Private Practice Scorecard Episode 6: Why You’re Not Collecting What You’re Owed

Private Practice Scorecard Episode 6: Why You’re Not Collecting What You’re Owed

If you want a private practice and still feel 100% dependent on whatever the insurance companies decide to send you, this episode is for you. Over-the-counter collections are the very first financial touchpoint inside your clinic. For a lot of practices, it's quietly 20% to 25% of total revenue collected. If you don't have the right person or the right systems at the front desk, that money ends up walking out of the door. In this episode, I'm going to share how to measure your over-the-counter collection percentages, what it's costing you when you let it slide with your patients, and the eight simple people systems that you can install so your team collects what you are owed or without you standing at the front desk all day.

Let's get into it. In this episode, we're talking about over-the-counter collection percentage. More money stuff. As mentioned, over-the-counter collections are going to be a big financial touch point for your private practice. If you want to make money, this is where we're going to start. This is not rocket science for a lot of us. You collect money over the counter. It's simple, but it's hard to execute, especially when the operational complexities of the private practice occupy your bandwidth, your energy and your motivation.

Understanding Over-The-Counter Collections

It's hard to structure all that stuff to keep things organized and efficient for yourself and for your team. Hopefully, this episode is going to give you some value to help you zoom out a little bit and see how you can easily implement a few simple Frameworks to help you move the needle with your over the counter collections. Let's get into it. Step one, what is over the counter collections? What is it? Adam’s definition is, the percentage of patient responsibility. That's going to be co-pays, co-insurance, deductibles, and cash that is collected at the time of service at the front desk.

That is your first financial touchpoint for your business. Why is that the case? This is a transaction that happens before billing, before your claims, before your denials or before any of the backend mess happens. This is a pure collectible cash transaction that is a pretty big component of your revenue generation mechanism in the business. Back in the early days, back in 2019, I opened my practice March 19th, 2019. I did not do a good job of collecting over the counter. I was afraid to ask for money. Honestly, I didn't have a good system of knowing what patients owed me.

I was terrified to ask them for money because I didn't want to create friction or barriers to a patient being seen in my practice. I ended up building up a big patient AR balance that ended up being hundreds of thousands of dollars that I never collected. I want to help you avoid that if you are getting your practice started or if you're looking to improve your systems. Don't do the thing that I did. Later in my career, once I started doing this well, I hired some great admin. I have got some rockstar admin team and front desk people that are killers. They love working hard and doing a good job. They work well together.

Once we started collecting all the money that we were owed, we ran the numbers and we realized that 25% of our total revenue was over the counter. Now, mind you, I am in networked practice. We are in network with every contract that you can imagine pretty much. We're still at 25%. That's a big number. A quarter of your revenue is over the counter in the form of co-pays, co-insurances and deductibles or the little bit of cash payments that you do.

The Reality Of Declining Insurance Reimbursements

That 25% is often more than your profit margin. Typically, for in-network practices, the average practice is running 10% to 15% profit margins in the country. Twenty-five percent sometimes could double your profit margin. It’s a big financial influencer in your business. Let's talk about why it matters. It matters not to mention the financial implications that we've already mentioned. We all recognize that reimbursements are gradually declining. Insurances are making it harder and harder to get paid. Denial rates are rising. They're getting higher and higher.

Payers like Medicare, Medicaid., Blue Cross, and United are pushing more of the costs onto the patients. You're seeing larger coinsurance deductibles and larger co-pays being shifted over to the patient's responsibility. It's becoming more and more critical for us to get good at transacting over the counter with our patients. Back in 2019, which is not that far long ago. I was probably making 20% more revenue in my practice. At least 10% more revenue in my practice. If you talk to older practice owners who’ve been in business for twenty plus years. Reimbursements were even higher back then.

Back in the day, you had the margin to eat the over the counter collections and still survive. Meaning if you had a friend or a family member or you had a patient that had a hard time. They forgot their credit card or forgot their wallet at home. We would end up being a lot more loose with our expectations with our patients and we could still survive. The margins were there, but now that's not the case. Administrative complexities are getting more challenging. Reimbursement starts to decline. Now, missed over the counter money is no longer a tip.

It's no longer a tip for you because you did a good job or you care a lot. It's the difference between profit and loss. It's the difference between you having a practice that is viable, versus you having one that is not, quite frankly. This can no longer be ignored and we can no longer wing it at the front desk. Some of the common mistakes that I see after working with several practice owners ,and these are the same ones that I've made.

