Challenges of Collecting Copays

Collecting patient copayments or coinsurance can be challenging, and the difficulty in obtaining copayments often increases if the patient is a Medicare beneficiary. In fact, the most difficult billing problem faced by some O&P practices is collecting copays from Medicare patients. However, although it may be tempting to write off copays for Medicare patients, routinely waiving Medicare copayments is illegal, said Joyce Perrone, practice administrator for DeLaTorre Orthotics and Prosthetics Inc., and co-owner of Promise Consulting.

“It is totally illegal to say, ‘Well, we’ll accept whatever Medicare gives us as payment in full,” said Perrone. “You have to make every attempt to collect that payment.”


Although the routine waiver of Medicare copays can be construed by the Office of the Inspector General (OIG) as fraud and may violate anti-kickback statutes, one exception seems to be universally recognized — the copayment can be forgiven in consideration of a particular patient’s financial hardship. Unfortunately, though, there are no specific Medicare rules to guide clinicians on how to determine when it is acceptable to waive copays, leaving practices to establish their own guidelines for handling such situations.

Documenting Financial Hardship

Before waiving copays for Medicare patients, a good faith effort to collect the payment must be made, and if a patient cannot afford to pay, the patient must provide proof that he or she cannot financially meet the copay, said Perrone. For Perrone’s practice, such proof usually consists of a signed financial waiver indicating the patient’s income.

“Generally, we request a W2 or a copy of their Social Security Insurance benefits — something that is going to prove they are not financially capable of paying that copay,” said Perrone.

The financial waiver is kept in the patient’s file, and the debt is removed from the patient’s account as well as the practice’s accounts receivable. The debt can then be written off as an uncollectible debt that was on the patient’s account rather than as a Medicare write-off, said Perrone.

A recent item in the MOASC News Briefs, a monthly publication for the Medical Oncology Association of Southern California, noted that federal prosecution for “occasionally forgiving copayments for patients who genuinely can’t afford to pay them” is unlikely. However, the practice of regularly promoting waivers or telling patients they do not have to pay their copays may result in prosecution. Moreover, the article recommended that practices should document waiving a patient’s copay for financial hardship, and it also suggested noting what criteria were used for determining that the patient could not afford to pay.

One company, Expert System Applications Inc., noted that “Providers, practitioners or suppliers may forgive the copayment in consideration of a particular patient’s financial hardship.” However, according to the company’s Web site, this exception “… should be used occasionally to address the special financial needs of a particular patient. Except in such special cases, a good faith effort to collect deductibles and copayments must be made.”

Although a “good faith effort” to collect copays is open to interpretation, Expert System Applications’ Web site noted that documentation of a patient’s financial hardship may be required by the OIG. Further, such documentation normally consists of “repeated attempts of billing and related collection behaviors by the provider.”

Finally, before waiving any Medicare copays or deductibles, the Texas Medical Association recommends that clinicians have policies in place regarding such waivers. A practice tip on the Association’s Web site suggested that such policies include consistent standards for waiving copays as well as an application form for waivers. In addition, the policy should appoint only one person in the practice who can grant waivers and who will also track and document waivers.

10 Steps to Better Receivables

  • Post your copay policy
  • Maintain benefit coordination reconciliation
  • Maintain provider registration/credentialing files
  • Interact regularly with insurance carriers
  • Check contact information/addresses regularly
  • Be willing to create separate accounts
  • Provide a line-item-billing statement
  • Be ready to appeal denials
  • Staff training
  • Use electronic billing

Source: Expert System Applications Inc. Ten Steps To Better Receivables. Available at

Offering Flexible Payment Plans

For Pat O’Connor, office manager for John J. O’Connor, CPO Inc., waiving Medicare copays is not something the practice considers. Instead, she works with patients to arrange flexible payment plans. Consequently, patients often carry a balance and make payments when they can afford to — even if it takes years for them to pay off their balance.

“Most of my patients will give me $5 here, $10 there, and we just carry their balance and continue to carry it,” said O’Connor. “I have a patient who’s been paying for 10 years — that is through several replacement prostheses. We don’t ever say, ‘Well, you don’t have to pay this.’”

O’Connor, who does the practice’s billing herself, noted the biggest problem she faces is collecting copayments from Medicare and Medicaid patients.

“It is difficult to collect a copay because their funds are limited, and Medicaid has recently stopped paying balances for Medicare claims for patients more than 21 [years old] for orthotic and prosthetic services,” said O’Connor.

