A doctor should give think carefully before working with a collection agency.
How will it affect your patient relationships? Are their fees worth it? Do they specialize in healthcare clients? These are the type of questions we’ll try to answer in this post.
Here are four steps to consider when making the decision to turn an account over to a collection agency.
Step 1: Be sensitive to public relations
Before you send a patient balance to a collection agency, consider how it will affect the relationship. You should look out for the financial health of your practice, but do so with integrity and respect for your patients.
Is your accounts receivable management clear and consistent? Or do you treat patients differently?
Has your staff been proactive in their communication? Or are your patients unfamiliar with your financial policies?
If you have been consistent, fair, and transparent with your patients, then working with a collection agency is a viable option.
However, a harsh collection policy can negate goodwill built up over the years. I’ve often found that a “soft” approach yields higher collection rates than does taking a hard line.
Step 2: Define your procedure to maximize collection agency recovery
Develop a detailed procedure for working with a collection agency. This includes determining when an account is sent out for collection. This should be based on when the cost of collection is not worth it for your practice.
Working with a collection agency is not cheap. Collection agencies usually charge on a contingency basis – 30 to 50% of the amount collected.
Compare your current agency’s fees to the cost of your internal collection efforts. Is the probability of collection greater with the agency than with your own staff?
Set up a system for referring accounts on a regular basis. For example, this could be every two weeks. This should help minimize the lead time between a decision to refer, and the actual referral date.
Remember that the probability of collection decreases with time. This is especially true if proper follow-up has not been carried out periodically.
Finally, set up a system for notifying the agency promptly of any payment received by your office on accounts they are handling so they do not continue to attempt to collect. And if you decide it is necessary to cancel your account with a collection agency, be sure to do so in writing.
Step 3: Working with the right collection agency
In choosing a collection agency, be sure to assess their experience in dealing with medical practices. After all, you wouldn’t want the agency to use the same techniques for collecting bills from your patients as they use for collecting used car payments.
Does the agency have special policies for handling healthcare accounts receivable? Do they have staff that specializes in medical or dental accounts?
Furthermore, do your due diligence before working with a collection agency. Ask them for names of referral healthcare clients. Contact those practices and ask them if they are happy with the agency.
Other factors to consider in choosing a collection agency include the following:
- Does the agency accurately account for and report all funds collected?
- Does the agency promptly remit all collections?
- Is the agency attentive to public relations considerations?
- Is the agency willing to accommodate your special needs?
Step 4: Evaluate and track progress
Periodically step back to evaluate your collection system and pinpoint problem areas. Keep track of the percentage of patients who pay at the time of service. Do a three-month analysis of the payment history of individual third party payers by recording the number of billings, total days it took to pay each bill, and average number of days before payment.
Analyze your history of sending bills to agencies for collection by determining the average months from time of service to write-off by patient, the average number of calls placed before going to collection, and the percentage of gross dollars collected by the agency.
Also review accounts written off as bad debts. Develop new goals and procedures based on these analyses.
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