Q&A: Referring accounts to collections

February 5, 2009
Judy Bee

The author, a practice management consultant with Practice Performance Group in La Jolla, CA, is an editorial consultant to <i>Medical Economics</i>.

When is the right time to refer an account to a collections agency? Generally, is referring accounts to a collections agency worth the time, expense, and effort?

Q: I've been having difficulty collecting payments from some patients recently. When is the right time to refer an account to a collections agency? Generally, is referring accounts to a collections agency worth the time, expense, and effort?

A: After two uncollected bills, the staff should call the patient and attempt to make arrangements for payment. If the patient fails to pay after the first call, make one more call to inform the patient that you have no choice but to refer the account to a collection agency. If the patient is still noncompliant, ask the treating physician for permission to turn over the account to an agency. It is generally worth the trouble for larger account balances, but be sure to factor in the fees you'll have to pay an agency. Collection agencies usually charge a percentage of whatever they collect. These contingency fees range from 20 to 50 percent, although some practice management consultants advise against paying more than 33 percent. If you're providing a large volume of accounts to an agency, you may be able to negotiate a lower rate, but keep in mind that the higher the rate the collection agency receives, the more motivated it'll likely be to collect on your behalf.

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