Patient Cost-Shares: The Pitfalls of Pre-Collecting Payments

Let’s talk about the pitfalls of pre-collecting payments and the challenges of determining patient cost shares. If you run a healthcare practice or handle medical billing, you’ve probably thought about collecting payments before services are rendered.

At first glance, this seems like a smart move—patients have high deductibles, and you want to make sure you get paid so your business stays afloat. But let’s pump the brakes for a second. Pre-collecting payments comes with risks, and if you’re not careful, you could end up issuing a ton of refunds, violating payer contracts, or even getting into legal trouble.

The Hidden Risks of Pre-Collecting Payments

Here’s the deal: insurance benefits change constantly. If you’re not checking a patient’s benefits on the exact day of their appointment, you might collect too much—and that’s where the trouble starts.

If you don’t log into the insurance portal and verify:

How much of their deductible has been met
Their exact co-insurance percentage
What services apply to their deductible or co-insurance
Copay amounts for different visit types (PCP, specialist, urgent care, etc.)

…then you could end up overcharging the patient, and trust me, refunds are a nightmare.

“I’d Rather Refund the Money Than Not Get Paid”—Think Again

Some doctors say, “I’d rather have the money upfront and just refund them later if needed.” Sounds simple, right?

Not so fast. Once you start handing out refunds, you’ll realize just how painful the process can be. Thousands of dollars in refunds add up fast, and if you’re writing check after check, you’ll start feeling the sting.

There are also legal rules on patient refunds. Some states have laws that dictate:

How long you can hold a credit balance before refunding the patient
How quickly refunds must be issued

Plus, your payer contracts might have strict rules against collecting money upfront. If your contracts prohibit pre-collecting payments and you ignore that, you could get into trouble with insurance providers.

Insurance Claims Move Slowly—And That Can Hurt You

Another reason pre-collecting payments is risky? Insurance claims take time to process.

Let’s say you check a patient’s deductible today, and it looks like they haven’t met it yet. You collect a big upfront payment, assuming they’ll owe most of the cost. But here’s what you can’t see:

Other outstanding claims from previous doctor visits
Slow-moving insurance adjudications (especially during the holidays)

By the time your claim gets processed, their deductible might be fully met, and they only owe co-insurance. If you’ve already taken their full deductible amount, you’ve overcharged them and now owe them a refund.

Why Pre-Collecting Payments Can Wreck Your Cash Flow

So we’ve already covered how pre-collecting payments can lead to refund nightmares, payer contract violations, and legal issues if you’re not careful. Now, let’s dive into how insurance complexities make this even worse and what you should do instead.

Not All Insurance Plans Are Created Equal

One of the biggest pitfalls of pre-collecting payments is assuming that every insurance plan works the same way. Spoiler alert: they don’t.

Insurance companies have all kinds of carve-outs, exceptions, and hidden rules that make it nearly impossible to predict exactly what a patient will owe.

For example:

Preventive exams (like annual physicals) are usually covered at 100%—but if you add an E/M code or diagnose something outside of preventive care, the patient might suddenly owe money.
Different CPT codes have different coverage rules. Some services apply to deductibles, while others are immediately covered.
Some claims take longer to process—so a deductible balance you see today might not reflect pending charges from another provider.

This is why pre-collecting the full estimated patient balance is risky. You simply don’t have all the information at the time of service.

Billing Mistakes That Can Cost You Big Time

Another reason pre-collecting payments is dangerous? Many practices assume they should collect based on their billed charges—but that’s completely wrong.

Here’s why:

You bill higher than what you expect to receive because insurance will apply a contractual adjustment.
Patients never owe the full billed amount—they owe the allowed amount set by their insurance plan.
If you collect too much upfront, you’ll owe the patient a refund.

Let’s break this down with an example:

Scenario	Billed Amount	Allowed Amount	Patient Responsibility	Collected Upfront	Refund Owed?
Routine Office Visit	$200	$125	$125 (applies to deductible)	$200	Yes, refund $75
Specialist Visit	$250	$150	$30 copay	$150	Yes, refund $120
Urgent Care	$300	$180	$50 copay + 20% co-insurance	$180	No refund needed

As you can see, if you’re pre-collecting payments based on billed charges, you’re almost always overcharging—which leads to refund headaches later.

A Smarter Approach: Strengthen Your Collections Process

Instead of dealing with the pitfalls of pre-collecting payments, focus on building a rock-solid collections system.

Verify patient benefits the day before or day of the appointment. This helps you get the most accurate picture of what the patient actually owes.
Send statements immediately after claims process. The sooner the patient gets a bill, the more likely they are to pay it.
Offer multiple payment options. Let patients pay online, via text, over the phone, or by mail—the easier you make it, the faster you get paid.
Have a strict collections timeline. If a balance isn’t paid within 60–90 days, follow up with calls, letters, and escalate to collections if needed.

At the end of the day, pre-collecting payments may seem like a good idea, but it’s a risky strategy that can backfire hard. Instead, tighten up your collections process and make it easy for patients to pay when they actually owe money.

