When outstanding patient balances grow out of control, your practice may feel there’s no option but to place them in the hands of a collection agency. Putting debt professionals in charge is the best way to get your payment… right?
Not always. Physicians and practice managers often resort too quickly to the services of a collection agency and end up feeling the choice was a mistake. Learn why, and how, to avoid needing outside collection services – and bolster your cash flow in the process.
Collections Calamities
As you’re hopefully already aware, turning an account over to collections should be done only as a last resort. Even then, don’t expect doing so to recoup the entirety of what you’re owed.
The debt collection industry averages a recovery rate of about 20 percent of delinquent funds according to Harry Strausser III, president of the Mid-Atlantic Collectors Association. Typically, medical collection agencies take 30-40 percent of a collected total as commission – earning you ultimately as little as 12 percent of the balances you place under their service.
Undoubtedly, that amount is better than nothing, but it may also arrive with additional consequences.
“The costs are really high, and the public relations are just horrible,” Elizabeth Woodcock, principal of physician management and consulting firm, told amednews regarding the debt recovery process.
The Federal Trade Commission receives more complaints from consumers about debt collectors than any other industry – 140,036 complaints in 2010.
The issue of collector behavior is more sensitive in healthcare than other sectors, since the bills patients are failing to pay are often for lifesaving care. There’s a prevailing sense that healthcare entities should be cautious and patient when it comes to recovering debt for medical bills and not pursue debtors too aggressively, which can easily happen when an outside company is handling your patient collections.
If you place an account in the care of a collector, you’re entrusting the business to act on your behalf. With that, your reputation is at stake; the collector can easily burn your bridges with your patients, their kin and their colleagues if it represents you poorly.
All the more reason to keep your patient balances from ever getting to the point where aggressive collection efforts are necessary.
Patient Payments
Avoiding collections requires that you get patients to pay their bills in full – up front when possible. That means your staff must be assertive when discussing balances with patients, which is a significant challenge in some offices.
“Because our practice consists of four physicians serving a town of 6,000, we inevitably encounter our patients in our daily life outside of work. It can be difficult to speak frankly with patients who don’t pay because we worry about the awkward interactions that might occur later, for example, at the grocery store or at our children’s school,” wrote Dr. Kristen Dillon in Family Practice Management.
“Nevertheless,” she continued, “since we have invested time, money and effort into the quality of care we provide, it’s only reasonable to expect our patients to recognize and meet their financial obligations to us.”
Making that concept part of your office’s “collection culture” is crucial.
Getting proper payment at the time of service requires that you know what amount is due at the visit. Follow the steps outlined here to know ahead of time exactly what the patient will owe on her appointment date.
When the patient checks in, ask assertively for necessary payment. Train your staff to appropriately answer any cagey patient responses they may encounter; check out the MGMA’s sample patient collection scripts for suggestions.
If a patient still dodges paying at your practice, establish your own internal collections policy, which should involve more than just sending the patient one or two statements per month
When a patient fails to pay a balance within a reasonable amount of time – say, three months – begin following up the mailing of a statement with a call from your office. On such calls, be firm but generous: request payment and offer to set the patient up on a payment plan.
If that doesn’t work after two more months have passed, follow up statements for the next few months with both phone calls and warning letters, which outline the fact that the patient will be completely dismissed from your practice’s care if he or she does not begin paying on the balance by a designated date.
When that date arrives, send off a letter of dismissal that notifies the patient if the account is going to the collections agency. (Click the links to view sample warning and dismissal letters.)
At that point, you have the option to write off small balances as losses if you would rather not deal with an agency – an advisable choice in some cases. Yet if you decide to move into debt recovery with an outside company, make sure to use a trusted, vetted agency. Ask colleagues for referrals before contracting with a debt recovery business and ensure during sign-up that they know exactly how you’d like your accounts to be handled.
It may never be possible for your practice to collect 100 percent of what you’re owed from patients – especially in today’s economy – but implementing firm payment policies is the best way to avoid issues. Tighten up your processes for the benefit of your cash flow.
How do you avoid entering the debt recovery process with patients at your practice?
