Should you offer self-pay discounts?

Read the full discussion in the MGMA Member Community Financial Management Network.

We are a regional multispecialty provider group with only about 2% of our patients self-pay. We have not to this date offered self-pay discounts. What self-pay discount policies do you recommend? 
Anonymous MGMA member

If, as an industry, we want to encourage patient responsibility and freedom to pick doctors, let’s offer them our best price.  – Charles R. Wold, CPA, PFS, MGMA member

Rather than using self-pay discounts, I recommend reviewing your standard fees to make sure they’re reasonable relative to the rates you get from contracted payers.

In some specialties/situations, it might make sense to offer discounts for full payment at time of service (if that isn’t the norm), but I try to set fees so that after the prompt pay discount, the rate paid is comparable to the best contracted rates.
David L. Smith, FACMPE, MGMA member, executive and  advisor, Lawrence, Kan., david.smith@radexec.com

Before setting a direct or self-pay discount, please be sure you’re happy with your master fee schedule.

Once establishing that, look at your highest payer, the percentage of Medicare, awareness of cost and compare to your standard master fee schedule.

Approaching it from different directions will help you create a pattern with which you’re comfortable: a blend of covering your costs and realizing a profit along with giving your patience a substantial discount.

If you are looking at standard percentages from your master fee schedule, I have seen everything from 20% to 50%, most typically 30% or 40% ... with 30% off visits and 40% off procedures. 

You know your patient population better than anybody else, and I think you can quickly come to some numbers you’re happy with. 
Susan Childs, FACMPE, MGMA member, president,  Evolution Healthcare Consulting, Rougemont, N.C., schilds@evohcc.com

Self-pay discounts should reflect the fact that the patient is paying in full at time of service and there is no practice expense for filing a claim and collecting from insurance. I suggest a self-pay rate slightly above Medicare, which in some parts of the country is the equivalent of the best payer but in most is not.
Mary Pat Whaley, FACMPE, CPC, MGMA member, co-founder and president, Manage My Practice, LLC,  Morrisville, N.C., marypatwhaley@gmail.com

We recommend having a standard fee schedule that is higher than your highest contract, which allows room for possible higher reimbursements. This is a simple way to measure productivity and gross collection ratios among payers and time periods and providers. 

Cash paying patients are the best (if they pay). No pre-authorizations, no third party contracts, no special billing. So if the self-pay patient pays at time of service, why not discount to your best rate? While this might not turn the tide, let’s try to give the self-pay who is willing to promptly pay our best price and encourage the behavior.

… If, as an industry, we want to encourage patient responsibility and freedom to pick doctors, let’s offer them our best price. We also need to educate them that the physician part of the cost is a small part of the cost of healthcare.
Charles R. Wold, CPA, PFS, MGMA member, business consultant, Wold Consulting PC, Phoenix, chuck@askwold.com

There are a variety of technical approaches to determine whether or not to give a discount and how much. Our reality was that many of our charges are obscenely high, driven by other physicians in Manhattan who think they are really worth what they charge based on “Usual and Customary” as published by ZIP code through certain insurance associations. Recognizing that charges have no real relationship to many services, we established a very simple self-pay fee schedule. A person with no insurance, which of course is against the law, is asked to pay a specific rate. We make our rates global since we see many injuries (orthopedics). It includes the visit, X-ray and, if there is a fracture, a flat rate based on body part. Of course this does not include hospitalization for surgery. Surgical cases are negotiated individually based on a person’s problem, the Medicare fee schedule and what we believe the service is worth based on our belief of the costs and effort to provide the care. The bot-tom line is a self-pay fee schedule. 

We don’t have too many wind up in the hospital but we have a significant number in the office and the simplified fee schedule is very helpful.
Paul I. Berkley, FACMPE, MGMA member, administrator and chief executive officer, Healthcare Associates in Medicine, P.C., Staten Island, N.Y., pberkley@hms-nj.com

I have not considered a policy of enticing patients to opt out of their network plans/rates. If negotiations were real, the network rate would be fair compensation for a given volume of patients via the network relationship. (You may stop laugh-ing.) So one wouldn’t want to extend that rate (or lower) to solo or any payer that didn’t bring that volume. In the real world, network rates are set with little or no regard to volume (but a practice might not sign an agreement without some expectation of volume), so should the network rate be the lower level of acceptable payment? … I don’t see any value in offering patients an incentive to go self-pay via an opt-out. 
Peter Mertzanis, MHA, MBA, MGMA member, consultant, PM Consults, Langhorne, Pa., membah@mertzanis.com