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Get Tough on Collections


How to be more aggressive -- but fair -- when collecting

Physicians historically have been very timid about pursuing payment from reluctant patients, often writing off balances without doing much more than mailing a few statements. But the time has come to be more aggressive in collecting what you are owed, as rising costs and shrinking reimbursements are eroding the bottom line of many practices.

Start by reviewing the effectiveness of your current collection process, and know how to proceed should you need to contract with a collections agency or an attorney.

Tell patients what's expected

It is surprising how few medical practices have a formal collections policy. It is not something that only larger practices should have. Your staff needs to have a roadmap to follow in dealing with delinquent patients.

A good collections policy should, at a minimum, address the following issues:

  • Time-of-service expectations -- What is your policy about collecting money from the patient at the time they are seen? What if they say they don't have the copay? Do you reschedule them? Do you want to include guidelines for patients who will be paying out-of-pocket for the service? Many practices establish some minimum payment that is expected before the patient leaves the office.
  • Discounts for cash -- A growing number of patients are assuming responsibility for larger portions of their bill. This means that they will be faced with paying your charges. Do you want to offer some discount if they pay promptly?
  • Statements -- How many bills do you intend to send before you initiate a collection action? Tell the patient that you will send a specified number of statements and after that the account will be turned over for collection.
  • Insurance information -- Many times the insurance company will require more information from the patient before they resolve the bill. What will your policy be if the patient fails to submit the requested data? Many practices give patients a set number of days to respond and then the balance becomes their obligation.
  • Collections -- At what point will the patient be sent to the agency or attorney? Will you send only balances above a certain size? Will the patient lose his or her right to be seen at the practice, and, if so, who will communicate this fact? Finally, will the patient be reinstated if they pay their account?
  • Payment plans -- What if the patient requests the ability to pay over time? What will be your expectations about a minimum monthly payment? A growing number of practices set the monthly amount at $50 to $100 or whatever level will satisfy the obligation within 12 months.

New patients should be given a copy of the policy when they register, along with the practice's HIPAA privacy policies and patient registration material, and be asked to sign a statement that they received the documents.

The patient demographic form, which contains the assignment of benefits release and authorization to treat, should also include a phrase that indicates patients agree to pay and will incur the costs of collection, if it becomes necessary. This means you may be able to recover any commission or fees from the patient. It is also wise to post your financial policy on your office's Web site.

Stop the mail!

Many practices do little more than mail monthly statements for extended periods, hoping the patient will suddenly realize their obligation and send a check. However, unless statements are followed up with a call or increasingly firm letters requesting payment, patients quickly recognize that this is a bill they can ignore without consequence. At some point, practices need to stop simply mailing out pleas for payment.

Consider sending two or three statements and one or two letters over a three- or four-month period. Typically your software will allow you to include a message at the bottom of each statement. Phrases such as "Did you forget us?" or "Your payment is delinquent" can provide a reminder that you haven't forgotten. Before you send the account for collection, send a letter that states that you expect payment immediately or else you will initiate collections -- then do it.

Delinquent consumers understand that, while the physician's office can be avoided, agencies and attorneys can damage their credit rating or take them to court.

Realize that when your staff does an excellent job mailing statements, letters, and making follow-up calls, your need to hire a collections agency decreases, and the agency will only end up collecting 15 percent to 20 percent of the accounts referred.

Statements and letters should be followed by a call from the office. Unfortunately, it's often difficult to reach people directly during regular business hours. If possible, have a staff member spend a few hours placing calls, perhaps from 4:30 p.m. to 7:30 p.m. a few days a week.
Attorney or agency?

If you have sent two monthly statements, and have received no response from the patient, it is highly unlikely that you will get paid for your service without formal collections activity. Often the final phone call or letter will show that you are serious, but the likelihood of getting paid diminishes with each statement.

Once you've decided you need outside help, which is better -- a collections agency or a collections attorney? Could you use the services of both? Historically, attorneys have focused on small numbers of accounts, usually with larger balances, and agencies handled larger volumes with smaller accounts. If you are not prepared to go to court and obtain a judgment or lien, an attorney may be more than you need.

Evaluating performance

How do you know whether the resource you choose is doing a good job?

While nobody likes to get a call requesting money, patients will complain if the tactics are too aggressive. Be sure that your agency or attorney understands rules governing the collections process, including the Fair Debt Collection Practices Act (for details, go to www.fair-debt-collection.com), federal privacy rules, and any further restrictions that your state may impose. Any attorney you select must be licensed in your state or the state the patient lives in. If federal or state regulations are not followed, you may lose your right to collect the delinquent sum.

Before you retain an agency or attorney, ask the following questions:

  • How long have you been doing collections and how much of your business is medical? Look for attorneys or agencies with healthcare experience.
  • What is your process? Do you mail letters? If so, how many? Do you make phone calls? When and how many? Do you file reports with credit agencies?
  • What is your performance record? Ask for information on the percentage of revenue collected, specific to healthcare accounts.
  • What are your fees? Most charge 30 percent to 40 percent of the amount collected. Some companies charge by the letter, regardless of the success. Ask about the office's ability to withdraw an account and whether you would have to pay a fee to do so.
  • What type of reports do you issue and how often are they sent?
  • Do you belong to one of the national organizations for collections companies? Do you follow a Code of Ethics? Do you monitor the tactics of your employees?

Finally, get references from your prospective agency or attorney and call them. Ask them to provide you with the names of physicians that use them and for one or two clients that have stopped using them.

Gregory Mertz, FACMPE, can be reached at editor@physicianspractice.com.

This article originally appeared in the February 2005 issue of Physicians Practice.

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