Should practices simply send delinquent accounts to a third-party collection agency?
Collection agencies can play a role in effectively managing accounts receivable. However, practices frequently turn to collection agencies prematurely. The proper role of a collection agency is to handle outstanding accounts receivable that have gone through the practic’ses 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 practice’s internal processes are well- designed and followed, then the collection agency should need to collect very little. Sometimes our clients lament that their collection agency isn’t collecting much and thus not doing its job well. Many times we find that is because the practice’s internal collection processes are effective, consequently the collection agency is receiving the most difficult of accounts to work.
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.