For Ridgeview Medical Center, using a third-party debt collection agency to recover overdue patient accounts isn’t a luxury. It’s a necessity. “Aged accounts is a numbers game,” says Tony Rinkenberger, Ridgeview’s director of revenue cycle services. Rinkenberger says that collecting balances requires many calls, which in turn requires technology that facilitates high-volume contacts with patients. “This technology is not core to a healthcare provider,” he says, “so it’s best to outsource to those that have the technology and do it well.”
Outsourcing may be the destination, but the debt collection journey – and the patient revenue cycle itself – can be rife with pitfalls. “Urgent care has revenue cycle nuances that require more focus,” says Tom Gavinski, debt collection industry association ACA International board member and ARS National Services vice president, healthcare revenue cycle.
Among those nuances is the necessity of being on top of the self-pay portion of a patient’s charges. “Identify the self-pay for the patient, and get it before they leave,” advises Gavinski. “After they leave, they’ll just as likely forget – or want to forget – about the medical bill.”
Rinkenberger notes that, as the popularity of high-deductible plans has risen, there is a portion of the population that can only afford to pay insurance premiums. “They struggle to fund the HSA that will cover the high deductible,” he says. “These are the balances that end up in collections if not collected at the time of service.”
Gavinski says that, once a patient walks through the door, it’s important to identify her insurance so you can collect her co-pay and determine if she’s met her deductible. Even though they’re imperfect, “insurance verification systems and payment estimator systems are crucial,” Gavinski says. “Do your due diligence and mitigate some of the risk upfront.” Because once the patient walks back out the door, he says, “the odds of getting money decrease.”
Two factors help determine when to turn your accounts receivable over to a collection agency: the resources you have to conduct internal collections and the break-even point for your accounts.
The first decision is whether or not to outsource internal collection work. Rinkenberger says that Ridgeview Medical Center works accounts in house for the first 30 days, and then sends them to an “early out” vendor. These vendors act as first-party collectors, and use the center’s name during the collection process.
According to Gavinski, many urgent care centers “send the account to an outsourcer after 30 days, let them work it for 60 to 90 days, and then move the account from an outsourcer to a bad debt agency.”
The second decision is when to send past due accounts to a third-party collection agency. If an urgent care is not outsourcing first-party collections, Gavinski says, the norm is to work the account in house between 90 and 150 days, though some will turn the account over at 60 days. “My recommendation is to turn it over between 90 and 120 days,” he says.
Choosing debt collection agency vendors involves both financial risk and reputational risk – while working to mitigate both.
Gavinski says that many urgent care centers choose to use one agency for outsourced first-party collections and another for third-party collections. “The concern on the part of urgent care centers is that an agency in both roles won’t initially work the account that hard, and they’ll wait until it rolls over to bad debt and charge a higher fee,” he says. “It depends on the level of trust.”
According to Gavinski, both first- and third-party collections are typically performed on a contingency fee basis. Rates for “early out” collections range from 5 to 12 percent, he says, while third-party collectors charge between 15 and 30 percent. “It depends on the age and type of debt,” he says. “A debt that’s 250 days old is harder to collect than debt that’s 120 days old.”
If you’re in the market for a first- or third-party debt collection agency, price should be one factor, but not the only factor. “Everyone looks at price first,” Gavinski says. “But the best price might not yield the best results.”
Gavinski suggests sending a request for proposal to at least three collection agencies. “It doesn’t have to be elaborate,” he says. “It can be a one-page questionnaire.”
In an age where a tweet from a dissatisfied patient can go viral and where community goodwill is crucial for an urgent care center’s survival, the reputational risk associated with selecting a debt collection agency can’t be overstated. “Patient relations can get touchy with delinquent accounts,” says Gavinski. For that reason, he suggests asking potential vendors about their patient complaint resolution process. “A good agency will have a well-trained staff talking to those patients,” he says.
It’s also important to talk to references. “Ask about an agency’s strengths, weaknesses, and issues,” says Gavinski. “Look for quality issues, compliance issues, and patient relation issues.”
Rinkenberger says that Minnesota-based Ridgeview Medical Center’s early-out vendor is a sister company to their third-party vendor, and that its selection criteria were twofold: that the company was local or had a local presence and that it had a good reputation. Noting that the Minnesota Attorney General has laid out specific requirements for third-party collections, Rinkenberger says, “We need a service that is familiar with these requirements for compliance purposes.”
The Compliance Landscape
A debt collection agency plays a critical role in an urgent care center’s revenue cycle, but the $13 billion debt collection industry is also highly regulated and highly scrutinized. In 2014, the federal Consumer Financial Protection Bureau (CFPB) fielded more than 88,300 debt collection complaints, more than for any other type of financial service.
