Collecting Debt Collection agencies affect the bottom line

by Joshua Shatz, Custom Collections, LLC

Medical practices, like most small business, successfully develop with hard work, quality services, and determination. As the number of customers and revenue grows, so does the feeling of satisfaction. Unfortunately, so can bad debt.

The financial processes of a business are crucial to the financial health of your business. But handling the finances doesn’t have to be time-consuming. Just as you have the expertise to provide great care for your patients, collection agencies have the same expertise and desire to do great work in collections.

Internal Management of the Collection Process

An alternative to using a collection agency is to use internal staff. Internal collections work best for businesses that have evening hours, given that 5:30–6:30 pm is the best time to reach people at home. Proactive, timely collection practices pay off. Bad debt is far more likely to be collected if the process begins at the 30-day mark. After that, each day can cost money.

To efficiently manage your debt, you must analyze and understand it. Do you understand why your customer has not paid? Is he going through bankruptcy? Does she tend not to pay unless reminded? Did he ever intend to pay? Knowing these answers will help determine your priority for each account and your method for collecting. Customers tend to fall into four categories.

1. Sloppy payers. These generally are good customers who intend to pay but never get around to it. They may eventually pay or they may opt not to pay, reasoning that it is too late to matter.
2. Financially burdened customers. These customers often want to pay but simply are waiting for a better time when they have more money.
3. Dissatisfied customers. They believe they have a legitimate reason not to pay the amount billed, but often are willing to make a partial payment.
4. Customers who never intend to pay.

For each category, some techniques are likely to be more effective than others. For those who never intend to pay, the goal should be recovering the debt. The other categories mostly will include customers who can be retained, which must be considered part of the collection effort.

Benefits to Using a Collection Agency

A good collection agency will understand these customer types and alter its approach for each portfolio, based on effective collection techniques and the style and preferences of the practice. It will provide a number of services, but first and foremost, it should increase your revenue.

In addition, outsourcing the collections of bad debt can be a time-saver for medical offices. By eliminating the tasks associated with collections, office staff can spend their time on more value-added activities, including patient care. Outsourcing also will help in employee retention; many office managers and personnel cite collection of bad accounts as one of their least liked tasks.

Based on their exposure to multiple practices, collection agencies often see a number of best practices which they should be able to share and apply to your practice. They also can prescreen clients for qualification to get credit, and standardize follow-up on billing for unpaid invoices. By working together, you often can prevent bad debt.

How to Select Your Service Provider

To select a collection partner for your practice, answer these questions.

• Do I trust the people I will be working with?
• Did they spend time learning about my patients, my processes, and my approach toward customer service?
• Do they understand the new HIPAA regulations?
• Does this agency understand my business?
• Does it differentiate among customer types?
• Is the agency’s other clients happy with its services?
• Will they treat me as well as I treat my patients?
• How often will they communicate with me about my portfolio? What type of reporting do they offer?
• Will I have to pay anything up front, or is their compensation based on their ability to increase revenue?

As with any service provider, select a collection agency based on trust. Your patients are your most valuable business attribute. You should be comfortable with how the agency treats your patients and how it represents your practice to them.