Effective Collection Practices: How to Make Sure You Are Paid for Medical Services in an Immediate, Professional, and Efficient Manner

Doctors’ offices are one of the few and only places left in our instantaneous consumer society where a customer, the patient, can receive services and goods and not pay for them immediately upon receipt.  In a day of mounting debts and rising expenses, the doctor riskily assumes the role of credit grantor, unless the unusual happens and the patient pays for services in full before he or she leaves the office.  

In an estimated 85 percent of office visits, the patient receives medical services with the good faith of paying later, without the doctor’s staff checking the financial solvency of the patient.  Basically, the doctor is taking a gamble that the patient will pay, at some point, in the near or distant future—an assumption that proves costly for any medical practice.  And, as time passes, the likelihood that the doctor will be paid in full for services rendered frighteningly dwindles while the doctor’s office overhead (rent, payroll, medical supplies, insurance, etc.) continues to grow.  

So, the question for the medical practitioner becomes this:  how can I make sure that I am paid for my services in an immediate, professional, and efficient manner without losing patients?  In this workbook, you will learn the simple tips involved in making sure you are paid by the patient for services you provide.  By 1) teaching their billing staffs and office managers the essential steps to collecting patient payments timely, 2)  detecting the red flags that indicate a risk of non-payment, and 3)  knowing when to call an outside collections agency, doctors can drastically cut down on delinquent accounts and have more time and financial resources available to cultivate their practice. 

This workbook clearly outlines, in a user-friendly manner, the in-office procedures you can follow to get paid for medical services.  Samples of patient forms, letters, and phone dialogue have been provided as appendices for easy reference.  At the end of the workbook, we have supplied checklists to be photocopied and inserted into patient files, then used to keep track of the billing steps followed for each patient, as well as blank notes pages.  The workbook is not only for people new to collections; it also serves as a refresher and reference book for those already handling collections looking to become more efficient and effective in their collection practices.

1) Essential In-Office Steps to Collecting Patient Payment

The grim fact remains that doctor bills are usually placed on the bottom of the pile for most bill payers.  After all, patients are not purchasing a tangible good.  Because of this, doctors and their office staffs must be savvy from the start with patients and collecting money, constantly reflecting upon billing practices to see what is working and what mistakes need to be fixed. 

The following are some of the essential procedures that should be followed in-office, all of the time, to collect patients’ payments: 

Get a completed patient information form, including items such as work and emergency contact numbers (see Appendix A, #1-4)

 The patient information form must be completed in its entirety by every single patient.  Once completed, the office staff should verify the information supplied by the patient before the patient leaves.  Call the provided phone numbers; photocopy the patient’s driver’s license or another form of legitimate identification, social security card, and insurance identification card.  If the patient has not been in the office for over six months, then the patient information form should be filled out again.  It is not good enough for the front desk staff to just ask patients if anything has changed since the last visit, as they might not remember what they put on the form six months ago or more. 

The information on the form should include the following:

  • patient’s full name, date of birth, and social security number
  • full name of the person financially responsible for the account, his or her street address and years living there, phone number, previous street address and years living there, present employer, number of years working there, job position, and the address and phone number of the employer
  • name, address, and phone number of the nearest relative not living with the responsible person or patient and the nature of relation to the patient (especially useful in dealing with an estate situation that could crop up down the road) 
  • name and address of the party who referred the patient
  • name, address, policy type or plan, and policy number of the insurance carrier for the patient or responsible party (photocopy the insurance card every visit or at least once a month) 
  • emergency contact’s name, address, and phone number (helpful if a patient moves or if a phone number is disconnected, as it is another avenue to use to contact him or her). 

Clearly explain the credit and payment policies of your office and get a signed patient financial responsibility agreement or policy (see Appendix B, #1-3)

Before services are rendered for the first time, each patient should be made aware of your office’s credit and payment policies.  You should have a prepared handout outlining specific credit and payment policy details, a copy of which every staff member and patient should receive.  All employees who handle patient payment or billing in any way should be thoroughly educated about payment policy details:  an educated staff acting in unison is key to getting paid for services.  This way, billing staff can explain—in detail—the payment policy to patients at the time of the first office visit.  Subsequently, patients can take home copies of the payment policy that reiterate exactly what the staff already explained.  The handout also can be used as a script to teach office staff exactly what they are expected to say consistently to every patient about credit and payment policies. 