Number one, this is probably the most common one. If you have somebody that's at the front desk that you already know, like and trust, but the systems aren't quite there. We assume that my front desk does a pretty good job without measuring it. I'll put this in quotations. “My front desk does a pretty good job at collecting over the counter.” I hear her collecting. She does a pretty good job. You can't manage what you don't measure. You don't realize the financial implications unless you put hard data to it.

Don't make the mistake of just winging it. Make sure you have systems to measure the actual over the counter collection percentages, what is owed, paid, and missed. You might realize that it's not quite as good as you think it is, or maybe it is pretty good but with just one tiny bit of effort, you can make it a lot better. That could open up another level of profitability in your business. Mistake number two is avoiding the money conversations with your patients because it's because of discomfort or because of fear of losing the patiently. Especially for young practice owners.

We all know what it's like to not understand our value or feel like we have to give away our service. Unfortunately, as private practice, it beats you up over the years. You start to realize that you don't have time for that anymore. If you're a younger practice owner or if you've always been somebody that's been uncomfortable asking for money, my recommendation, in general, is to lean into that discomfort and ask for the money because it's yours.

Number three is letting patient balances grow and then trying to chase those balances after discharge, which almost never works. I don't have data to support this, but a lot of people who are a lot smarter than me have told me. That when you let money walk out of the door, let's say a patient owes you $100 and they discharge. You're on average. You're only going to collect $0.10 of every dollar that is owed. In that case, you're only going to collect $10 if you're lucky. Collecting it at the time of service is key. It's the point. This is why it matters. This is why over the counter collections really matter.

If you are Looking to improve this, you're at the right episode. Let's talk about how to measure it. How do you measure over the counter collections? Ideally, your EMR should have some type of reporting mechanism that can clearly measure over the counter collections. As EMR has become more sophisticated, they become better at measuring this type of data. Whether that measures it or not, in my opinion, it's important for you to understand how it's measured and why it's measured this way so that you can make sure that you're leveraging the EMR tool effectively.

You don't want to just say, “EMR tool is 90%.” It’s like, 90% of what? What does that mean? Why does it even matter? What levers can I pull or should I pull based on that metric to drive it up? Those are all things that you need to know in order to make decisions in private practice. Now, we're going to assume you don't have any type of mechanism that you trust. We're going to use a spreadsheet. I'm going to share with you a simple spreadsheet that you can use for measuring over the counter.

We're going to use this over the counter collections tool. By the way, if this tool seems like it's useful to you or if you're like, “I wish I had a tool like that.” Reach out to me. Shoot an email or find me on social media. I'm happy to give you a copy of this. It's yours. This is how you can set up your spreadsheet. If you can imagine. This is going to be a daily spreadsheet. Every day, you will create a new tab. Let's say the date is 11/2, then tomorrow, we’ll make a copy and we'll call this 11/3. I'm not suggesting that you have to measure it that way. I'm just suggesting that you can measure it that way.

For this tool, this is probably going to be the easiest way to do it. Here we are. We have four primary columns. Column A is the date. Your front desk has access to this. This is going to stay open on their screen as they're checking patients in. They're going to have this date sprinkled down column A. Column B is going to be the patient's name. I have some fictitious names that I'm just using as an example. Every time a patient shows up for their appointment, their name will go in column B. If a patient cancels for whatever reason, they don't show up. They do not get added to the sheet. If they show up, the front desk goes in, goes to column B and adds them to the sheet.

Column C is going to be the over the counter amount that that patient is expected to pay for that visit. This is going to be the dollar amount that is verified during the insurance verification process. Which is why it's important to have a strong verification process. You want to know what your patient's plan is. You're going to verify the benefits very well. You're going to collect that policy number. You're going to do a good job verifying and understanding exactly what that patient owes every visit according to their policy. Put that in column C.

Column D is going to be the amount that you collect at the time of service. If you can imagine at the end of the day, you will have all of your patient visits that showed up for the day in column B. All of the total number of dollars that were supposed to be collected in column C, in column D will be the total number of dollars for that day that was actually collected. If you scroll down to the bottom, you'll see the totals. On C33 and C34, this will total out the expected amount D33 and D34 will total out the collected amount. Your over the counter collections percentage will automatically populate in the yellow cell underneath.

