From a collections standpoint, there are three leverages, which “motivate” patients to pay a delinquent bill. The first is the involvement of an independent third party. Collection agencies create a situation where the debtor may or may not know what the collection agency is going to do to collect the debt. I call this the threat of the unknown. This creates an environment, which motivates some account holders to resolve their debt quickly and amicably. The second leverage is the threat of affecting a person’s credit. For those who care about their credit, this can be a huge motivator to resolve their outstanding account. Finally, the third and final leverage to collect a debt is the threat of litigation. A successfully litigated past due account may not only include the initial amount of the debt in the settlement, it could also include interest, court fees and potentially collection fees if it is notated in the agreement the patient acknowledged when the service was rendered (such as a consent form). Once the court has ruled in favor of the provider, wage garnishment and property liens are strategies to collect an outstanding judgment. I am a believer that medical services are paramount to a community’s well being and to limit the leverages a collection agency may use to collect outstanding accounts will hurt the provider and the community in the long run. For many providers, self-pay accounts have increased as much as two or three fold over the past three years. Not doing everything a provider can to collect outstanding A/R takes away from the financial well being of the medical provider, thus reducing the amount of service they can provide the community. Quality medical care does not come without a cost. I recommend providers utilize credit reporting judiciously, and only after the patient has ample opportunity to resolve the debt.

In addition, with the advent of the new Patient Protection and Affordable Care Act (PPACA) requirement, it is critical to be sure the accounts going to a collection agency do not meet a provider’s charity policy. If collection activity is performed by a third party and it is deemed that the account could have qualified for charity, the new legislation’s requirements could put a provider at financial risk. My recommendation is to scan all accounts ready for write off with an automated charity-scoring tool. If providers follow a consistent process for identifying charity accounts, and then writing them off to charity, the risk of running afoul of the new PPACA legislation reduces dramatically. This strategy is a win-win. The provider wins because they can control their bad debt reserves, provide more community benefit and eliminate the possibility of a legislative issue and the collection agency wins because they are collecting on accounts which truly are “collection accounts” thereby reducing the time and effort attempting to collect accounts, which should be deemed charity. For more information on this subject, please contact me at and I’ll send you a copy of the whitepaper titled: Patient Protection and Affordable Care Act (enacted March 23, 2010) Patient Access Strategies – Compliance with Section 501(r).

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