How to Reduce Chiropractic Accounts Receivable Without Using a Collections Agency (or Cousin Larry)

I was on a strategy session call with a new coaching client a few months ago who was so frustrated with the Accounts Receivable in his chiropractic practice that he asked a hilarious question:

“What do I have to do to get patients to pay? Employ my Crazy Cousin Larry to go scream at them until they give me their money?”

John’s silly question had a serious side. He felt he was working way too hard for the money he was making. He knew his A/R was a major source of trouble and he had tried a number of tactics to increase collections without success. And he was now beyond frazzled.

In fact, John’s attempts were exactly the most common knee jerk reactions that chiropractors have when they realize that their accounts receivable is getting out of hand. I explained this to John (who wasn’t surprised thanks to the lack of success) and I will let you in on them so you can avoid the same mistakes. Here they are:

5 Mistakes Chiropractors Make With A/R

  • Not Monitoring the Mess. John’s first mistake (which he owned up to) was that he didn’t really pay a lot of attention to the accounts receivable his chiropractic practice was generating. He has a successful practice and keeps busy so studying his A/R reports really seemed like something he never had time to do…until it became an obvious problem and a big mess to monitor.
  • Trying to fix the wrong problem. Since a growing accounts receivable problem in your chiropractic practice generally (but not always) correlates with a decrease in collections, the well-intentioned chiropractor panics about his declining collections. John attempted to solve this by running ads, reactivation campaigns and tightening the bolts of his Treatment Plans and ROFs to increase visits and services. While an increase in services is always welcome and typically results in increased collections, it does not fix accounts receivable issues. In other words, it fails to address the “root cause” of the collections issue. As John experienced, he got a temporary boost in collections thanks to a bump up in volume but it quickly died down as his campaigns ended. Unfortunately, John was left with his A/R in the same place as before (It can also get worse thanks to increased staff focus on production and lack of focus on collections). The result was the same problem as before: John got more tired as he worked harder and now he felt more deflated as he realized he was giving away a portion of their services due to the fact he can’t properly collect and get paid for what he does.
  • Sending out SOS Statements. John’s next move was to instruct his billing person to send out reams of statements to every patient who owes a balance. Admittedly, she did so much more frequently and ferociously than they’ve done in the past. Like the sailor’s SOS signal, this attempt at least addressed John’s A/R issue and resulted in a small boost in collections. (So, in that respect, he is at least solving the right problem.) Unfortunately, John’s staff found it incredibly labor intensive, it smelled of desperation and it also produced a bit of bad will among his patients. But the worst aspect of this strategy is that it does nothing to prevent the same things from happening again in the future
  • Collections Agency – Because nothing appeared to be working, John’s third move was to send patients to a collections agency. Admittedly, he was extremely hesitant in regards to using a collections agency (and for good reason). His results were unfortunately typical: an incredibly low collections ratio, a painfully high percentage fees charged by the collection agency (50% or more of the collected balance) and an even higher number of patients who were angry or irritated.
  • Forget About It! Having experienced minimal success with collections agencies and having a healthy dose of fear of retribution from patients, John’s final move was a common one: he instructed his billing person to simply write off the balance and pretend to “forget” about it. He felt like a massive failure in the area of collections and he realized that he is setting a dangerous precedent for not paying your bills to his patient. But he felt entirely out of options.

A Corrective Plan for Reducing Your Chiropractic Accounts Receivable 

Rather than rely on the flawed methods mentioned above, John and I install a multi-faceted corrective plan that not only goes after past due balances but paves the way for future payments and reduced A/R. Here’s what we did:

  1. Established Stronger Financial Policies: Like many chiropractors, John used a boilerplate financial policy that he copied from a friend who got it from a coaching group he had been with in the 1990’s. While a dated financial policy is better than none, John’s had no teeth, no specifics and most importantly, no connection to his front desk procedures. In other words, it was just a form that the patient signed.   So we tweaked his policy to give it some well-defined guidelines, trained the staff on the procedures and created a plan for success.
  1. Build in Plan B. Even the best plans and policies fall short or fail, so Plan B is necessary. For John, this included created payment policies that allowed his patients flexibility and payment solutions that ensured he will eventually be paid in full.
  1. Pursue Pre-Collections Sooner. In the past, when everything failed, John let balances brew until they came to a boil and were eventually sent to collections. This was always an uneasy step that was complicated by little success. Instead, we had John utilize a “pre-collections” solution whereby he outsourced past due accounts much sooner but without the penalty of ruining the patients credit.
  1. Final Forgiveness – For some patients who had smaller balances didn’t justify all of the above steps, we installed a plan of sending “forgiveness letters.” Instead of John silently writing off the balance, we provided him with a letter that notified the patient their balance was forgiven. This produced an abundance of good will and, interestingly enough, also increased collections from patients who insisted on paying anyway.

Fast Forward to Final Results

Approximately 6 weeks later, John told me the results of our plan (so far) on one of our coaching calls.

  • At the 15 Day Mark (Post-Plan) – collections had increased by 7%
  • At the 30 Day Mark (Post-Plan) – collections had increased by 18%
  • At the 45 Day Mark (Post-Plan) – collections increased by 24%
  • Pre-Collections Letters produced $3732 in collections in 6 weeks for a 9:1 ROI
  • Forgiveness letters resulted in $288 additional recovered
  • Total A/R – decreased 28% in 6 weeks

Even better, John noted that they have approximately 16 patients now on payment plans which will result in their full balance down to zero and an additional $18,000 once these payments are completed.

Finally, John’s staff is now being proactive and getting patients on payment plans much sooner which will result in the A/R not creeping back up again as in the past!

How to Apply These Principles to Your Practice

Generally speaking, A/R trouble is more often the result of poor procedures and planning on the “front end” than a billing issue on the back end. And the last-ditch effort collections agency is usually a strategy that produces only minimal success (at a price).

Analyze your A/R and what mistakes you’ve been making. Then use some or all of the strategies above to reduce your Accounts Receivable once and for all!

But whatever you do…don’t get Crazy Cousin Larry on the job!