Posted on Nov 8, 2017

Simplifying accounts receivable can only happen after you know the current status of your accounts receivable. There are a couple of numbers or KPIs you can consider when setting a benchmark to accelerate receipt of payment for services and then improve the processes to support that goal.

Compare the status of your current accounts receivable to national benchmarks by the Medical Group Management Association. This can help determine how extensively this accounts receivable is limiting cash flow. A good accounts receivable process may reduce accounts receivable lag time of more than three months old to below the national MGMA benchmarks. According to data from the MGMA, family practices have a median of 1.19 months in A/R, but general surgeons have a median of 1.52 months in A/R. In other words, setting a goal of receiving payment within two months of providing medical services is a reasonable goal for half of practices in the U.S. But you do need to consider your geographic area as well as your payor mix and type of practice. Those factors could shorten or lengthen days in A/R.

Calculating Days in A/R

To calculate the number of days that claims sit in A/R before being paid (e.g. “days in A/R”), you can take your total accounts receivable and divide that by your monthly charges. Then multiply the resulting number by the number of days in a particular month.

Calculating Accounts Receivable Turnover Ratio

Another KPI is your accounts receivable turnover ratio. You can use this to monitor your rate of debt collection and conversion of A/R into cash in a given accounting period. Divide your net credit sales by your average net accounts receivable (the sum of your net A/R at the beginning of the period and at the end of the period, divided by 2).

Compare this figure with past accounting periods to note if you are maintaining collection rates or if collection is lagging. One rule of thumb is that your accounts receivable should never exceed 1.5 times your monthly charges, but this is just a baseline. Accounts receivable of 0 to 30 days is considered current A/R while anything 30 to 60 days out from the date of service should be the list of accounts worked by your staff or billing company. The billing department should either work on collecting payments or setting up payment plans. However, if you notice Medicare claims showing up in the 30 to 60 day mark, that is a red flag to look at resolving payor denial issues.

According to three years of results from the American Medical Association’s Physician’s Practice Benchmark Survey (2012, 2014, 2016), a post-residency physician today is much more likely to work in a small practice. More than 57% of the 3,500 physicians surveyed in 2016 work for practices with 10 or fewer physicians. Only 13% work in practices with 50 or more. Even more interesting, most physicians work for other physicians rather than for a hospital system. In the last two years, hospital acquisitions of practices have flatlined as those systems work to better manage what they have acquired.

Physicians in small practices today are in a great position to innovate on the standards of patient care, use of technology and practice efficiency. The small practice model may even entice more young people to the medical profession once again as they consider the autonomy and equity from owning a practice. By looking at the fundamental systems that support a productive practice — and the tools and specialists available for your success — your practice can be a critical part of this health care renaissance.

Download the Whitepaper: Tips to Simplify Medical Practice Accounting at Small to Mid-sized Practices

 

Cornwell Jackson’s Business Services Department offers a wide range of outsourced financial services to serve small to mid-sized medical and dental practices — including payroll outsourcing and solutions to improve cash flow and productivity. While you focus on care outcomes of your patients, we can address the business side of a healthy practice. Contact us for a consultation or click here to view our whitepaper on medical practice KPIs.

Scott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in auto, healthcare, real estate, transportation, technology, service, retail and manufacturing and distribution.

Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.

 

Posted on Oct 26, 2017

The majority of a medical practice’s Key Performance Indicators (or KPIs) will address Health Care Accounting Processes that add to or take away from revenue. By focusing on KPIs, your practice increases practice efficiency and cash flow. Ultimately, you can see who or what is contributing to productivity and losses.

For example, a focus on Work Relative Value Units (wRVUs) per practitioner will show the true work output of each physician or practitioner — creating an opportunity for setting productivity goals. It can also pinpoint real barriers to productivity. Without the baseline measurement, however, you won’t know if practitioners need to boost productivity or if perhaps the practice is underpricing services. Tracking wRVUs can also tie into appropriate physician compensation measured against national benchmarks, and also if the practice needs to hire more staff to reduce the administrative burden on physicians.

