In United States, healthcare practitioners face an ever-increasing problem of patients who do not pay their medical bills. If a medical practice works on a 10% profit margin, let’s say 3% of its patients do not pay, then effectively 30% of the net profit is gone.
Collecting money from existing patients is a lot more important than getting new patients. Medical practices of all sizes eventually hire a collection agency to recover money from past-due accounts to minimize their loss.
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Physicians, hospitals and diagnostic labs are grappling with the rise in high-deductible insurance. The in-house staff of medical offices is fed up with being turned into part-time debt collectors. New rules implemented by CFPD effective 11/30/2021 have made debt recovery even more complicated.
Main reasons for non-payment
- Insurance coverage is getting restricted on many more procedures, leaving patients to bear the additional cost.
- The rise in healthcare costs.
- Medicaid cuts.
- Many patients have high deductibles health plans. However, two-thirds of Americans have less than $1000 in savings.
- Medical expenses are usually unforeseen and overwhelming. Sudden outbreaks like the Coronavirus pandemic can financially cripple many Americans.
- Patients often have multiple medical bills because they require more than one procedure for the treatment.
- They may have other bills to pay like Student Debt or Credit Card payments.
- Emergency room visits.
- Your billing system might be too complicated for patients.
|Tip: Debt recovery involves these three services – Collection Demands (Letters), Collection Calls, and Filing a Legal Suit. Collection Letters are incredibly cost-effective and efficient for recovering medical debt. Several patients will pay when they get written demands from a Collection Agency. |
Fact: A medical collection agency makes more money if you directly go for “Contingency based” services like Collection Calls or Legal Suit.
A doctor will save a lot of money by assigning accounts to the Collection letters first, and then transferring “only those accounts” for Contingency based services that did not pay during the Letters service.
How soon can I forward a patient’s account for collections?
Minimizing medical accounts receivables
Large hospitals and individual medical practices suffer from non-payment of medical bills. We will cover the most important steps which healthcare facilities of all sizes should take to minimize the loss incurred due to these delinquent patients.
# 1. The number one rule in medical debt collections is Early Intervention.
Have a plan in place for accounts where payment has been past due for more than 30 days. The majority of patients who have not paid within 60 days are now heading for some intensive follow-up and collection efforts from your staff. However, your employees may not well trained to perform the task of debt collections. They may also not be aware of laws involved while performing the collections activity, risking your practice to lawsuits. Their primary concern should be treating patients.
Better Approach: Hire a medical debt collection agency to do this job. Collection agencies have existed in the United States for decades because you cannot beat their effectiveness, cost, and tactics required to collect money from past due accounts. They can collect money using a diplomatic or and intensive approach. Collection agencies can accept payments in many more ways than you ( Example: Over the phone, Credit Card, Check, Western Union, Online Payments, Installments, etc.). If needed, they can also do insurance follow-up and back-office support to enhance your revenue cycle management.
# 2. Make sure that your “Patient-Doctor Agreement” form mentions that in case the medical bill is 30-60 days past due, this account will be transferred to a collections agency, and all debt collection expenses will be added to it.
# 3. Many of these accounts are not worth your time. You should be concentrating on getting new business. Focus on your core strength i.e., put all your energy into running and expanding your practice. Let a medical collection agency recovering money from these past-due medical bills. An experienced medical collection agency will preserve the reputation of your office and your relationship with the patient.
# 4. A significant portion of your patients may have resources to clear your medical bill right away (or in installments), but they may have other bills too ( credit card, other medical bills, etc.).
The idea is to become the patient’s number one priority, so when your patient decides to make payments finally, you are number one on their list. A medical bill collection agency is an excellent tool to make you their top priority.
# 5. The older an account gets, recovering money becomes a lot harder. It’s possible that after visiting your clinic, your patient has accumulated other medical bills too. Medical debt is a severe problem in the United States, and once a person is trapped, then there are no easy ways out. Recovering on a past-due debt is a lot about being quick.
# 6. It is crucial to hire a collection agency that has vast experience in the field of medical debt collections and knows how to handle angry patients.
#7. All medical debt collectors must undergo training in HIPAA regulations while delivering enhanced collection results. The debt collectors must understand the impact, penalty, and terminology to safeguard the patient data.
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Collection agencies understand the delicate nature of medical collections and attempt to recover money in a way that the doctor-patient relationship remains in good standing. Building a positive relationship also ensures that the problem will not happen again. Collections are done by treating patients with dignity and respect and helping them to understand their responsibility for making payments. A medical debt collection agency will perform advance skip tracing to locate in case the patient becomes untraceable. They should also be in full compliance with new collections rules implemented by the CFPB in Nov 2021.
- Early Out (Optional @30-60 days – First Party Collections)
The first step is to utilize their “1st Party” written demands service. The cost to send five demand letters under your name (or your practice name) is only $15 per patient. Demands are sent weekly for five weeks. They also check if the patient has moved to a new address or if he has filed for bankruptcy recently. In written demands service, the patient is instructed to pay directly to you. You get to keep 100% of the money recovered. Can your staff write 5 perfectly crafted letters for $15? ( plus all the overheads like postal, printing, stationery, infrastructure and employee’s own cost). The real cost associated with in-house collections will roughly come to more than $100 per patient.
- Collection Agency Demand Letters (Recommended @ 60-120 days)
If the patient has not responded to “1st party” letters, send five more letters using “3rd party” written demands service where a collection agency collects money using their name (not your practice name). At this point, your patient knows that this case has been assigned to a professional collections agency, and the situation has become extremely serious now. The likelihood of getting paid increases substantially. You still get to keep 100% of the money collected.
- Contingency Collections (Intensive Collections @120+ days)
If the patient has still not paid, more intensive efforts will be required now. Forwarding these accounts for the Collection Calls service and finally, for the Legal intervention, makes all the sense. In Contingency services, Collection Agencies get paid if they collect, else you incur no cost.
Assign the role to a staff member to execute your new Account Receivables plan. It should not take 20-30 minutes a day.
A medical collection agency will follow a diplomatic, empathetic, yet professional approach to maximize the chances of recovering money.
|Steps to Improve Cash Flow for your medical office ( Read the detailed article here) |
1. Have a Defined Credit Collection Policy
Newer credit scoring models such as VantageScore 4 and FICO 9 give less significance to medical debt, so they don’t impact a score as much as they use to. Medical debts are generally removed once they have been paid off by the patient or by their insurance.
Medical debt collection is the process of recovering overdue medical bills from former or present patients. It is always advisable to communicate with patients in advance the approximate cost of medical treatment and what all is covered by their insurance, and how much can they expect to pay out of pocket. Make payment plans or if your state law allows, take written consent from patients to skip the non-essential treatments or tests, if they are already doubtful about their ability to pay all medical bills. The collection agency will assist in increasing your medical practice profitability.
A Collection Agency near you may not be the best, in fact in medical debt collections, the location of a collection agency does not matter. Do not restrict your search locally.