Receivables management: Hand over your bad debt

A. Have you ever thought about what happens to your accounts once you assign them to a collection agency or attorney? The action taken by third-party collectors on your behalf presents an interesting and complex set of variables.

First, keep in mind that when unpaid patient accounts have been assigned, the patients have been given every opportunity to voluntarily resolve their debt.

Third-party collectors, whose phone collection fees average 35% to 50%, only get paid if they get cash payment, so they have a vested interest in continual pursuit.

Once the collector receives the account, they will validate the debt letter by informing the patient in writing that the account has been assigned to a third party. This letter usually notifies the patient that they have 30 days to dispute the charges. If they do not, the debt is now valid.

The collector will then follow up by phone. The collector must make the patient believe the time for payments and stalling tactics is over. In most cases, the collector will ask for full and immediate resolution of the debt, usually within seven days. Generally, this is non-negotiable and discussions at this point are rather limited.

Collectors want all patient calls to you to be referred back to them. Promises of payment and claims of alleged harassment are among the reasons given by hardcore patients who wish to avoid their obligation to you, the creditor.

If no payment is received, the collector will follow up with phone calls, first to negotiate a payment arrangement, then to find out what the patient is willing to offer.

Generally, collectors will work an account for four months. If no suitable arrangements have been made, the account will be closed.

Keith Lilek is CEO of A/R Allegiance Group. Reach him at klilek@arallegiance.com.