How does a doctor’s practice handle mounting unpaid statements when there is not enough staff to make collection calls? Try hiring an accounts receivable management company who specializes in revenue cycle management.

There are times when a provider of medical services must deal with uncollected debts. The reasons patients do not pay may vary from an unexpected hardship to being an old-fashioned deadbeat patient. It is not something that providers want to think about but it does happen and it’s better to be prepared than surprised.

An occasional unpaid statement can be absorbed as a practice operating expense. An accumulation of unpaid statements, however, cannot and must be addressed. After all, any practice, large, or small is in practice to make money, not to lose it. Being proactive increases your collection rate.

Medical practices usually don’t have the administrative staff or the extra person power to spend countless hours tracking down unpaid statements. Depending on the number of outstanding statements, it may make financial sense to hire an accounts receivable management company to collect the outstanding debts. Generally, the outstanding amount or dollar amount is not the question. The question is do you want to take control of your accounts receivables.

Here are a few things to consider in your search:

1. Look for a accounts receivable management company that works with medical practices. Finding an agency that is familiar with a particular line of practice will prove to be more successful than an agency that is totally unfamiliar with medical operations. Understanding billing and knowing HIPPA are a must.
2. Know your patient. Accounts receivable management companies vary as much as practices do. Look for an accounts receivable management company that specializes in collecting for your type of practice.
3. Consider the collection agency’s collection tactics. Make sure that the company you choose practices Revenue Cycle Management with proactive communications early in the revenue cycle thus ensuring the highest collection rate. If the accounts receivable management company has been successful in collecting outstanding payments by sending letters, ask to review the letter before they are sent out. Ensure the accounts receivable management company is complying with the Fair Debt Collection Practices Act. Additionally, your patient views the accounts receivable management company as an extension of the servicing practice. As a result, a properly worded letter may not only prompt the patient to pay, but it may also salvage the practice relationship whereby the patient may come back to continue to do practice. Tread carefully however. If they were delinquent before, they may be again.
4. Find out about skip tracing. Make sure the accounts receivable management company employs skip tracing. On the occasion when the patient has moved with no forwarding address and has disconnected the telephone, companies can use skip tracing (accessing various databases) to locate the patient.
5. Ensure the agency is licensed in the states for which the patients are located. The last thing any practice would want is to receive the outstanding debt only to find out that it was illegally collected through an unlicensed agency.
6. Verify the accounts receivable management company has Errors and Omissions insurance. This insurance will protect the practice and the accounts receivable management company in the event an unhappy patient sues the accounts receivable management company for tactics used to collect monies on behalf of the practice.
7. Compare costs. Accounts receivable companies earn income based on either a set fee or on a contingency basis. The contingency is based on a percentage of the debts collected. Before choosing whether to agree to a set fee or contingency, find out the collection agency’s success ratio and contingency fee percentage.

Practices face many challenges. Collecting outstanding debts will add to the practice’s bottom-line profits. Other ways to increase the profit margin is to squeeze as much productivity out of a day as possible by utilizing your staff for what they do best, patient care and outsourcing your accounts receivable management to a firm that specializes in revenue cycle management.

There are many reasons why medical practices have issues in collecting their accounts receivables:

• No defined Collection Plan
• Collection tasks are delegated among employees
• Collection is not a priority (common among large practices with positive cash flow)
• Inefficiencies in the billing and / or collection department

Here are some of the causes and actions needed for improvement:

Proper Reporting
Accounts receivable management starts with good accounts receivable and aging reports. Accounts receivables should be separated by insurance companies and patient receivables. There are two different and distinct plans of action to improve outstanding balances.

Patients’ Statements
Too many providers do not send out patient statements timely and consistently.

The 10 day Collection Letter
Instead of sending multiple statements, consider this – send the statement then send a 10-day collection letter showing the patient balance with a note asking for payment. Studies show, sending more than 2 statements and 2 letters is an exercise in futility.

The letters basically send the message to the patient that

• The account is now overdue and your practice is professional and serious about collecting their outstanding debts.
• The practice is understanding and thus is willing to work with the patient to assist with a mutually favorable payment plan if full payment is not possible.
• The patient should call the office to discuss the account. The underlying message of the letters is your practice will pursue a more serious form of collection effort if a patient does not call to setup payment. After 60 days, if the patient has not called the office, the odds are they probably are not going to pay the account without additional incentive. Send these accounts for more aggressive collection action immediately.

Collecting in the office
A major collection-policy goal for a practice should be to collect co-pays and deductibles from the patient who comes to the office for an appointment, unless payment is not allowed by law. You need to conduct a periodic check of the front-desk collection activity to determine if the front-desk employee is collecting the necessary monies.  Remember: If payment is collected at the front desk, it does not become a receivable!

Insurance Claims

• Check insurance claims with the insurance company if older than 25 days
• Research why claims have not paid and when you can expect payment
• Re-file insurance claims immediately if insurance company has no record
• Document all conversations with the person at the insurance company with date and name

Collection options
3rd party collection company - Collection agencies will report debt to the credit bureau which, in itself, is sometimes enough of an incentive to entice the patient to pay. A patient faced with bad credit will often attempt at some point in the future to contact the office regarding settling the delinquent account.

Small claims court - Before filing any court action try a collection agency, the cost is less expensive and time consuming. Most 3rd party collection companies will advise if the debt is large enough and when it is time to file any court action.