Cancellation Fees: How and When to Use Them

Before deciding whether or not to use cancellation fees, make sure your office is doing everything i
Before deciding whether or not to use cancellation fees, make sure your office is doing everything i

“A significant portion of no-show patients are habitually irresponsible people,” said Keith Borglum, a consultant with Professional Management and Marketing out of Santa Rosa, Calif.

No one is perfect. Everyone forgets a scheduled meeting now and again. But if you take a moment to look at your practice and analyze who is missing appointments, it's likely a handful of repeat offenders.

So what do you do about these people who are wasting the practice's time and money? More and more, physicians are choosing to implement no-show fees. Here's what you should know before you implement this kind of policy.

The purpose

Cancellation fees are not meant to fully recoup the missed appointment. Their goal is to change patients' habits.

“The purpose is to have patients recognize that this time is reserved for them and there is an expense whether they show up or not,” said Deb Hill, manager at the Atlanta-based The Coker Group. “I think once you've implemented a policy like that, patients become more educated.”

Gray Tuttle, principal at Rehmann's Healthcare Management Advisors in Lansing, Mich., said cancellation fees are justifiable. Not only is there a clear economic loss with a missed appointment, but it is a risk management issue when patients don't review medications or get test results.

“If patients have skin in the game, they will develop better habits in the future,” he said.

First steps

There are a couple of things you might want to do before deciding whether to use cancellation fees. First, make sure your office is doing what it can to reduce the number of no-shows. Something going on internally may be contributing.

The Medical Group Management Association created a blog with 30 ways to reduce no-shows, including providing discounts to patients who make their appointments and have staff place reminder calls before visits.

“Any patient scheduled for anything other than a routine follow-up the next day gets a reminder phone call,” Borglum said.

Are you sending reminder cards, especially for visits that were scheduled a long way out? Do physicians reschedule frequently? Do patients have to wait for an hour in the waiting room for visits? These could all be contributing factors.

“You need to make sure there isn't some underlying cause,” Hill said. “If you have a large increase in no-shows, you need to get to the bottom of what is going on.”

Other options

Borglum said his preference is that offices don't use no-show fees, but Hill has mixed feelings about them. Hill said you have to consider things like your payer mix: if the pay is predominantly Medicaid, you aren't going to collect. Additionally, remember that most patients don't like it. Even if they know about the charge, it may alienate them.

If you don't want to use no-show fees, you might opt for making patients pay in advance. Particularly for visits that take up a large block of time, you could have them remit their co-pay in advance, then put it toward the cost of the claim.

Borglum said fees might backfire and make patients feel justified for missing appointments. If you define a price for your time and they pay it, they won't feel guilty.

Implementation

If you want to implement a no-show policy (or you have one in place, but want to begin enforcing it) the most important thing to remember is communication.

First, make sure patients know why you are doing it. If you are changing or implementing the practice, Hill said, you may want to send out a letter explaining the reason. She recommends telling them that practice costs and no-shows are increasing. Explain why it is important to keep an appointment and how it is detrimental to the practice when they don't.

Borglum recommends “carefully articulating it” in a formal written policy that is given to every patient. Put it in your financial policy that outlines details about insurance, what you expect of patients financially, how you deal with balances and missed appointments. Have patients sign and date it, then renew it annually or if it changes. “If you can couch this one piece in a comprehensive patient financial policy, it diffuses the issue about missed appointments,” he said. “And it is a good, solid business practice to have all policies reduced to writing.”

Use every chance to let patients know about the policy. If someone misses an appointment, place a follow-up call to find out why. Tell them about the fee then and that is should be paid during the next billing cycle. You should have it at the check-in desk and listed on your brochures, appointment cards and billing statements. 

Tuttle said a physician's time for a typical office visit is worth about $60 to $70. Therefore, a fee of $50 is justifiable. If you are going to charge a fee, Borglum said it should be “significant” so patients understand their habits need to be changed. You could charge up to $100, he said.

Cut some slack

One thing to remember is also to give patients some slack, but make sure you stand firm on your policies. Borglum recommends a call on the first absence, a letter and charge on the second and charge or dismissal from the practice after the third missed appointment.

“Make sure you do this each time,” he said. “Someone dismissed from a practice for no shows will likely improve their behavior at another practice and it isn't fair to your other patients.”

And when will you know you need to start implementing fees or dismissal? Tuttle said it's when you start feeling abused. Just remember, there is no measure to tell how successful no-show fees are and you may have difficulty collecting the fees. You also may alienate some patients from the practice.

“But we believe you can manage these issues if the fees are carefully crafted, designed, and properly communicated to your patients,” he said.

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