When people go into healing professions, they think about saving lives and relieving suffering. The business side of medicine rarely tops the list of things to learn.
However, to continue helping patients, healthcare providers need to take a realistic approach to the dollars and cents side of sustaining a practice. That includes a strategy for handling the sensitive issue of overdue accounts.
"If you haven't been paid, the general rule of thumb for turning it over to collections is—the sooner, the better. Within 60 to 90 days is the maximum. New debts are much easier to collect than old ones, when the visit is still fresh in the patient's mind and information is easier to access," said Sherri McClain, Vice President of Portfolio Management for Franklin Collection Service, Inc.
Most collection agencies work on a contingency basis. You don't pay unless they collect. However, older debts can increase the contingency rate and reduce the odds of collecting.
"Providers need a user-friendly, but consistent policy," said Dick Williams, President of Healthcare Financial Services LLC. "If patients are having difficulty paying, the most important thing they can do is communicate. Often, a reasonable payment schedule can be worked out within their ability to pay."
McClain added, "We try to approach them and let them know we understand that bad things can happen to good people, but we want to work with them to see if we can find a way to work it out."
Collections agencies sometimes offer contract billing to handle the extra paperwork of arrangements that allow patients to pay off their balances in monthly payments.
"We take care of the billing and followup, providers get paid, and patients can protect their credit," Williams said.
The Legal Side Of Collections
To collect debts, collection agencies use information and communication technologies to locate and contact debtors. Another important advantage they offer is their understanding of federal and state regulations.
"The collections process is highly regulated, and laws vary by state and county," Williams said. "Members of The American Collectors Association should be up-to-date on regulations and the requirements of the Fair Credit Reporting Act. In medical collections, they should also understand HIPPA and the need for sensitivity in patient relations."
In Alabama, the statute of limitations is three years on an open account. However, having patients sign an acknowledgement of responsibility when setting up the account can lengthen that time.
McClain explained, "Where the debtor has acknowledged responsibility, the statute of limitations for collecting debts in Alabama is extended to six years under a contract. Under a judgment, the statue of limitations is ten years, and it can be extended to 20."
If a debtor refuses to pay, the debt can be reported to credit reporting agencies or legal action can be taken. Keeping credit reports clear can be sufficient motivation for some to respond. When there is no response, some agencies send information to credit reporting agencies automatically, and others do so based on how their clients choose to proceed.
Preventing Payment Problems
Medical bills can get into a collection situation because of major illnesses or changes in health coverage or employment. Sometimes, however, it can be a simple case of confusion.
"Patients often think insurance takes care of everything, and they are surprised to find it doesn't," Williams said. "One visit to the emergency room can generate bills from several providers that drop at different times and then have to go through insurance. It can be a while before patients get all the bills and get a clear picture of what they owe."
McClain added, "Patients may think that when they pay the hospital bill that the ER physician and other services are included. When they start getting bills for imaging, pathology and other charges, they may think they have already paid them.
Keeping credit reports clear motivates some debtors to respond. When there is no response, some agencies automatically file reports and others do so as instructed by clients.
"Another issue is that no one really knows how healthcare legislation is going to impact payments. A lot of conversations are going on about it. The best advice is to make sure accounts are in the best possible condition.
"It helps to be proactive by collecting copays up front and verifying that there have been no changes in insurance, employment, address or phone number. As always, it's important to be diligent about get insurance preapprovals.
"The doctors and medical facilities that provide services deserve to be paid fairly for the work they do."