In this example, it's 97.22%, which is essentially the sum of column D divided by the sum of column C. We want that metric to ideally be 100% every day. That's the target. That's the benchmark. Everybody that comes in knows what they owe. They pay what they owe and we collect it 100% of the time. Nobody leaves without paying what's expected. However, things happen. We're humans. Things break or whatever. There may be instances where we don't fully collect for whatever reason.

In that example or in that instance, at the very bottom, you'll see the amount missing tab. In this example, $15 was missing or missing $15. For this day, $15 was missing, which is why we're at 97.22%. If we were to collect that money, we would have been at 100%. It looks like Spencer Shoemaker, this person here, didn't collect. If I put that $15 in, you could see it jumps to 100%. This is important because this is the tool that can be used or a similar tool that will be used every day that will be reported to you every day.

The front desk will own that metric, will be accountable to that metric and will report that metric daily. Also, in this example, give me the battle plan of what we need to do to collect that missing $15 within the next 24 hours. That could be like, “I'm going to reach out to Spencer Shoemake. Give him a call and charge the credit card on file,” or whatever your battle plan is. This is the tool. If this is useful, reach out to me and I'll send it to you. If not, you can make something similar to satisfy the way that you like to do it.

In that example, it's a clean little process. It doesn't have to be more complicated than that. It's simple to do, but hard to execute on. I'm going to give you some tools, systems, frameworks and strategies that you can use to make this easy and to make sure that you're collecting every single dollar that's owed. Let's do the money math. If we don't understand the financial impact of something like this, then it's never going to strike the nerve in a way that drives behavior change for you and your team. Why should this even matter from an objective standpoint?

We're going to compare 70% versus 100% over the counter percentage. We’ll compare these examples. We're going to assume our same clinic with 100 visits per week. We're going to assume 400 visits per month on average. We're just going to use easy math here. Let’s assume that every visit on average, some patients are going to owe $50, $0, and $20. Let's say, across all of your payers, across all of your patient demographics. Let's say on average each patient owes you $10 a visit. Now, that would be at 70% collections. That would look like $10,000 dollars a week.

Hopefully, I didn't lose you guys on that because you're doing 100 visits at $10 a visit and you’re collecting $1,000 a week. At 70% collections, you're going to have $1,000 times 0.7, which is going to be collecting $700 per week. That would give you around $2,800 per month. If you're collecting over the counter at 70% efficiency, you would be collecting $2,800 per month in this example. Now, this is where we make the mistake. We say, “Adam, we need more new patients. We need more marketing.” Maybe, but also what if we didn't spend any money.

Before we did that, what if we just put a little bit of effort into improving our systems to collect 100% over the counter? For 100% collections, you're looking at the same $1,000 times one, which is going to give you $1,000 a week which will give you $4,000 per month. What if we just did a good job of collecting over the counter? If we go from $4,000 to $2,800, this is going to be a monthly increase of $1,200. If you multiply that over a yearly increase of $14,400. This is just a simple example for a very small practice like if you have 4, 5 or 6 locations.

That number can go from $14,000 to a lot more like $50,000 or $60,000 or $80,000 or $100,000. Big numbers. In bigger clinics with higher patient responsibilities, the missed amount compounds very quickly into tens of thousands of dollars. The point is, this is money that you should be getting paid for the work that you already delivered and the risk that you've already taken as the owner and as somebody who's employed, all the team members, etc. Don't sleep on this.

It's important that you have some tight systems at the front desk. How do we fix it? This is everybody's favorite part. Here we are. You’re like, “Adam, you barely know how to write on an iPad. Tell me how to fix it.” I'm going to try my best. There are eight primary ways in my mind that I feel like I can give you the biggest bits. Probably six of them will be true drivers of the statistics. Two of them will be safety net systems that you can use for insinuating circumstances. How do you manage certain barriers to collecting 100% every time? We're going to get into that.

We're going to talk about the eight ways to improve over the counter collection percentages. This is going to be your people/systems. You have some good systems. You have some good people who are executing those systems. Therefore, you're going to have great results. Number one, is going to be a strong intake and benefits verification process. We talked a little bit about the intake process in the previous episode, but the intake is really important. You want to make sure during that intake process. You're collecting accurate health insurance coverage information from your patients.