The payment policy should be written in simple, clear terms, thus making patient compliance easy.  It should cover details regarding 1) what payment is expected at the time of service, 2) what methods are available for payment (checks, charge cards, and cash), 3) what billing steps the office follows with various insurance plans (capitated, direct-payment, and deductible, to name a few), and 4) what procedures or circumstances can be paid on a pre-arranged payment plan.  It is a good idea to have each patient sign and date a payment responsibility agreement or policy stating he or she has reviewed and agrees with credit and payment policies.  Also, be sure to get separate, signed financial responsibility agreements or policies from patients who are husband and wife to help eliminate any divorce-related problems down the road. 

Know what information insurance companies expect, such as coding, as well as patient co-pays and deductibles

Dealing effectively and correctly with insurance companies is a huge part of eliminating delayed payments.  Promptly submit insurance claims (on a daily basis, if possible) and be sure to follow up with insurance companies within the first 30 days.   This procedure is beneficial two-fold: It speeds up payment by the insurance company and also maintains patient satisfaction, as patients see you are handling the dreaded task of dealing with the insurance company for them.  

One of the biggest mistakes offices make resulting in denied insurance claims or delayed payment is miscoding, or using the wrong ICD-9 and CPT codes when submitting claims.  Keep coding records up-to-date, be sure all doctors and staff are abreast of the latest codes, and check codes regularly for errors and changes.  

Conduct age analyses for all outstanding accounts, as aging takes a heavy toll on past due accounts

 As indicated in the chart below, chances of recovering full payment seriously decline the longer an outstanding bill goes unpaid: 

Declining Recovery Rates by Age of Account

Source: 2003 Top Collection Market Survey (ACA International 2004)      * Note:  All numbers rounded to the nearest full percentage point.

Source: 2003 Top Collection Market Survey (ACA International 2004)

     * Note:  All numbers rounded to the nearest full percentage point.

Make sure you have billing software that can create a periodic age analysis of every outstanding account, which is helpful in staying on top of your billing.  Accounts should be posted as overdue in 30-day increments (30, 60, 90, and 120 and over past due balances), and it helps to produce spreadsheets to religiously review this information, at least at-a-glance.  This way, you can track past due accounts and immediately know when one should receive a bill or go straight to your collections agency.

Adhere to a consistent patient billing cycle with systematic follow-up

Consistently bill each client with the amount due, and also establish regular contact via letters and phone calls.  Be sure to be brief and firm yet friendly when using either of these media for collecting.  Always ask to speak with or write specifically to the named patient or responsible party and set a firm date by which payment must be received.  Put the patient at ease when communicating verbally or through writing, using the attitude, “What can we do to help you make this payment?”  It shows you care and establishes loyalty, which more often results in payment than using an angry, threatening tone.  Sympathy and a calm demeanor go a long way when collecting money.

The 30-60-90 Day Patient Billing Cycle, as listed below, should be followed exactly: (see Appendix C, #1-4)

  • give the patient a bill upon rendering service if it is agreed the patient will pay for services after leaving the office and if their insurance company isn’t being billed 
  • after insurance has paid their portion and an explanation of benefits (EOB) has been received, immediately send the first mailed statement 
  • if no payment is received within 30 days, a letter and second mailed statement should be sent with a handwritten note on the statement (maintain a copy in the patient’s file)  (see Appendix C, #1)
  • if no payment is received within 15 days, the first phone call should be made and documented in the patient’s file (see Appendix C, #2) 
  • if no payment is received within 30 days after sending the last statement, a letter and third mailed statement need to be sent to the patient requesting payment (maintain a copy in the patient’s file)  (see Appendix C, #3)
  • if no payment is received within 15 days after sending the letter requesting payment, a second phone call should be made and documented in the patient’s file (see Appendix C, #2) 
  • finally, if no payment is received within 30 days after sending the last letter, send a letter and final, fourth mailed statement noting that payment is due within ten days or the matter will be forwarded to a collections agency (again, maintain a copy in the patient’s file) (see Appendix C, #4).  

Systematic follow-up is essential to collecting from patients who owe, and all attempts at collecting money should be documented in writing through keeping photocopies of bills and written correspondences, as well as maintaining patient journals or file notes to document phone calls.  When handling phone calls, please note, it is best to call people between eight and ten in the morning, five to nine at night, and on Saturdays.  And, remember to handle calls firmly yet professionally; keep control or have a professional collector do your calls. 

