Collection agencies can play a role in effectively managing accounts receivable. However, the proper role of a collection agency is to handle outstanding accounts receivable that have gone through the practices’ established internal processes without success.
The cost of employing a collection agency is significant, generally ranging from 20% to as high as 50% of the amount collected.
It is important to understand how an agency will go about collecting delinquent balances. Because an agency represents the practice in the eyes of the patient, it is important to know what the agency will say to patients and what actions it may take to collect outstanding accounts.
Using a collection agency is different than other services. If the office’s internal processes are well-designed and followed, then the collection agency should need to collect very little. The way to test an agency’s effectiveness is to use two agencies, give each a similar blend of accounts, see which one collects more, and use that one.
The more important task, however, is to establish effective internal processes before turning accounts over to an outside collection agency. The internal processes should include a financial policy provided to each patient, in advance, so that expectations are clearly established.
Internal Processes
Most bills should be collected through internal processes. These processes should include the following:
1. Flag charts so that when the patient is scheduled to return to the office, the office staff can speak to them about their overdue account.
2. Send statements as soon as any portion of unpaid patient responsibility is determined. Include dunning messages with monthly statements sent to the patient, and tailored to the age of the outstanding balance.
3. If a patient fails to pay after two statements are sent, send a series of more strongly worded letters. Letters should be in addition to statements so that they stand out. Letters need to go out consistently.
4. If allowed by your state, pursue revenue recapture from individual tax refunds, property tax refunds, and lottery or gambling winnings.