How to Avoid The Pitfalls of Pre-Collecting Payments & Optimize Your Revenue Cycle

So far, we’ve covered why pre-collecting payments can backfire, leading to refund nightmares, contract violations, and billing errors. But if you’re running a healthcare practice, you still need a solid payment strategy to keep cash flow healthy.

Let’s talk about smarter alternatives to pre-collecting payments and how you can streamline patient billing without unnecessary risks.

The Key to Accurate Patient Cost Shares: Know Your Allowed Amounts

If you’re determined to collect at the time of service, the smartest way to do it is by knowing your contracted allowable amounts—not your billed charges.

Every insurance company has negotiated rates for each CPT code. If you don’t know what those are, you’ll always be guessing how much a patient actually owes.

Here’s what you should do instead:

Create a fee schedule cheat sheet. Track your top-billed CPT codes and their allowed amounts for each payer.
Train your front desk staff on how to estimate patient responsibility correctly—so they collect the right amount (or as close as possible).
Use real-time benefits verification tools. Many clearinghouses and EHR systems offer integrations that let you check a patient’s benefits instantly.

If you must collect upfront, at least make sure you’re collecting only what’s necessary—so you’re not constantly issuing refunds.

Why a Strong Collections Process Beats Pre-Collecting Payments

Instead of focusing on taking money upfront, your time and energy are better spent on optimizing your back-end collections process.

Here’s what works:

Send Statements Immediately After Insurance Adjudication
- As soon as the insurance processes the claim, the patient should get a bill.
- No delays = faster payments.
Make Payment Stupid Easy
- Patients should be able to pay online, via text, over the phone, or by mail.
- Most people don’t want to call you—let them pay in a few clicks.
Have a Clear Follow-Up System for Outstanding Balances
- If a patient hasn’t paid in 30–60 days, send reminders.
- After 90 days? Start collections efforts. (Phone calls, final notices, etc.)
- Still unpaid? Send to a collection agency—it’s a business, not a charity.

FAQ: The Pitfalls of Pre-Collecting Payments & Determining Patient Cost Shares

Still have questions? Here are some common concerns about pre-collecting payments and determining patient cost shares—answered!

Why is pre-collecting payments risky for my practice?

Pre-collecting payments can lead to overcharges, refunds, and compliance issues. Insurance benefits change constantly, and if you collect based on outdated information, you could end up owing thousands in refunds. Plus, some payer contracts prohibit upfront collections, putting you at risk of contract violations.

What if I don’t want to chase patients for payments later?

Instead of pre-collecting, optimize your collections process. Send bills immediately after insurance adjudication, offer multiple payment options, and follow up aggressively on unpaid balances. A strong back-end collections process is more reliable than guessing patient costs upfront.

Can I collect at least part of the payment upfront?

Yes—but with caution. If you choose to collect upfront, make sure you’re only collecting a portion of the estimated patient responsibility based on allowed amounts, not billed charges. Always check payer contracts first to avoid violating any policies.

How do I find out the allowed amount for services?

Each insurance company sets its own allowable rates for different CPT codes. To get accurate numbers:

Check your contracted fee schedules
Use real-time eligibility and benefits verification tools
Train staff to collect based on allowed amounts, not billed charges

What happens if I overcharge a patient?

If you over-collect, you legally owe the patient a refund. Many states have laws requiring refunds within a certain time frame, and some contracts limit how long you can hold patient credits. Failing to issue refunds on time can lead to compliance penalties.

What’s the best way to get patients to pay their bills?

Make paying as easy as possible by offering:

Online bill pay
Text-to-pay options
Phone payments
Mail-in check options

Also, send statements immediately, and follow up with reminders at 30, 60, and 90 days. If unpaid past 90 days, escalate to collections.

Should I use a collection agency?

If a patient balance remains unpaid after 90+ days, sending it to a collection agency is often the best option. Some agencies even offer pre-collection letters to encourage payment before reporting the debt.

What if my insurance portal doesn’t show real-time deductible updates?

Insurance claims take time to process, so portals don’t always show the full picture. A patient’s deductible status today may not reflect pending claims. This is why pre-collecting payments is risky—you might charge a patient who has actually already met their deductible.

What’s a better alternative to pre-collecting payments?

Verify benefits the day before or the day of the appointment
Send statements as soon as insurance processes the claim
Make payment options easy and convenient
Follow up aggressively on unpaid balances

What’s the biggest mistake practices make with patient cost shares?

The most common mistake? Charging based on billed amounts instead of allowed amounts. Always check contracted rates before collecting, and remember that most billed charges get adjusted down.

Final Thoughts: Don’t Let Pre-Collecting Payments Wreck Your Practice

The pitfalls of pre-collecting payments aren’t worth the hassle. Refunding money is a pain, payer contracts can limit upfront collections, and insurance benefits are unpredictable. Instead of relying on a flawed billing strategy, focus on strengthening your collections process and making it easy for patients to pay when they actually owe money.

At the end of the day, the goal is simple:

Get paid on time
Reduce unnecessary refunds
Avoid compliance issues
Keep patients happy

If you follow these strategies, you’ll boost your revenue cycle without the headaches of pre-collecting payments.