Practice Management Alert

Question: What are some key things to look for in a new collections agency?

North Dakota Subscriber

Answer: First, you want a collection agency that will clearly explain its procedures. "Understanding the procedures that your collection agency is going to follow through on is important" to the business relationship you will have, says Vincent Gaudio, principal of Collexx Inc., a collection agency in Long Valley, N.J.

Watch out: Many collection agencies offer only simple collection letter-writing services, operating on the premise that a percentage of people will pay right away when they receive a third-party letter, Gaudio says. These letter-writing services may get poor results because the company doesn't provide any follow-up services.

"The collection process is progressive, and different people are going to respond at different points," he says. For more complete collection services and better results, look for an agency that also offers other services, such as follow-up phone calls, skip tracing (to locate patients who change their address) and credit bureau reporting.

What you see isn't always what you get: "Buying collections services is different than any other product or service," Gaudio says. The agency that offers you the lowest percentage price on collections isn't necessarily the best financial choice. For example, if Company A charges 10 percent on everything it collects and Company B charges 90 percent, Company A is going to sound like a much better deal. Right? The catch is the company has to collect the money first. If Company A collects $0 out of $100,000 and Company B collects 100 percent of $100,000, then Company B makes you a profit of $10,000 and is the better choice - even though it didn't look better on paper.

Results are the key: Always ask for a collections agency's collection rate or return rate before agreeing to do business, Gaudio says. Although several factors can affect collection rates -- such as your practice's client base, regional affluence level, and the age and amount of claims being sent to collections -- you need to remember that collection rate, not price of service, is what will help you collect more money. And, ask for the agency's normal collections turn-around time.