Self-Pay Medical Bills – Pending Credit Legislation – Collection Strategy

by Phil C. Solomon on March 10, 2012

in Collecting self pay deductibles and co pays,Revenue Cycle Outsourcing

Self-pay Medical bills can cause lingering credit pain

The article recently posted at, highlights the growing issue affecting medical providers collecting outstanding self-pay medical bills. A skyrocketing rise in uninsured and underinsured patients has providers reassessing their collection strategy and approach. I believe providers are finally figuring out that being too sensitive with their patients and allowing past due accounts to linger in accounts receivable only exacerbates the situation. At the end of the day, patients get themselves in financial trouble by ignoring medical bills, ultimately negatively affecting their credit status. Providers lose millions by delaying contact with patients early in the billing cycle, then eventually passing accounts over to a collection agency.

More often that not, providers have a broken collection process that trains patients to either be delinquent with their payment or not pay their bills at all. Even with the advent of “patient friendly” statements, patients are confused with the medial billing process and that leads many to ignore their bills until it’s too late.

Self-Pay Medical Bills, and how to collect them is the question. The solution is not necessarily to offer amnesty for small overdue patient accounts which are eventually placed with a collection agency, as a recent bill co-sponsored by U.S. Rep. Heath Shuler, a North Carolina Democrat endorses. This legislation only offers consumers a fall back if they do not stay in contact with the provider and refuse to pay their bill.

So what is the solution? It costs providers a lot to allocate extra labor to collect self-pay accounts, therefore they are apprehensive to spend their limited labor resources to collect small dollar self-pay medical bills when 70% to 80% of their revenue comes from commercial and government payers. Instead of accelerating past due accounts to a collection agency after minimal collection effort, I believe it is more appropriate to invest in a partnership with an outsource provider who is equipped to contact, educate, explain and collect outstanding self-pay medical bills from patients. If this strategy is executed properly, collections will improve, bad PR will be reduced and patient satisfaction will rapidly increase.

One caveat is providers must be willing to work with patients who have legitimate financial issues and allow reasonable repayment plans to assist patients in satisfying their obligations. What do you think?

Here is an excerpt from the article written by Carla Johnson – Associated Press on 3-4-12. Click on the link to read the entire artice:

A growing number of Americans are discovering this unexpected land mine when they refinance or take out a loan. The Commonwealth Fund, a private foundation that sponsors health care research, estimates that 22 million Americans were contacted by collection agencies for unpaid medical bills in 2005. That increased to 30 million Americans in 2010.

People with wrecked credit scores include those who were just trying to resolve a dispute with their insurance company. It includes people owing less than $250. And even after the bill is paid, the record of the collection action can stay on a credit report for up to seven years. That can drag down a credit score and drive up the cost of financing a home.

Most hospitals and physician groups use collection agencies to go after late bills after 60 or 90 days, rather than hiring more staff. It makes financial sense to share the amounts collected with an agency. “If you don’t collect anything, it’s worth zero,” said Richard Gundling of the Healthcare Financial Management Association.

Hospitals started relying on debt collectors in the 1980s, said Chicago-based health care consultant Jim Unland. “When the numbers of uninsured started to grow significantly, hospital financial staffs had the perception they were getting overloaded” with delinquent bills, Unland said. “It became easier to turn these bills over to collection agencies.”

The Affordable Care Act, President Barack Obama’s health care law, bars tax-exempt hospitals from using “extraordinary collection actions” until it has made “reasonable efforts” to determine whether a patient qualifies for financial assistance. But it’s still unclear how that will be interpreted and whether reporting late bills to a collection agency would be considered extraordinary, Unland said.

{ 2 comments… read them below or add one }

Sara March 15, 2012 at 11:16 AM

Phil- very interesting article. We have been thinking a lot about this and even created a white paper that was very popular on how to improve your practice’s self-pay collections. (it can be found on our blog) We also have been pushing our centers to look into Save On Medical, which is a site where referring physicians can send self-pay patients so that they can price shop and pay ahead of time for services online, without sticking the centers with the responsibility of having to collect. Have you seen that site?


Phil C. Solomon March 16, 2012 at 11:51 AM


Thanks for the comment. I had not seen the Save on Medical site until you mentioned it. I looked it up and it is very impressive. Your company, has a very interesting concept. I’ll keep my eye on your success. Best of luck to you!



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