You want to know the name of the insurance, the policy number, the member ID number, and all of the information that's critical for you to have a strong and accurate insurance verification process. That way, you can understand specifically what their co-pay is and what their co-insurance is. We're talking about the patient. What is that patient's copay, co-insurance, deductible, or is there any visit limits that they have. From here, you can fill out what we call your financial responsibility agreement. Prior to the visit, prior to that initial evaluation, you're going to verify their benefits. They're going to show up.

You're going to have a pre-filled financial responsibility agreement for that patient that is built around what their insurance policy is and aligned with how you collect over the counter money. I'm going to share with you an example of what those could look like. An example is a financial responsibility agreement. I'm not even quite sure if this is the same one that we still use, but we're going to clearly define the financial expectations with that patient such as transparency and ease of payment. All patients are required to have a credit card on file. Apply to your card upon checking for every visit, cancellation, no show fees and remaining balances from your insurance company will be charged monthly.

We're going to get into what all that stuff means, but the point is, have an agreement. When that patient shows up for their initial evaluation, they're going to walk up to the window. You're going to check them in and then, you're going to go through just like we went through the missed visit policy. You're going to go through that full agreement with them line by line. Read it out for them. Make sure they understand exactly what their estimated cost per visit is. That you're going to be collecting that at the time of service and you have a credit card on file. We can get into that and walk them through that.

Ensure that they verbalize understanding with you. Also, you want to have them have a written confirmation via a name, date and signature while you are present. Both you and that person will sign them together at the intake process. That way, it's very clear and very explicit. It gives you both time to have a conversation around finances. We're going to reference this same agreement here in a little bit, but I want to give you an example. If this looks like something that you might want to use in your practice, shoot me in a message and I'll send it over to you.

We bled into what part two is. You have strong intake, strong benefits verification. Number two is going to be that explicit financial responsibility agreement. I had a mentor of mine tell me one time, “Confused people don't.” Confused people don't take action. Confused people don't follow instructions. They don't behave in the way that is typically in their best interest or in alignment with the goals because they're confused. They're not sure what's expected. They're not sure which way to go. If they did, they wouldn't be confused.

The only way for you to unconfuse them is through education. As confusion increases, education and orientation must increase so that you can serve them so that they can be unconfused. They can be clear and their expectations can be managed. Some of the best ways to educate your patients are to have a written policy that they can read and also verbally communicate and educate them on that policy. Not only do you want to do that with your misfit policy but also with your financial responsibility. That way it's very clear and very transparent and everybody's on the same page. That's number two. We went through that already.

Number three, is going to be scripts for money conversations and objections. Patients are going to have objections around money, period. They're going to be like, “didn't know that.” Make sure that you have scripting already played out. When I say scripting, it doesn't mean you need to sound like a robot. Make sure that you have some communication that you have prepared during those difficult money conversations. You can use ChatGPT or Claude. They can help you come up with sales scripts or objection handling frameworks. It doesn't have to be complicated.

This isn't like high level sales. It’s just very simple. The main thing is to have a script, have it documented and role play and practice the script with your front desk team. Also, having strong sales scripts during the initial evaluation helps overcome a lot of these money objections on the back end as well. You want to make sure that the front desk has a simple script for explaining patient responsibility for normalizing paying at the time of service. It’s also very key. You want to have some objection handling frameworks for, “I can't pay or I'll pay later,” type things.

Your whole homework here, if there is any. Let's say your homework is going to be to write scripts. You can use AI or modify them the way that you want and role play them. Role play with the team. You probably want it to add to the onboarding process. Part of your onboarding framework with your front desk or your clinicians is going to be two sets aside a little bit of time to roll these things right out the script. Role play the things that are critical to their role. Which is going to bring me to number four which is credit card on file plus auto pay.

I alluded to this in the agreement section. I highly recommend that you have a standard in your practice that you cannot activate a plan of care without a credit card on file. That is an important factor if driving over the counter collection percentage is important to you. If you run a business, I recommend that you make it a priority. You want that card. That credit card will be used for co-pays, co-insurances, deductibles at the time of service if they're not paid in cash. Obviously, your patients can pay in cash but never again will you ever have the excuse of, “I forgot my wallet at home or I can't pay now.”

Credit cards on file will always be the primary payment method. Unless the patient shows up with cash or some other form of payment that they prefer. That's important. The other thing that is important to know. We've all done this thing where we charge patients $10 a visit because that's what we think. That's what the insurance tells us and we come to find out maybe it was only $5 a visit or $15 a visit and they have an outstanding balance at the end of the month. Maybe we're under collecting by a hair. Let's say the patient owes $50 at the end of the month.

