How Does Medical Debt Collection Work? A Closer Look

medical debt collection

Although total medical debt has declined across the U.S. since the great recession, still an astounding 79 million Americans have medical bills or medical debt problems. This number is why so many medical offices have turned to collection agencies for help with debt recovery.

However, there are many more reasons to hire a medical collection agency, including:

  • You don’t have the resources to do it yourself
  • You don’t understand debt collection laws
  • You don’t have the staff to assist with debt collection
  • Your business needs cash flow quickly

If you’re interested to know how medical debt collection really works, read on to learn more about the process and how it can benefit your business.

3 Step Process to Medical Debt Collection

Due to the delayed collection of accounts receivable for most medical offices, it’s important for businesses in the healthcare to obtain all monies owed as quickly as possible. This is where partnering with a debt collection agency can be of benefit.

Let’s take a closer look at the debt collection process.

1. Unpaid Balance = Bad Debt

Other than a copay, healthcare services are typically billed out to the insurance carrier prior to collecting any dues from the patient. This means the patient might not receive a bill for 30 days or up to months depending on how the billing process goes.

However, collections aren’t based on the number of days outstanding since the date of service.

Once insurance has sent an estimation of benefits and the remainder of the claim is moved to the patient’s responsibility, the patient then has a set amount of time to pay or contact the provider before they are considered past due.

Once accounts are marked as past due, the medical office usually has a process of trying to collect the past due amount by contacting the patient prior to turning the balance over to collections.

After the medical office has exhausted their efforts trying to collect, they mark the past due amount as bad debt. At that time the account is turned over to a collection agency.

2. Medical Office & Collection Agency Partnership

Partnering with a collection agency can save you time and money and provide protection for your business from the Federal Trade Commission laws governing the Fair Debt Collection Practices Act.

This is what the partnership will look like.

The Formal Agreement

When starting a relationship with a collection agency, it’s important to address legal matters first. You will need a formal agreement and to ensure HIPAA privacy laws are addressed in the form of a confidentiality agreement.

Forms of payment will also be discussed in the agreement. Some collection agencies, called debt buyers, will purchase the bad debt from the medical facility at a small portion of the original bill amount.

At this point, the debt is completely owned by the debt buyers. The debt buyers may then go on to add interest or penalties to the past due amount to make a profit.

Other collection agencies, like First Federal Credit Control (FFCC), will work with the healthcare office to collect the debt and then charge the healthcare facility a percentage of each past due amount collected.

The remaining funds collected go back to the healthcare office.

How it Works

After adjusting the unpaid balance off as bad debt, it’s time to send your information to the collection agency.

Here are a few things the collection agency will need from you to get started collecting past due balances.

  • Name of patient
  • Patient’s date of birth
  • Patient’s social security number, if on file
  • Patient’s last known address and phone number
  • Guarantor contact information if patient is a minor
  • Total amount of past due balance to be collected
  • Date of service for past due balance

This information is usually sent in the form of a spreadsheet on a monthly basis. However, you may decide on different terms for your agreement.

Also, more experienced debt collectors have a customer portal that makes the process and communication between you and the collector much smoother.

3. Debt Recovery

Once the past due balance is turned over to a collection agency, it’s the collection agency’s job to obtain payment from the patient.

Collection agencies typically try to contact the patient by calling them and sending collection notice letters. They are also allowed to contact the patient by email or text message.

At some point, the collection agency may report the collection account to the credit bureaus as well in an attempt to get a response from the patient.

What if the patient calls the healthcare office where the bill originated after it’s in collection status?

The collection agency is required to provide certain information to the patient, including the name of the creditor. Because of this, it’s likely the patient will call the healthcare facility where the bill originated to find out more information.

The patient might offer to pay you instead of the debt collector. Depending on your agreement with the debt collection agency, you might be able to collect the amount due and report it to the collection agency. However, the agency is still going to take their payment from the collected amount as well.

Most healthcare offices prefer to have the patient pay the collection agency directly since they are going to get paid regardless of who collects the money.

Choosing the Right Medical Debt Collection Agency for Your Business

When choosing a medical debt collection agency, it’s important to find an agency that is experienced, effective and trustworthy.

If you’re thinking about using a collection agency to collect your facility’s bad debt, First Federal Credit Control (FFCC) might be exactly what you’re looking for.

First Federal Credit Control has been in business for over 50 years helping healthcare businesses from all over to collect on past due accounts.

You can be assured FFCC is on top of all new laws and regulations governing debt collection, and we’re eager to share our experience with you.

Contact us today to learn more about how First Federal Credit Control can help you with medical debt collection.