How to choose (and use) a collection agency

April 7, 2006

If you don't choose a reputable one and monitor what gets sent to collection, you may be very sorry.

As deductibles and copayments soar, you may have noticed that an increasing percentage of your A/R consists of self-pay accounts. If you follow the right procedures, you should be able to collect most of these bills. But it's inevitable that a certain percentage of patients won't pay, even after receiving multiple statements and phone calls. At some point, you have to consider sending these accounts to collection agencies or attorneys. If you don't, you risk losing thousands of dollars.

Here are some pointers on selecting a collection agency and on how to work with the one you've chosen to maximize the recovery of debts you can't collect yourself.

Have your office manager call her counterparts at other practices and ask which agencies they're using. Besides getting feedback on the agencies, this will help you find out which ones specialize in healthcare. That's key, because medical debt collectors have to understand health industry concepts like secondary insurance and coinsurance. They should also be sensitive to doctors' concerns about how they want patients treated.

Should you use a local agency or a national firm with regional call centers? Big agencies stress their technology, infrastructure, and professionalism, while small firms say they're in closer touch with the needs of the local community. While you might get more attention from a small firm that needs your business, an undercapitalized, short-staffed agency might not serve you well. So judge each company individually.

When you're ready to look at agencies, says Jeffrey Denning, a consultant in La Jolla, CA, call three of them, and ask each to send a salesperson over to tell you how the company works and to give you references. In addition to checking their references, have your office manager walk through each agency's office and listen to how its collectors talk to debtors on the phone, advises Sarah Wiskerchen, a Chicago consultant. You should also read the collection letters the agency sends out and make sure they adhere to the federal Fair Debt Collection Practices Act (for details, see http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm).

Checking out an agency's reputation

Naturally, every agency will tell you that it stays within the law and that its collectors are never too aggressive. But lots of consumers complain about debt collectors' tactics, and some of them sue over those tactics.

So how can you make sure that the agency you choose won't harass your patients? It's not easy. One way is to check with the Federal Trade Commission to find out whether it has sanctioned the agency for violations of the Fair Debt Collection Practices Act (call 877-FTC-HELP). But such FTC actions are rare, so you might want to ask your county medical society or hospital whether it's heard any complaints about the agency. If your county court has put its records online, you might also check there to find out how many suits have been filed against the agency, suggests Robert Stempler, an attorney in Ontario, CA. Also make sure that an agency is licensed if you're located in one of the 30 states or three cities (New York City; Buffalo, NY; and Wilmington, DE) that require licensure.