Editor's Note:

We recognize that the credit card strategies described in Dr. Eastern's commentary may not apply to all countries in which credit cards are used.

The largest asset on your balance sheet is almost certainly, believe it or not, accounts receivable. Collecting balances due has always been a problem for physicians. After all, most of us receive woefully deficient business training, when we get any at all. As a result, many physicians fail to appreciate that aggressive management of accounts receivable is key to any practice's financial success, particularly in the current tight-money practice environment.

Managing accounts receivable is, of course, easier said than done. The traditional advice for minimizing accounts receivable has always been to collect everything collectable at the time of service (including, obviously, fees for all cosmetic services). But some patients inevitably brandish the old "I forgot my checkbook" excuse and escape without paying. And some fees, in particular the patient-owed portion of most insurance plans, are difficult if not impossible to calculate at the time of service and must be billed later.

But once a patient has left your office without paying, good luck getting your money. According to one study, a physician's bill ranks 19 out of 20 on the average consumer's payment priority list. In other words, each month they'll pay their electric, gas, telephone, and 15 OTHER bills before they get around to paying yours.

So What's the Solution?

A growing number of businesses, including hotels and car rental agencies, ask each customer at the beginning of the transaction for a credit card, take an imprint, and bill balances to it as they come in.

Geoffrey Anders, president of The Health Care Group, suggested this in a talk he gave for my Office Efficiency course at the American Academy of Dermatology (AAD) summer meeting last year, and it struck me as one of those ideas we all should have thought of years ago.

After all, most people think nothing of handing a credit card to a busboy in a restaurant, with little or no concern for what he might do with it in the kitchen. Those same people blithely shoot credit card numbers into a black hole on the Internet. So why should they object to covering their medical bills the same way?

For a year and a half now, every patient who enters our office has been handed a letter (see Figure 1) at the check-in desk explaining our new policy: We will ask for a credit card number on which any outstanding balances will be billed. At the bottom is a brief consent for the patient to sign and a place to write the credit card number and expiration date.

Figure 1. Letter for patients

For the first year it was optional, but starting this past January, it became mandatory. Why? Because in only a year our accounts receivable totals dropped by nearly 50%. They are now the lowest they have ever been, in all categories, in my 24+ years of practice.

And by the way, this is also an excellent way to enforce any no-show charges your practice might impose.

Handling Patient Objections

I know what you're probably thinking: Don't your patients object to signing, in effect, a blank check? Some did object initially - mostly older people. (Nowadays a wide chasm seems to have formed in financial philosophies, right around age 35. If you're older than that, for example, when you receive your checking account statement each month, you probably say, "Thank goodness they still include copies of my cancelled checks." If you're younger, you probably say, "Why do they send all this PAPER with each statement?")

But when we explain that we're doing nothing different than most hotels and car rental agencies, as well as most restaurants and online businesses, and that it will work to their advantage by decreasing the bills they will receive and the checks they must write, most come around.

And they're not "signing a blank check" - all credit card contracts give cardholders the right to challenge any charge against their account, and we remind them of that.

Keeping It Secure and Legal

You may also be wondering how we store the credit card information we collect, and how we keep it secure. We keep each patient's credit information in that patient's chart, where it is guarded with the same level of security as the rest of his or her privileged information.

Some offices prefer to store it all in one place - a Rolodex-type container, or an Excel (or QuickBooks, or similar) computer file, for example - protected by locked cabinets, passwords, and any other precautions that might be necessary.

I have been asked if this process should be considered "balance billing," and therefore illegal. "Balance billing" is asking patients to pay the difference between your normal fee and the insurer's normal payment. If you have a contract with the insurer, that is indeed illegal - or more precisely, it's a breach of your contract.

But what we charge to the patient's credit card is the portion of the insurer-determined payment not paid by the insurer and is therefore not "balance billing." For example, we bill $200, the payer approves $100 and pays 80% of that. The remaining $20 is the patient's responsibility, and that is what we charge to the credit card rather than sending the patient a statement for that amount.

I have also been asked how I would respond to queries from patients or insurance companies regarding the legality of such an arrangement. First, legality is not an issue. I would ask any patients who questioned the practice (none have so far) if they question the legality every time they check into a hotel or rent a car.

As for insurers, my response would be that it's none of their business. You have every right to collect the patient-owed portion of your fees, and insurance companies have no say in how you do it.

No Credit Card?

Finally, there is the inevitable question of how to handle patients who refuse to hand over a number, particularly those who claim they have no credit cards. We used to let refusers slide, but as mentioned, our policy is now mandatory. Patients who refuse without a good reason are asked, like any patient who refuses to cooperate with any standard office policy, to go elsewhere. Life's too short.

And "I don't have any credit cards" does NOT count as a good reason. Everybody has a credit card in this day and age, except deadbeats with such awful credit that you don't want them anyway. My office manager does have the authority to make exceptions on a case-by-case basis, however.

One surgeon I know asks "no credit card" patients to pay a lawyer-style "retainer" of $500, which is held in escrow and used to pay receivable amounts as they come due. When presented with that alternative, most suddenly remember that they do have a credit card after all.

Credit card companies have begun to appreciate this largely untapped segment of potential business for them. Soon, you may begin receiving help from them in setting up a system similar to mine, as well as other payment plans for your patients.

A few credit companies are even promoting cards specifically meant to finance private-pay portions of healthcare expenses. One example is HELP card. (I have no financial interest in HELP card or any other credit company.)

It's time for physicians to do more of what we do best - treating patients - and leave the business of extending credit to those who do that best.