Use One for the Money

March 27, 2008

With the current economic downturn, expect your accounts receivable to increase -- maybe dramatically.

With the current economic downturn, expect your accounts receivable to increase -- maybe dramatically. Before the number and size of your accounts grow beyond practice norms, do the following:

  • Run an accounts receivable report. Note the difference between patient- and payer-owed balances. You’d like the largest AR category to be between zero and 30 days old.

  • Run the over-120-days category out to 150, 180, and 210 days. Carefully assess whether patients have been making periodic payments. If not, you may need to turn some accounts over to collections or write them off.

  • Ask yourself the following questions:

  • Is your optimism about your patients’ willingness to pay their bills warranted?

  • What should your practice do about past-due accounts?

  • Can you trust a collection agency to help you?

  • What process should your practice have in place to turn accounts over to a collection agency?

  • How much can you expect a collection agency to collect from your patients?

Why consider a collections agency? For starters, your staff are not professional debt collectors. “Many physicians don’t run the office for a good reason: We’re doctors. Yet, because many physicians don’t want to give up a percentage of their fees, they utilize their staff as collectors,” says Jeffrey Hausfeld, a former otolaryngologist and the current managing partner of FMS Financial Solutions. Some of the problems this thinking can lead to are:

  • Diverting staff from attending to other important office processes.

  • Using staff untrained in compliance issues increases the likelihood of violating HIPAA and the Fair Debt Collection statutes.

  • Keeping bad debts on the books too long because of heavy workloads decreases the likelihood you’ll ever get paid.

Physician reluctance to use collection agencies has waned as patient debts have dramatically increased. But with hundreds of medical collection agencies to choose from, it may not be easy to choose

the

agency that’s right for you. When looking for a collection agency, consider these two important factors:

  • Reputation -- Use a collection agency connected to a law firm, or endorsed by a medical society or organization. This will ensure that the agency uses appropriate collection techniques. You certainly don’t want to alienate patients or violate any laws. Using a reputable agency will also reduce your anxiety about having a third party collect for you.

  • Bang for the buck -- Rates should vary depending on the level of service and age of the request. For example: FMS Financial Solutions charges a small flat fee for claims recovered within 90 days of adjudication and a percentage of collections for older claims.

After you’ve outsourced to a collection agency, don’t dilly-dally with handing over past-due accounts. The longer an account remains delinquent, the harder it becomes to collect. Often, staff will hold off on notifying a physician of an account’s delinquency until it is 90 days overdue. But when you add these extra weeks for the physician to approve collections, you decrease the chances you’ll every collect on the account. Put office procedures in place to avoid such bottlenecks. It is also a good idea to appoint somebody in the billing department to act as a liaison with the collection agency should any problems arise.

Take the time to review accounts that have been sent to collections, and know your agency’s collection rate. In a recent survey my consulting firm conducted, 17 percent of respondents had no idea how much their collection agency actually collected! Taking an hour to review past-due accounts may be the most profitable hour you spend on business issues.

Karen Zupko is a seasoned senior advisor who has been helping physicians to navigate America's healthcare system since 1974. Her perspective stems from more than 25 years of consulting, coaching, and training experience with physicians and those who manage them. She is a member of the American Marketing Association and Women in Communications, and has served on the board of trustees of Chicago's Grant Hospital. Karen is a graduate of the University of Kansas and a Chicago native. You can contact her at kzupko@karenzupko.com.