I have to admit that I’ve been in the profession long enough to remember the “golden days,” the times when patients paid in full for their services and materials—and, in cash! In the past 25 years, there has been a sea change in patient payment methods. According to the most recent AOA state-of-the-profession report, more than 70% of optometric income comes from third party sources.1

With reimbursements from third party payers shrinking, coupled with the decline in private-pay patients, maximizing cash flow is paramount in today’s ophthalmic practice. This means that practitioners are trying to collect every available dollar at the time of service. While this may sound like a straightforward strategy, it isn’t always the case. Take, for example, deductibles and co-pays—one area where cash flow is easy to determine, but not always easy to collect.

The Everyday Reality of Co-Pays
“Nowadays you can determine co-pays for 99% of patients either by looking at their cards or going online,” said Terry Bonds, O.D., of Jacksonville, Ala. “In any locality, a majority of folks will have one of about a half dozen plans. So, co-pays are fairly straight forward.” This will require some work on the front end, before the patient may present to your office.

“We make every effort to know what a patient’s financial obligation is for their eye care before, or at least when, the care is provided,” said Jay Petersma, O.D., of Johnston, Iowa. “Whether it’s a co-pay, a contact lens or eyeglass allowance, an unmet deductible or even being ineligible for coverage, knowing ahead keeps things flowing smoothly.”

For James Fanelli, O.D., of Cape Fear Eye Institute in Wilmington, N.C., “Co-pays are about the only known entity that is easily identified for a patient and are usually spelled out on their card in black and white.”

The Story Behind Deductibles
Deductibles can be a different animal than co-pays.

“Deductibles are a bit trickier as sometimes, if the info is available on the website, it is not necessarily ‘up to date’ and accurate,” Dr. Fanelli said. Asking the patient does not always lead to a straight answer; most of the time they will automatically say they have either already met, or think they have met, the deductible. “Either way you don’t know for sure and you can’t argue that point with the patient as you really don’t know either,” he said. Eye care practitioners, then, invariably collect the co-pay and bill insurance. Once the claim is filed, they will bill the patient for the appropriate amount that was applied to the deductible. “The money comes in after the fact, but it gets there eventually,” Dr. Fannelli said.

Dr. Bonds agreed. “Many patients are choosing higher deductible plans to keep premiums affordable. Deductibles are more difficult and involve considerably more money,” he said, adding that even though many insurers allow you to check online, the process is time-consuming.
Also important to remember, the deductible cycle begins again with each calendar year. For example, Dr. Fanelli tries to deal with Medicare in the beginning of the year. In early January, Medicare patients have not yet met their deductible, so unless they have a supplement, they collect that money up front. By February, a lot of Medicare patients have been to another provider and chances are they have already met the deductible, so they just collect the 20%, or file both Medicare and the supplement.

The Write-Off
Writing off deductibles and co-pays, while it may make you feel better personally, is not good business sense and is illegal. The routine waiver of co-payments and/or deductibles can constitute a violation of the federal anti-kickback statute (42 U.S.C. Section 1320a-7b), as well as applicable state law.

• In May 1991, the Office of the Inspector General (OIG) of the Department of Health and Human Services issued a “fraud alert” concerning waiving co-pays for Medicare patients. It stated that routinely waiving co-payments for Medicare beneficiaries—if you are paid on the basis of charges—is considered fraud.2

• The federal anti-kickback statute prohibits the payment of remuneration (which includes the transfer of anything of value) to induce referrals of business for which payment may be made by the Medicare or Medicaid programs. The verdict was that by routinely waiving co-pays or deductibles, you are encouraging—or inducing—patients to come to your practice rather than others, and expecting Medicare to cover your generosity.2 

• The Health Insurance Portability and Accountability Act of 1996 (HIPAA) further provides for civil monetary penalties for offering or transferring remuneration to Medicare and Medicaid beneficiaries that the physician knows or should know is likely to influence the individual to receive covered services from the physician.

