Increase Collections with Credit Card Pre-Authorization
“Bill me the balance. I’m good for it.” Just try that line next time you rent a car or check into a hotel. Yet every day, thousands of patients effectively say that very line to Medical Practice staff and physician clinics. Every day clinics in America lose millions of dollars due to nonpayment, collection costs, and the actual cost of billing patients after the fact. The process of billing patients for deductibles and other patient responsibility can be a long drawn out procedure resulting in significant costs, delays and write-offs. The traditional method of sending out patient statements and waiting and hoping for patients to pay is costly and inefficient. Contacting insurance companies prior to the patient visit to determine deductibles and co-pays does not work well in the Medical Practice as payor websites are often incomplete and phone reps are generally unavailable to take patient calls. In the past, a few clinics have solved this problem by writing down patient credit card information along with a signed release to charge the card for the remaining balance when the EOB was returned. The problem with this solution, however, was that storing the information was non-compliant. Paper copies of patient credit card information left the clinic exposed to a large risk for credit card fraud by a thief or dishonest employee. There is, however, now a compliant way to receive the same functionality. Some systems give the clinic the ability to scan a credit card at the time of visit and then receive payment when the EOB is returned weeks or even months after the patient visit. The information is held electronically and compliantly by the vendor that provides merchant services to the clinic, mitigating the clinic’s vulnerability to fraud from stored patient credit card information. Better yet, some practice management companies offer fully integrated functionality allowing all billing of patient credit cards to be automated in the system. So how would this work? When the patient registers at the clinic, the patient fills out pre-authorization forms permitting the clinic to charge the credit card for the balance due after insurance processes the claim. The patient’s credit card is then swiped and the credit card information is stored with a secure independent sales organization (ISO) for up to 90 days. This generally allows enough time for the payor to return the explanation of benefits (EOB) to the practice. Upon receipt of the EOB, the clinic can charge any amount that remains the patient’s responsibility, up to the maximum preauthorized amount. If the patient responsibility is greater than the pre-authorization amount, then the patient will receive a mailed statement for the remaining balance. In most cases in the Medical Practice setting, a pre-authorized reserve of $250 fully covers the amount of patient responsibility. 
Let’s review a specific example: • Sept 6: Patient visit - Credit card is preauthorized for up to $250. Patient pays copay of $40. • Sept 7: Insurance is billed for $215 • Oct 4: EOB returned to clinic...Re-priced to $165 due per contract. ....$40 already paid as copay ....$60 paid by insurance ....$65 is patient responsibility • Oct 4: Email sent to patient to indicate credit card will be charged in 3 days • Oct 7: Credit card charged for $65. • Zero balance remains • Zero cost for statements • Zero cost for working and reworking of claims • Zero cost for payment delays • Zero cost for collection agency or non-payment Clinics that have implemented these systems have seen collections jump, often with a five to ten-fold increase in collections in the first month after receipt of the EOB. In addition, average savings on statements have been realized in the range of $1 per patient visit, which amounts to savings of $5,000 to $10,000 for many Medical Practices. As the use of credit card pre-authorization becomes more common place in the Medical Practice, patients will become as comfortable providing pre-payment information to cover their payment responsibility as they would if they were renting a hotel room or rental car. Thus, credit card pre-authorization is a powerful tool to drive down healthcare collection costs and increase clinic collections by providing timely and efficient collections of amounts deemed patient responsibility. Check with your software vendor to see if this functionality is available.
Article By: David Stern, M.D, CPC Dr. David Stern is CEO of Practice Velocity, the leading supplier of software and electronic medical records (EMR) for Medical Practices. In addition to operating the largest billing service company for Medical Practice, Practice Velocity provides EMR, medical coding, online patient registration, and practice management software to more than 800 Medical Practices in 49 states. With over 20 years experience in Medical Practice medicine, he is board-certified in internal medicine and is a certified professional coder (CPC). He speaks frequently on the topics of Medical Practice strategy, coding, billing and managed care contracting. He has been listed four times in the Castle-Connolly publication of Top Doctors in America. He has received a Lifetime Membership to the Medical Practice Association of America and served as a founding Director on the Board of Directors of UCAOA. He welcomes your questions and comments about any aspect of Medical Practice medicine.
