Practice Management Alert

Practices should decide whether they will charge their own collection fee on delinquent accounts. Although Bob Shultz, a representative with Berks Credit and Collection in Sinking Spring, Pa., suggests that practices add interest to overdue accounts to try to recoup expenses incurred in attempting to collect the debt, many practices oppose levying such additional fees, arguing that increasing the amount owed does nothing to motivate nonpaying patients.
 
States have a variety of laws on debt collection and charging interest that may apply to practices planning to add fees on past-due accounts. Some states may have statutory interest rates, allowing creditors to charge interest on past-due accounts up to a specific maximum percentage rate without having an agreement for that fee with the debtor. But, levying a fee up front to try to recoup court and administrative costs of pursuing a bad debt before that debt is adjudicated in court is legally questionable, says Adam Plotkin, JD, who heads his own law firm and is principal and general counsel for Health Care Outsourcing Network LLC in Denver.
 
The federal Fair Debt Collection Practices Act states that a third-party debt collector cannot collect any amount, including interest, fees, charges or expenses incidental to the principal obligation, unless the amount is expressly authorized by the agreement that created the debt. Although creditors, such as medical practices, trying to collect their own debt in their own name are generally exempt from the federal law, collection agencies are not. For a practice to assess and an agency to try to recover a debt and costs of collection, the agreement on the debt and fee must be made before the patient receives services, Shultz says. That agreement could be made through the practice's financial policy. But unless the policy specifically states that the agreement on debt collection and fees is for the services on that day and any time in the future, an agreement on debt and collection fees would need to be signed by the patient at every visit, he says. Practices should check with attorneys for advice on developing such policies.