I received a call yesterday from a new business prospect – a medical practice that has experienced rapid growth. They have realized “all of a sudden” a bad debt load of nearly $500,000 and have decided it is time to hire a collection agency.
Much of the bad debt they are holding is well aged, at least over a year old. They have sent numerous statements and have tried to reach delinquent patients by phone. Nothing has worked to get these patients to pay, or even to get them onto a payment plan.
They hired me, but now have decided to send “just one more letter” before turning files over to us. So, in effect, they are going to do one more time the same thing that has not worked month after month.
Why do small business owners wait to turn accounts over to a collection agency? Is is the cost?
The cost of collection to a business is certainly a factor. Doctors agree to take patients with the understanding that once insurance is billed, the patient will pay any costs not covered by insurance. So, when patients do not pay and they have to hire a collection agency, it means that the doctor receives only partial payment since the collection agency takes a percentage of the amount collected.
In reality, a receivable is not real money. It is only an obligation. If the patient does not meet their obligation by paying the bill, the doctor has zero. Zero times any percentage (collection agency fee) is still zero.
Consider a patient account in collections as worthless. You have nothing. Your collection agency will attempt to recover as much as they can. So instead of focusing on how much you are going to lose, consider it lost, and then anything recovered is extra.
Also, if the cost of collections is an issue, there are many ways to reduce the cost, including a strong patient financial agreement.
Do physicians delay collections out of fear of consequences?
Physicians may also fear some sort of retaliation if they refer a patient account to a collection agency. They fear damage to their reputation, loss of business, or even a malpractice suit from patients in collections.
I have never seen anything of the sort happen, and I have been collecting for physicians for years. Now, if you have a patient that is threatening you with a malpractice claim, that is not the account to send to collections.
A doctor once told me that he did not want to gain the reputation of being the doctor who send his patients to collections. I congratulated him, and told him that he had accomplished his goal. He was officially the doctor no one paid, since they realized there was no consequences to not paying.
As to a patient who does not pay you putting a bad review online, do you really think someone is going to admit to the world that they owe money? And, if they do, how credible will their complaint be if it is based on non-payment?
So, while a well-worded collection letter to your patients is a good idea, it should be done early, within the first 90 days. After that time, bring in a collection agency to help you so that you can focus on treating patients.