Practice Management Alert

Even with consistent adherence to collection procedures, practices will have some outstanding patient balances they just cant seem to get paid. Instead of writing off the amount owed as bad debt, hiring a collection agency to pursue payment can generate revenue from those past-due accounts.
 
Getting results from a collection agency is a two-way street, says Bob Shultz, a representative with Berks Credit and Collection in Sinking Spring, Pa., an agency with 90 percent of its business in medical collection. The practice needs to have financial policies and collection procedures in place and consistently adhere to them so the agency has the tools it needs to do the job, he says. And the agency needs to devote the staff and effort to pursue payment.
 
One of the biggest problems physician practices have with collecting money is the public-relations issue, Shultz says. As the providers of services, they are limited to how aggressively they can pursue their money, because they have to protect their reputations so patients keep coming to see them. With a collection agency, the doctors are off the hook. If patients complain, the doctors can blame it on the outside agency.
 
Practices have nothing to lose by hiring a collection agency to try to obtain payment. When we send an account to the collection agency, whatever we get from the agency on that account is great because we just figure were not going to get anything, says Bonnie Thomas, CPC, operations director for West Jersey Anesthesia Associates, a 28-physician practice in Marlton, N.J.
 
If you are shopping for a collection agency, Shultz and Thomas recommend the following:
 
1. Experience counts. Collecting owed medical bills is not the same as collecting delinquent credit-card accounts, Shultz says. I can be more aggressive when collecting on a bank account than I can with a medical practice. Although the bank and the medical practice both want their money, the medical practice wants the patient to return, while the bank doesnt want the business if the customer doesnt pay the bills, he says.
 
Thomas adds that the agency also needs to understand how insurance payments work, what part of the bill is the patients responsibility, and the physicians need to protect patient confidentiality.
 
2. Check references. In addition to asking other medical practices to recommend agencies that worked well for them, you should ask the agencies for medical clients you can contact to discuss their experience with the companies, Shultz says. Also, ask the agencies whether they are members of the American Collectors Association (ACA), based in Minneapolis, a trade organization of collection professionals. ACA members are agencies that adhere to a code of ethics promulgated by the association and have access to continuing education through the association.
 
Tip: You can check whether an agency is a member of the ACA through the Internet by visiting its Web site at www.collector.com and clicking on resources.

 
3. Negotiate a contract. Collection-agency fees are negotiable. Most are contingency-based, meaning the agency gets paid only when it collects a delinquent account. Be wary of an agency that charges fees up front, Shultz says. Why should you pay up front to collect money you may have already lost? How hard is that agency going to work to collect your money when theyve already gotten paid themselves? he asks. Most agencies will say, If we collect it, well take a percentage of it. And if we dont collect it, youve spent nothing. Then the question is, how much is that percentage fee. All clients want the lowest possible fee, but they might be sacrificing services for it. 
 
For example, the fee that Berks will accept during negotiations with a medical practice client depends on how accurate and complete the patient information is on the accounts, how old the accounts are and how many accounts the practice turns over to the agency, Shultz says. If I come to your office and see you have six doctors who will give me 150 accounts totaling $300,000 outstanding every month to collect, the accounts are 90 days old, you have the patients complete information, and you can electronically submit accounts to me every month, you are my ideal client, and I will agree to a lower fee, Shultz says.
 
Other items a practice should negotiate in its contract with an agency are how the agency will report its performance to the practice, and who is responsible in the case of negligence by the practice or the agency, says Adam Plotkin, JD, who heads his own law firm and is principal and general counsel for Health Care Outsourcing Network LLC, a medical billing company that handles nondefault self-pay and insurance accounts in Denver.
 
And, have your compliance officer check how the Health Insurance Portability and Accountability Act (HIPAA) may affect the contract. HIPAA requires that certain language be in every contract between an entity covered by the act and the entitys business associates.

 
4. Give complete data. Complete patient information for an agency includes names, addresses, phone numbers at home and at work, itemized statements that show when the services were rendered, how much the services cost, how much the insurance company paid and how much each patient owes.
 
Practices that have done their homework on patient data will help the collection agency better pursue payment of the debt. With that information, I can supply the patients with verification of the debt if they request it, he adds. In his ideal-client example, Shultz says he would agree to a fee of 26 percent, rather than the agencys flat 35 percent for accounts under 6 months old.

 
5. Two agencies are better than one. Thomas agrees that all collection agencies are not the same, and the fees they charge should not be the determining factor in selecting one. She suggests hiring two agencies at once and having them compete with each other. We have two agencies right now. One we pay 40 percent of what they collect, and the other, 25 percent. The agency with the 40 percent fee collects a higher percentage of our accounts. Ask each agency what its liquidation ratio is. The company that charges Thomas the higher fee has a 36 percent liquidation ratio, which is very good for a collection agency.
 
6. Monitor performance. Thomas recommends that practices track collection-agency performance themselves by monitoring what accounts it sends the agency, what the agency is collecting, the dollar amount of the accounts sent to the agency, and the amount of money recovered for the practice. An agency should obtain payment on at least 20 percent of the accounts you give it, Thomas says. The collection-industry average for obtaining payment on accounts is 18 percent, Shultz says.