The routine waiver of co-payments and deductibles can also constitute insurance fraud. For example, if an insurance company agrees to pay a physician 80% of the usual and customary charges, and the physician submits a claim for $100 but routinely waives the $20 co-payment, the insurance company could argue that the physician’s usual and customary charge is $80 rather than $100. In that event, the insurance company might be responsible for only 80% of the $80 charge or $64.2

In general, waivers of co-payments and deductibles are permitted only if they are not advertised, not routine, granted only to financially needy patients or where a reasonable collection effort has been made.

When Waiving A Fee Is OK
This warning doesn’t mean you must give up waiving co-pays and deductibles altogether. It isn’t a problem to waive co-pays if you establish and document the customer’s financial hardship. Remember, waivers cannot be determined via generalizations; you cannot discount or waive co-pays and deductibles at a certain percentage across the board because that is the percentage of “hardship cases” your office handles.

Waivers also should not be used simply because a patient pleads poverty or fails to respond to the first billing invoice. Waivers must be determined on a case-by-case basis.

A refraction is a routine part of what we do. Most health insurance was not designed to pay for non-emergency or routine procedures. Thus, Medicare, Medicaid, HMOs and most private policies will not pay for a refraction. Almost all medical insurances consider a refraction a routine procedure and will not reimburse it. So, it is an out-of-pocket procedure whose fee should be collected from the patient at the time of service.

A Better Business Model
Almost every eye care practitioner can agree that the best philosophy is the time-honored adage: Get the money up front. “The perceived value of services rendered diminishes quickly with time,” said Dr. Bonds. “It’s far better to inform the patient up front and collect deductibles on the same day as the visit. Many patients will balk at paying their $400 deductible, or start mailing in $5/month on a $400 tab.”

Dr. Petersma agreed. “Patients tend to not return to offices where they still owe money, and the longer it’s owed, the more awkward it gets.” Instead, his office collects all known balances at the time of service or order placement. The total fee is presented, and the patient is left to make the next move. In his experience, patients often just pay the fee. Occasionally they may balk if the entire amount is due immediately. In those cases, he can be the nice guy and imply that he is doing the patient a favor by suggesting that half the payment can be made today and half can be made when the patient returns.

This strategy does mean that you have to be willing to discuss financial matters with your patients. Many practitioners may not be comfortable with this practice, but remember that this is your office and the patient will, often times, want to deal directly with the person in charge. “I have no problem discussing financial matters, but staff is usually better informed than I am regarding most issues,” Dr. Bonds said.

“I personally don’t like discussing financial matters with a patient, but if I have to, I will,” Dr. Fanelli said. He begins the conversation by sympathizing with the patient and understanding the high deductible/high co-pay scenario he or she may face. However, he then clearly explains his role and how he has no control over how the medical insurance company chooses to cover the procedures.

“If a patient simply refuses medical testing that I deem necessary to their care, we explain the necessity of the care and if they still refuse, I won’t see them. I’m not putting myself in a malpractice situation,” Dr. Fanelli said. “The sad thing here is that there are plenty of other providers who will see the patient and forgo the medical evaluations necessary for their well-being. That is a problem between the patient and the doctor rendering that kind of care. A patient has to take some responsibility for their own care.”

Small businesses need working capital. In order to achieve a positive, consistent cash flow, you need a payment policy that clearly defines when and how you expect to be paid for your services. In other businesses, like a grocery store, you’re expected to pay for your purchases before you leave. The store’s payment policies are clear and that eliminates uncertainty. Similarly, at your office, your patients should have a good idea of what they’ll be paying for (i.e., services and materials) before they leave. The best way to let patients know how much they owe you for an office visit is to have them read and sign a copy of your credit policy as part of the registration process. Giving your patients clear instructions on their arrival to your office will ensure that they won’t have any surprises when it’s time to pay. 

Dr. Bowling runs a solo private optometric practice in Gadsden, Ala. He is also a diplomate in the Primary Care Section of the American Academy of Optometry.

1. American Optometric Association Research and Information Center.  Income from Optometry: Executive Summary. 2011 Jun.
2. Department of Health and Human Services. Publication of OIG Special Fraud Alerts. Federal Register: December 19, 1994.