Coding & Reimbursement

Dealing With Uninsured and Indigent Patients

By Suzanne L. Corcoran, COE

Many practices struggle with the question of charges for uninsured and indigent patients. Here are some issues to consider.

Q. How should we establish fees for uninsured patients?

You should use your regular fee schedule for all patients. Do not assume that uninsured necessarily means indigent. A single fee schedule is preferred over multiple fee schedules, because multiple fee schedules can create patient confusion and potential legal liability under federal and state laws.

Q. May we give discounts to cash-paying patients?

Yes, a discount for self-pay is fair and reasonable if it reflects the lower cost of billing and collections when a claim does not need to be submitted to a third-party payer and the patient pays at the time of service. Furthermore, prompt payment reduces the potential cost of bad debt.

Discounts should not be granted to classes of patients, such as "uninsured" or "unemployed." The patient should complete and sign a form that explains the financial hardship. The practice must also make a good-faith effort to verify that the patient is financially needy. Some hospitals check the patient's tax return or pay stubs to find evidence of indigency, but this is uncommon in physician offices.

The Federal Poverty Guidelines are a useful starting point for defining indigency, although not a strict limit. For instance, you might define indigency as 200% of the Federal Poverty Guideline (in 2007, the poverty guidelines are $10,210 for a single person, $3,480 for each additional person in the family and $20,650 for a family of four).

A discount for prompt payment in cash incorporates two ingredients: the time value of money and savings due to lower administrative expense because a claim(s) was not filed. The time value of money is about 1% per month based on prevailing bank interest rates. So if your practice customarily takes 1 to 2 months to obtain payment from a third-party payer, then a discount of 1 to 2% of the amount owed is justified.

The cost of filing a claim is about $10. So if no claim is required, a $10 discount for self-pay is warranted. Do not use a flat percentage discount as it may lead to unreasonable discounts, either too large or too small.

Q. Is there a maximum discount that may be given to an uninsured, indigent patient?

There is no limit. For severe financial hardship, you may elect to provide services at no charge. This is known as pro bono (being, involving or doing professional work donated especially for the public good). However, note that frequent discounting (>50% of all patients) within the population you serve is not advisable because it discredits your nominal fees.

If you know in advance what the charges will be, a deposit may be collected. Do not compromise the care of a patient in need of urgent care. Do not collect more than the anticipated charges.

Q. If the patient does not pay for care, must we send him to collections?

There may be ample reason why you do not wish to pursue collection, such as complete inability to pay for services. Of course, you should follow your regular office protocol to collect on overdue debts. Again, do not assume that uninsured patients will not honor their obligations.

Q. What should we do if the patient subsequently provides evidence of insurance?

Your office's protocol for an insured patient should be activated. If your practice participates with the insurance plan, file the claim as usual and advise the patient that a refund will likely be forthcoming when reimbursement is received. Note that your claim to the insurance company must be for the same amount as your charge to the patient, even if that is less than your usual fee.

If your practice does not accept assignment for this patient's insurance plan, you may either provide the patient with a receipt and let him submit it to the insurer for reimbursement, or file an unassigned claim and advise the patient that payment will be made directly to him. Of course, the amount of reimbursement will probably be less than your usual and customary charge. No refund would be owed to the patient in cases where you are not contracted with the payer. OM