valuable assets is determining whether the relationship is worth saving. Those who believe in holding onto every patient, no matter the cost, might never see their practice reach its maximum earning potential.
So before asking patients to take their business elsewhere, you should make an effort to “reform” them. There is no clear rule of thumb here, as each situation—and patient—is different. If the problem is one of slow pay with a small-balance patient, services can often be postponed or delivered on a cash basis until they’ve paid up.
The same approach might work in an insurance-based practice if the chiropractor has enough leverage.
Alternatively, increasing fees to offset the higher cost of extending credit might be warranted.
Worried about the patient going elsewhere? Sometimes it’s a good thing when troubled patients become problems for your competitors.
Slashing unprofitable patients
A question often ignored by many is of whether the best business decision may actually involve firing some of their worst patients. While this may seem like an illogical suggestion (particularly in a bad economy), having the wrong patients can be costing your practice in unexpected ways and holding it back from real success with the temptation of short term profits.
The joys of practice
No matter how enjoyable a practice can be, there’s one aspect that no chiropractor likes: Trying to collect from patients—or insurance companies—who have run short of money. Unfortunately, wringing money out of deadbeats has become a common issue in today’s slow-growing economy.
In some cases, the only option may be to hire a collection agency or go to court to collect, although few DCs like to go these routes. Obviously, it is far easier to take a proactive approach and avoid the type of patient who usually spells trouble, while staying alert to signs that longtime third-party payment providers are having financial problems, and taking quick action when payments are slowing down.
Losing patients can be worrisome, but keep in mind that some patients are just not worth it. Instead of tying the practice to individuals who are providing little income and much heartache, it’s often best to work on and please those individuals and payment providers who actually generate the most profit.
If you’re diligent, you might be able to minimize risk and bad debts by paying attention to your patients’ payment habits, a third-party’s standing in the trade, and potentially anticipating either one filing for bankruptcy.
By monitoring your cash flow and other financial indicators, you can significantly reduce financial headaches and enjoy a healthier bottom line.
After all, to be in practice means dealing with patients, and sometimes you have to be firm.
Mark E. Battersby is a tax and financial adviser, freelance writer, lecturer, and author located in Philadelphia. He can be reached at 610-789-2480.
Disclaimer: the author is not engaged in rendering tax, legal, or accounting advice. Consult your professional adviser about issues related to your practice.