Simplifying Health Care Accounting Processes

KPIs can bring to light operational inefficiencies that make a big difference on cash flow. Tracking “charge entry lag” can show how soon charges are entered into the system after the date of service. You can quickly see that a charge entry lag of even three days can lead to an increasing lag on A/R and cash flow over time.

Tracking patient encounters per day against “no show rates” can indicate a breakdown in the appointment reminder process — rather than assuming it’s a productivity issue. Tracking new patients as a percentage of total visits can indicate practice growth — or a need to increase marketing to new patients. Tracking denial rates by payors can indicate an issue with coding or perhaps a breakdown in the process of collecting accurate patient information at registration.

Best practices dictate that KPIs are reviewed weekly to help practices make improvements over the short-term. This diligence avoids long-term impact on profits. By the time quarterly financial reports come out, it is too late to make adjustments, and you have little more than a historical record to file under “missed opportunities.” Instead, identify the KPIs that are most important for your practice efficiency, and talk to your CPA and practice management software provider about the best ways to track them.

Continue Reading: Simplifying Medical Office Accounts Receivable

 

Cornwell Jackson’s Business Services Department offers a wide range of outsourced financial services to serve small to mid-sized medical and dental practices — including payroll outsourcing and solutions to improve cash flow and productivity. While you focus on care outcomes of your patients, we can address the business side of a healthy practice. Contact us for a consultation or click here to view our whitepaper on medical practice KPIs.

Scott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in auto, healthcare, real estate, transportation, technology, service, retail and manufacturing and distribution.

Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.

Posted on Oct 17, 2017

After working with a variety of physicians and specialty care groups on back-office functions, we have discovered one universal truth: most physicians prefer serving patients than dealing with accounting. However, staffing, processes and collections are critical to a profitable practice. With more physicians working for small practices or for other physicians than ever before, this whitepaper shares tips for simplifying accounting while also making staffing and processes more efficient to support practice profits and physician productivity.

 

In an article I wrote for Magazine this year, one of my key points emphasized the importance of high physician productivity. Physicians who spend increasing time on administrative duties can contribute to more than 50 percent of practice losses. It’s simple math. If they are not billing time for patient care, then they are not billing.

And yet, math (or accounting as we call it) is often what trips up a small to mid-sized practice group on the path to profits. It’s not only the accounting itself, but also the processes and controls in place to manage it. Physician group owners can spend a lot of time worrying over reimbursement from a variety of third-party payor models as well as compliance to support reimbursement, but the building blocks of efficient accounting lie with staffing, processes and accounts receivable. For example:

  • Staffing: If your administrative staff is not trained on reducing cancellation rates or inviting patients to set up a payment plan, these are potential points of loss.
  • Processes: Online scheduling options, automated appointment reminders and online bill pay can all help to streamline customer service and cash flow.
  • Accounts Receivable: Software that combines accounting with your payroll and reporting can help produce reports for partners as well as bankers to review revenue projections and make better business decisions such as the right time to purchase new equipment or buy a building.

We find that streamlined accounting processes on their own can improve practice efficiency and physician productivity. Give your staff the right tools and the autonomy to improve efficiency. Understand your key performance indicators. Track your numbers regularly through simplified reports. Let’s look at a few ways this can be accomplished in a small to mid-sized practice.

Simplifying Staffing Ties to Physician Productivity

Traditionally, physicians groups will hire part-time staff in scheduling and bookkeeping to bookend the practice delivery. The patient gets scheduled, treated and sent a bill. The physicians still wear many hats to oversee the business and also serve patients.

Practice management systems can help to centralize insurance submissions, accounting, billing, payroll and reporting. There are many practice management software solutions available to practices today, and it’s important that these systems are cost-effective, user friendly and compatible with other systems in the practice. Problems occur, however, when administrative employees are not properly trained on all of the tools and capabilities of the system, but also if they don’t understand the goals of the practice.