The primary federal law in play is the Fair Debt Collection Practices Act. According to consumer attorney Sergei Lemberg, “The FDCPA regulates third-party debt collectors by prohibiting certain collection tactics and granting consumers the right to sue collection agencies for violating the law.”
Lemberg notes that the Telephone Consumer Protection Act is another federal law that third-party debt collectors sometimes violate. “When a debt collector uses an automated dialer to robocall a consumer’s cell phone without their consent, the consumer can sue and recover between $500 and $1,500 for each call,” he says.
The original creditor, in this case the urgent care center, is typically not named as a defendant in these types of lawsuits. Nevertheless, Lemberg says, “When a patient sues the collection agency, there’s necessarily ill will toward the urgent care center.”
According to a report issued jointly by the Healthcare Financial Management Association and ACA International, other laws applicable to healthcare collections include the Federal Trade Commission Act, HIPAA, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, and a variety of state laws that address everything from licensing to unfair collection practices.
It’s against this backdrop that Lemberg advises urgent care centers to screen debt collection agencies for robust compliance initiatives. “It doesn’t mean that you shouldn’t collect,” he says. “It does mean that you have to take care to select agencies that are more likely to follow the rules.”
While the regulatory landscape might appear daunting, it’s one that many collection agencies – and urgent care centers – successfully navigate. According to Ridgeview Medical Center’s Rinkenberger, “Our vendor strives to be a ‘no complaint’ program. They have done a good job of this.”
Nuts and Bolts
Once an urgent care center has entered into an agreement with a third-party debt collection agency, the next steps are fairly standard. According to Gavinski, after consensus is reached about what data will be shared, delinquent patient accounts are typically transferred electronically. “It doesn’t have to be complicated,” he says. “It can be a spreadsheet.”
The collection agency will acknowledge receipt of the accounts and send information back to the urgent care center for reconciliation. “It’s important to follow up so that inaccurate information doesn’t go to the patient,” Gavinski says.
The debt collection agency will typically begin collections with a written notification sent to the patient through the mail. “There are so many legal requirements on the national and state levels that it’s the safest and most compliant to mail the first notice to the patient,” Gavinski says. The patient then has 30 days to, in writing, dispute the debt.
Once that waiting period is over, the agency “will start calling and trying to contact the patient through cell phones, landlines, and work numbers if they’re provided,” says Gavinski. The debt collection agency will also send out subsequent notices through the mail. “This will go on for weeks to months, depending on whether they get ahold of the patient or arrive at some payment arrangement,” he says.
If the debt collection agency can’t reach the patient, or if they are unable to get payment, Gavinski says that the agency can take any of a number of courses of action in agreement with the urgent care center. “They can potentially sue them, but they’re not going to do that unless the balance is big enough,” he says. They can also put the debt on the patient’s credit report – or threaten to do so. “You’re doing it as leverage to get them to pay,” he says. If the debt does get reported, Gavinski says, “Now they want to pay to get it resolved and get it off their record.”
Gavinski notes that there are risks associated with reporting medical debt to credit bureaus. “Medical debt reporting is getting scrutiny from the federal government,” he says.
In a report issued in December 2014, the CFPB expressed concern that 43 million Americans have overdue medical debt on their credit reports, the result of third-party collectors reporting delinquent debt to credit bureaus. The CFPB noted that the median unpaid medical debt was $207 and the average $579. The agency reported that these relatively small amounts have a relatively large impact on a consumer’s credit score.
As a result, the CFPB announced measures to hold credit bureaus and debt collection agencies accountable to ensure that the information reported to credit bureaus is accurate. Credit bureaus are required to investigate and take action when creditors and debt collectors have a disproportionate number of disputes. In addition, credit bureaus are required to list the volume of information provided by various industries, and to report those in each industry with the largest number of consumer disputes.
Adding to the Bottom Line
An urgent care center that takes care of business by diligently and accurately collecting co-pays, deductibles, and self-pays at the time of service is undoubtedly a step ahead in the revenue cycle. But when past due accounts accrue, tapping into a debt collection agency’s core competency and technology is sure to be a boon to an urgent care center’s bottom line.
In January 2014, the Healthcare Financial Management Association and ACA International published “Best Practices for Resolution of Medical Accounts: A Report from the Medical Debt Collection Task Force.” The report, which can be downloaded from http://www.hfma.org/Content.aspx?id=21225, includes this infographic of the medical account resolution process.