2) Red Flags Signaling You Might Not Be Paid

Perfecting your billing procedures, improving your rate of collecting patient payments for services, and eradicating overdue balances is an on-going process that requires doctors and their billing staffs to regularly assess billing procedures being used.  You must, over time, see which collection tactics seem to work and which need revamping.  Part of this reflective adjustment process involves learning to quickly identify the red flags, or triggers, which indicate a patient might not pay for services in a timely fashion.  Here are some of the red flags alerting you that payment might not be made: 

  • Returned mail (It is a good idea to put “Return Service Requested” on all of your mailing envelopes.  This way, you will get the party’s new address immediately sent to you by the post office rather than the post office just forwarding your mail to the new address and not advising you of the new address, which could result in a dead end as far as collections go once the forwarding service expires.) (see Appendix D)
  • Disconnected phone numbers 
  • Failure to return calls 
  • Payments stop coming 
  • Patient is deceased (There is a certain time limit wherein you can request payment from the estate, which varies from state to state.) 

3) Choosing the Right Collections Agency

If you have a red flag situation noted above, your office has tried in-house protocol to collect money unsuccessfully for three months, or if it is not cost-effective or within the realm of your staff capabilities to follow the necessary steps to collect money from patients on a regular basis, you need to immediately surrender your past dues to a collections agency.  But, now that you need outside help from the experts in collecting overdue debts, how should you choose a collections agency?

 A good collections agency should have the following: 

  • Specialization in medical collections
  • Contingency-based payment for service
  • Clear, professional collection letters
  • Courteous, effective phone contact
  • Efficient reporting to all three credit bureaus
  • Proficient skip tracing
  • Expert legal services, handled by an in-house attorney
  • Up-to-date technical capabilities, including paperless document imaging, efficient record keeping and document transmittal; secure electronic collection software, accessible from any computer; customer reports for at-a-glance analysis; a variety of payment methods for collections so that balances can be paid over the phone
  • Proof of licensing and bonding
  • Compliance with state regulations
  • Solid list of referrals
  • Memberships to national collection bureau associations, such as the American Collectors’ Association International 

Collections agencies must follow the legal practices mandated by the Fair Debt Collection Practices Act and cannot use illegal or unduly forceful tactics to collect your money, which could, in the end, reflect poorly upon your medical practice.  After all, some delinquent accounts might be going through a temporary hardship and may, down the road, become responsibly paying patients again, or they might refer your office to family and friends because of the way your office treated them. 

To guarantee your collection matters are handled legally and properly, choose a collections agency with an excellent reputation that has successfully proven to collect past due balances for its clients.  You may want to see referrals from clients they have serviced or go on the recommendation of someone you know who was pleased with their services. The employees of the collections agency should have thorough training and experience to handle every situation appropriately and with tact, ethics, and professionalism.

Some medical offices wonder why they should spend additional money attempting to collect delinquent balances when they already have spent enough time, money, and effort trying to collect on their own.  This is why it is important to choose a collections firm that works on a contingency basis, wherein they receive payment from the doctor only if they collect money from the patient with the past due balance.  Collection agencies also have the capability to report to credit bureaus.  Whereas your field of expertise is medicine, a successful collections agency offers expertise with collections of accounts receivable. 

Despite the all-too-real financial gamble that medical practitioners undertake in their mission to take care of their patients, there are tangible ways to ensure that payment is made in an immediate, professional, and efficient way.  With the framework outlined in this workbook to help you and your staff cohesively employ in-house policies, to watch for warning signs of non-payment, and to choose and utilize an effective collections agency, rendering medical services to patients no longer needs to be a detrimental fiscal risk.  

Sheryl Gambarella has been President of Bureau of Accounts Control, Inc. (BAC) for over 23 years.  Sheryl has over 30 years experience in debt collection.  BAC services over 1600 medical facilities a year and the company is constantly working with their clients to collect the most money possible.  

Sheryl has been an industry leader in the collection of medical accounts for many years and sits on many Board positions in her community, women organizations and is Vice President of the New Jersey Association of Collection Agencies. 

In 2003 Sheryl was awarded Women of the Year by the Monmouth Chapter of New Jersey Associations of Women Business Owners and was a finalist for the Greater Medical Newspapers Greater Women of Central New Jersey Award in the business category.  In 2006 Bureau of Accounts Control was named Business of the Year by the Howell Chamber of Commerce.            

Sheryl’s goals throughout her career have been to educate the medical offices throughout the country by teaching them how to keep their AR in check and recovering the most money possible.  Sheryl has always strived to achieve a good self-image of what her company as a collection agency does and also how collection agencies help people in debt and the positive impact the collection industry has on the economy.

 Sheryl Gambarella