Either extreme ignores how patient accounts differ from one another. Recommendations include “segmenting” accounts into at least three categories:
- Regular billing accounts: Patients who get one statement and pay the bill or call to make an alternative arrangement. They pay on time as promised.
- Delinquent accounts: Stubborn payers who ignore or don’t understand their responsibilities and let medical bills slide until they face serious consequences. They need a nudge— or a couple of nudges—to recognize you are serious about collecting.
- Collection accounts: Patients who really don’t intend to pay their part of the bill. Sometimes your billing staff mistakenly pigeonhole delinquent patients into this category. The few real deadbeats out there require heavy-handed techniques to get them to pay.
This unpublished article comes from two experienced A/R specialists who work for a well- known national collection agency. Their company pioneered and specializes in managing those second-tier delinquent patient account balances. It (as well as competing companies offering similar services) has shown medical practices that there can be a significant amount of collectible revenue hiding in those accounts. It just requires some judicious “mining.”
Effectively pursuing those balances starts with accurately identifying the accounts belonging in this category. That’s easier than you might guess. Patients who don’t respond to initial billing either belong in this segment or in the more difficult collection account group that requires much stronger tactics.
After two or three private statements, an unresponsive patient clearly needs additional attention. You can provide that attention by sending a letter or making a phone call to demand the patient either pay or make acceptable payment arrangements. Of course, doing so costs your practice in terms of employee time, materials, and postage.
As an alternative, you can outsource this “intermediate” collection process to an agency specializing in so-called “soft” collection efforts. Usually for a flat fee per account, the agency will send a series of letters on agency letterhead, directing the patients to contact the practice with payment or to set up arrangements. The agency letterhead adds a little punch to the demand letters.
Most collection agencies accept accounts on a contingency basis, charging you up to half of the collected dollars for its services. A flat-fee arrangement usually costs far less per account, but on the other hand, you have to pay the fee whether you collect anything or not. Still, if you manage the accounts well, you’ll be ahead on the flat-fee basis.
Patients who fail to pay after receiving these letters have shown by their lack of response that they belong in the dreaded collection category. At that point, you’re better off charging the accounts off to a full-blown collection agency for additional efforts up to and including legal action. It’s questionable whether you’ll see adequate payment at this point, so turning the accounts over to a contingency-based firm makes good sense. Consider anything you receive at this point as “gravy.”
Turn accounts over to a contingency agency too soon, and you risk surrendering a good portion of collectible dollars to the agency as collection fees. Using an intermediate effort before the tough guys take over can salvage more money for you. But you still must monitor carefully what kind of return you’re getting for those flat fees you pay. Never treat any outsourcing service as a “set it and forget it” program.