Before any services are performed, the patient’s insurance information is obtained and verified. Because the practice is a Medicare preferred provider, a lot of claims automatically cross over, and while most of their patients have primary and secondary insurance, O’Connor said she frequently arranges flexible payment plans for Medicare patients who don’t have secondary insurance.

Billing Patients for Copays

O’Connor sends three invoices over a 3- to 4-month period to patients who owe a balance. She noted that most patients who are going to pay their balance will either contact her or send her some money toward their balance during that time.

“I have probably sent three people to the collection agency in the last 5 years,” said O’Connor. “Those are the ones who make absolutely no effort and refuse to contact me; we just plain don’t ever hear from them again.”

Perrone also sends three bills to patients before turning the accounts over to a collection agency. She said sending a patient’s account to a collection agency is a last resort because the success rate for most collection agencies is poor — generally less than 10%.

“You don’t want it to go to collections. A very small percentage of your accounts should go to collections,” said Perrone. “The goal is do it right from the first time you get that phone call from the patient.”

To prevent sending patients’ unpaid bills to collection agencies, billing staff must remain “pretty active on attacking accounts receivable,” said Perrone. If no response is received from patients after one or two invoices are mailed, patients are called regarding their outstanding balance.

“We try to set them up on payment plans. We offer that they pay on a Master Card or Visa. We can give them a discount,” said Perrone. “We try a lot of different things, so we really do try to work with the patient.”

Perrone stressed that every attempt to collect patient copays should be made before a copay is waived or written off.

Increasing Successful Collection

The process for collecting patient copayments begins “the moment the patient walks into your office or the patient has a visit with you,” said Perrone. She noted the first question office staff should ask patients after their personal information has been obtained is, “What kind of insurance do you have?”

“If the patient says, ‘I have Medicare,’ “Who do you have as your secondary insurance?” should be the next question,” said Perrone.

If patients do not have secondary insurance or if the secondary insurance does not cover copays, it should be explained in advance to patients that they will be responsible for any balance not covered by Medicare. If patients indicate they are on a low, fixed income and cannot afford to pay, then they should be told they will need to provide proof of their income before waiving a copay can be considered, said Perrone.

“You want to make sure that everything is done up at the front end,” said Perrone. “I don’t think patients should be surprised.”

Policy Guidelines for Waiving Copays and Deductibles for Medicare Patients

While there are no Medicare rules regarding forgiveness of patient deductibles and copayments, effective policies may include the following features:

  • Consistent and reasonable standards for waiving the copay. These could be based on the federal poverty line, but also check with state public aid agencies or area hospitals. Also, the practice should check annually with waiver recipients to see if they still qualify.
  • A printed application for waivers. The practice may ask the patient to supply such information as sources of income, number of dependents, employment status, and even tax returns. Alternatively, if the bill is small but the patient still needs the copay waived, he or she could write a simple letter making the request.
  • Title of who may grant the waiver. Only one person in the practice should have this authority, such as the billing manager or the practice manager.
  • Documentation. The person responsible for granting waivers should keep a binder with the names of recipients organized alphabetically.

For more information:
Visit the TriCenturion Web site at

Source: Texas Medical Association. TMA practice e-tips: waiving copays and deductibles for Medicare patients. Available at

Staff Training

In addition to training office staff to obtain patients’ insurance information up front, hiring and training billing staff also can increase a practice’s success in collecting copays. Perrone noted that other than bad billing practices, the two biggest billing mistakes she sees practices make are hiring staff who are not dedicated to billing and failing to retain billing staff. Having good staff who stay on top of a practice’s accounts receivable can be crucial to the success of collecting copays.

For instance, Perrone estimated that it costs approximately $20 to send out an invoice. If a practice sends monthly invoices to patients for a $10 balance, the practice is actually losing $10 a month on each account.

“This is where you make those decisions, and you have to watch your accounts receivable,” said Perrone. “I’ve seen people who have been sending a patient a bill for a year and not getting a dime. They are asleep at the wheel, and they are just sending out these invoices blindly — the computer spits them out, they put them in an envelope, they put a stamp on it and they mail the thing every month without paying attention.”

Perrone also said that using an billing agency should always be a last resort. She noted that most billing agencies are not specialized in billing for O&P practices and aren’t familiar with the insurance companies.

Hiring the Right People

Finally, Perrone noted that it ultimately comes down to hiring people with the right personality and then having the right infrastructure in place to help them do their job.

“You want to get good people on your billing staff,” said Perrone. “You want to pay them a good wage. You want to get them trained properly. You want to bring in consultants to work with the staff to train them and to set up protocols for accountability.”

She added that getting good staff to “take care of all the other stuff” allows the practitioner to do what he or she does best — take care of patients.

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