That credit card will be used to automatically process any remaining balances after claims are processed monthly. The flow will look like this. At the end of the month, you'll have a process with your front desk. You'll review all active patients who have all of their claims processed with an outstanding balance. Anytime that outstanding balance is discovered, we typically will send out one courtesy email and text message notifying the patient of like, “This is a heads up. This is your current balance. This will close out your account. You're going to be charged in the next 24 hours for this balance.”

Courtesy reminder, then we chart we automatically charge the credit card that's on file and close out the account. Ideally, your patient never leaves your clinic with an outstanding balance. That's the whole goal. That's the whole point. You can review this during the intake process and you want to try to frame this as convenience, if possible. It is convenient. It's convenient for you and for them. They just show up and they pay their credit card. You're not going to be the last person that's going to require that patient to have a credit card on file,

If they go get a gym membership or get a massage, they're going to have to have a credit card on file. That standard should be no different for you and your business as well. Going back to the financial responsibility form. There's language on the top that says, “Upon check-in for every visit.” Let's say, “To ensure transparency and ease of payment, all patients are required to have a credit card on file. The charges for services will be applied to your card upon check in for every visit at the time of service. Cancellations and/or no-show fees and any remaining balances from your insurance company will be charged monthly.”

You can outline the estimated cost per visit, preferred monthly date. There's a section in the middle where you could see credit card information. This is the opportunity for you to manually collect the credit card number, the name, and all the things that are relevant to charge that card. If your payment processor doesn't automatically collect that for you, you have it here. They're going to give you that. You're going to sign it and you have full control of that financial account. Now, you have all the things you need. Everything's even. Everything is square. You have what you need to be successful managing over the counter collections.

That should give you everything that you need to do well. Now, I do want to hit on something important because this is something that I missed for a long time. I didn't start doing this until a few ago but it's important and we usually have a lot of questions around this. It brings me to number five. We're all very familiar with collecting copayments. We're not going to do a full episode on breaking down the difference between a copay and coinsurance.

Collect Fees At The Time Of Service

What I never had a lot of control over was the co-insurance and the deductibles because typically, I would collect co-pays up front. If they had a coinsurance or deductible, I would treat them and then wait for that thing to process, and then try to collect it on the back end. Bad idea. It never works. You're never going to get your money that way. You’re always going to have huge outstanding patient balances. What I want you to do is collect estimated co-insurance and deductibles at time of service. What you want to do here is build an internal fee schedule.

Let's say you're in network with five different insurances. This is just an example for you. You can go back and look at the historic data of those insurance companies. You can create an average revenue per visit, per insurance type, or per insurance plan and you can use that. if you can imagine. Your internal fee schedule will be sitting right there at the front desk. Column A will be all your insurances. Column B would be the internal fee schedule that we use to estimate co-insurance and deductibles based on historical data.

Now that process is not going to be perfect for all you type A people who only do things whenever it's perfect. This is not going to feel comfortable. You're going to have to be okay with 95% accuracy here because obviously, that number will fluctuate slightly depending on the types of units that you build. If somebody stays a little later, a 30-minute visit, versus a 45-minute visit. On average, over a long history, this is probably where you're going to land 95% of the time. I'll give you an example here. Let's say you're going to be working with United Healthcare, which we all can't stand.

Let's say UHC is paying you $60 a visit. You have a patient coming in and, by the way, let's say sometimes they're paying you $55 or $63 or $59. When you run 500 different claims over the course of a year, you see that on average, you land at $60 a visit. Let's say this patient has 25% coinsurance. What you'll do is you'll take $60. Multiply it by 25%, and that's going to give you $15 per visit. You treat that like a copay. Collect the $15 per visit. That's how that works for coinsurance. For deductibles, you know that United Healthcare pays you $60, so you just collect the $60 every visit.

Collect the full amount per visit until the deductible is met, then you can adjust. You're going to ask me, “Adam, what happens if they underpay?” That's why you have the credit card on file and you collect it every month. “Adam, what happens if you overpay?” No problem. Once those claims are processed, let's say you owe the patient $100. It’s just like you would charge them at the end of the month. You would just reimburse them or refund them at the end of every month. You write a check, mail it to them and say, “Sorry, we over paid you $100. Here's your $100.” You'd much rather want to pay overpayments out as opposed to sitting around and being poor.

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