13 Steps to Creating a Sliding Fee Scale for Your Healthcare Practice (Worksheets)

By Adria Schmedthorst  |  July 30, 2017

Whether financial problems have struck or the problem is simply a lack of insurance, you will always have clients that have difficulties in paying for their health services. But where does that leave you? Do you turn a patient away because they can’t pay full price or do you choose to accept a lesser fee in order to provide care to a patient in need?

The answer is up to you. However, if you do decide to offer a discount to patients in need, there are steps you must take to not only protect your practice financially, but also to stay within regulatory guidelines.

One way you can offer a financial break to both low income and self-pay patients is to create a sliding fee schedule. Basically, this type of fee schedule provides a discount based on a family’s income in comparison to the Federal Poverty Guidelines.

Below is the step-by-step process to create a sliding fee schedule for your health practice and help patients get the services they need at a fee they can afford.

Step 1 – Determine Usual and Customary Fees

The first step is to determine what the usual and customary fees for the health services are in your geographic area. For example, fees may range from $90 - $150 per hour in Texas while in New York usual fees could be $140 - $200. You have to do your research. This will give you a baseline to work with when setting up your sliding scale.

Step 2 – Add Up Expenses

Next, you will need to make a list of all expenses involved in running your practice for the period of one year. These should include both soft and hard costs, such as interest expenses for loans, employee salaries, insurance, lease fees, etc.

Step 3 – Set Your Salary

Now, you need to think about yourself. How much do you want to make this year? What will be your take-home salary? Add this number to the total expenses you determined above.

Step 4 – Break It Down

After adding your salary and expenses to come up with the total amount of income necessary to running your practice for a period of one year, divide the number by 12 to come up with the minimum amount of income you need in a month to make your practice successful.

Step 5 – Estimate Client Numbers

Now, you will look at your records for the previous year to determine how many clients you’ve seen in the past 12 months. Take this yearly number and divide by 12 for the average number of client visits you have per month.

Step 6 – Find Your Minimum Fee

Now, divide the minimum monthly income necessary for a successful practice from Step 4 by the average number of monthly client visits in Step 5. This is the minimum fee you can charge for your services and still pay all expenses associated with your practice, including your salary.

You should never charge less than this amount. Some therapists will offer services at a fee less than this in an effort to help their patients. While this goal is admirable, you put your business and livelihood in jeopardy when you do this. And, furthermore, you can’t help patients if you aren’t able to keep your practice up and running.

Step 7 – Set Your Schedule

Using the U.S. Federal Poverty Guidelines, you will determine what fees you will charge based on your patient’s income and the minimum and maximum fees you have determined. This will allow you to create your sliding fee schedule. Patients at or below 100% of the Federal Poverty Level (FPL) will pay the minimum fee you determined while patients above the FPL will pay incrementally more until you reach your maximum set fee based on the usual and customary fees you determined in Step 1.

Here is an example of a sliding scale based on a minimum fee of $30 per hour and maximum fee of $150.

Federal Poverty Level

Fee

<100% FPL

$30

100 – 200% FPL

$70

200 – 300% FPL

$110

>300% FPL

$150

Step 8 – Develop a Sliding Fee Policy

You will now need to develop a written policy to lay out the process by which patient’s will qualify and re-certify for your reduced fees as well as the type of documentation you will require they provide. These can include proof of insurance or lack thereof, proof of income (payroll stubs, tax returns, or unemployment benefits forms), family/household size, proof of residency and more.

Click here to view a sample policy for a sliding fee schedule.

Step 9 – Determine Advertising

Your next step is to decide how you will advertise your sliding fee discount program to your patient population. Will it be posted on your website? Will you have signs in your office?

The following is an example of appropriate signage:

NOTICE TO PATIENTS:

This practice serves all patients regardless of inability to pay.

Discounts for essential services are offered based on family size and income.

For more information, ask at the front desk or visit our website.

Thank you.

AVISO PARA PACIENTES:

Esta práctica sirve a todos los pacientes, independientemente de la incapacidad de pago.

Descuentos para los servicios esenciales son ofrecidos dependiendo de tamaño de la

familia y de los ingresos.

Usted puede solicitar un descuento en la recepción o visita nuestro sitio web.

Gracias.

 

Step 10 – Create Application

Your next step is to set up a system for assessing income and household size for all patients, to assist patients in determining whether they are eligible for your sliding fee discounts. It is important that the eligibility determination process be conducted in an efficient, respectful and culturally appropriate manner to assure that administrative operating procedures for such determinations do not themselves present a barrier to care. Patient privacy and confidentiality must be protected throughout the process.

Click here to view a sample sliding fee discount application.

Step 11 – Set Process for Patients with Insurance

Even patients whose insurance provides coverage for their mental health services may need help with their fees. You will need to set up a process for handling this issue. In such cases, subject to potential legal and contractual limitations, the fee charged for each pay class should be the maximum amount an eligible patient in that pay class is required to pay for service, regardless of insurance status.

For example, John Doe, an insured patient, receives a service for which you have established a maximum fee of $150. Based on John Doe’s insurance plan, his co-pay would be $90. You have also determined, through an assessment of his income and family size that he is at 150 percent of the Federal Poverty Guidelines and therefore qualifies for your sliding fee discount program.

Based on the sample sliding fee schedule above, a patient at 150 percent of the Federal Poverty Guidelines would pay $70. Rather than the $90 co-pay, you would normally charge John Doe; you will now charge no more than $70 out-of-pocket, consistent with your sliding fee schedule, as long as this is not precluded by the insurance contract terms.

Don’t forget to consult with your third party payers and/or private legal counsel regarding the permissibility of discounting patients’ out-of-pocket costs relative to the terms and conditions of your private payer contracts.

Step 12 – Apply Your Sliding Fee Schedule Consistently

Once you have adopted a sliding fee schedule, you must apply it consistently and fairly. You cannot offer it to some clients and not others. One way to ensure the fairness of your administration is to create a form that gathers relevant information such as proof of household income and number of dependents from each patient.

Step 13 – Update and Assess

Update your policy annually to reflect changes in your expenses and income needs as well as changes in the Federal Poverty Guidelines.

It’s also important to assess your patient’s eligibility annually to re-certify their eligibility for the program.

Serving the Needs of Your Patients

The key points you must take away from all of this are to always apply your sliding fee schedule policy consistently across your patient population and that while reducing your fees to better serve your patients can be a valuable tool to help your patients, you must never take less than the minimum you need to achieve practice success. By creating a sliding fee schedule using the 13 steps above, you are helping patients in need of mental health services get the care they need while still maintaining the financial viability of your practice.

 

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