For example, the three main areas staff should be focused on include:

  • Risk management. Make sure referrals and insurance authorizations are checked at registration and that patient co-pays are collected.
  • Claims management. Make sure all services are billed properly through the system.
  • Make sure that no-shows are reduced through appointment reminders and rescheduling options as quickly as possible.

If you are limited in administrative staffing — which every small to mid-sized practice should be — consider which back-office functions can be outsourced to professionals who specialize in them, including human resources, payroll administration, performance management and even recruitment. Also, there is IT support, legal expertise and medical billing. The right vendors will be efficient and pass along savings through fewer errors, a third-party perspective on best practices and healthier accounts receivable.

As an exercise, tally up the salary and benefits of a full-time equivalent employee to perform an office function correctly — as well as the cost of system upgrades, training, supplies and office space. Then look at the percentage a vendor will charge to handle the function for you.

We are not advocating that you necessarily terminate or reduce your administrative staff. In fact, by freeing up their time to focus more on patient service and follow-up, you will better leverage internal staff to support efficient scheduling and maintaining the office practice management system. They can also promote patient use of any online self-serve tools you have in place or will soon have in place.

Continue Reading: Simplifying Processes in Health Care Practices

 

Cornwell Jackson’s Business Services Department offers a wide range of outsourced financial services to serve small to mid-sized medical and dental practices — including payroll outsourcing and solutions to improve cash flow and productivity. While you focus on care outcomes of your patients, we can address the business side of a healthy practice. Contact us for a consultation or click here to view our whitepaper on medical practice KPIs.

Scott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in auto, healthcare, real estate, transportation, technology, service, retail and manufacturing and distribution.

Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.

Posted on Dec 27, 2016

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Of course, medical practices are also in business to provide a living for the doctors and staff.  Small practices are especially burdened by administration and compliance reporting. It’s important to look for solutions that streamline data collection, but also methods to automate or outsource analysis and reporting.

What we typically see in smaller independent medical practices — on average with 20 or fewer practitioners — is no different than what occurs in other small businesses. The physicians wear many hats to oversee the business and to serve patients. They will hire part-time staff in scheduling and bookkeeping to book-end the practice delivery. A patient gets scheduled, treated and sent a bill.

Well, it used to be that easy.

Federal law and insurance companies have made the business of physician compensation very complex. In order to get paid, practices must jump through many hoops to be considered a preferred provider, agreeing to reduced fees for service, adopting specific systems to monitor patient outcomes and reporting on those outcomes. One of the more recent laws, the Medicare Access and CHIP Reauthorization Act (MACRA), has analysts questioning whether the requirements will lead to more small medical practices selling to large hospital systems in the coming years.

The Centers for Medicare & Medicaid Services (CMS) has been fairly responsive to easing the transition of small practices into the system by 2018. Their vision, however, is for as many as 125,000 physicians to participate in Alternative Payment Models (APMs) by 2018. Medical groups that have half-heartedly adopted EHRs or used them inconsistently to report on quality measures may be challenged to adjust to certified EHRs and updated quality measures.

The bottom line is that practices can no longer rely on a few staff internally to run their practices efficiently and comply with external forces. Practice management systems can help to streamline insurance submissions, accounting, billing, payroll and reporting. There are many practice management software solutions available to practices today, and it’s important that these systems are cost-effective, user friendly and compatible with other systems in the practice.

Several back office functions can also be outsourced to professionals who specialize in them, including human resources, payroll administration, performance management and even recruitment. Also, there is IT support, legal expertise and medical billing. The right vendors will be efficient and pass along savings through fewer errors, a third-party perspective on best practices and healthier accounts receivables.

Take payroll. Keeping up with changes in payroll compliance and customized employee elections can be a time-consuming and costly undertaking in-house. The best outsource payroll providers will identify opportunities for greater security and efficiency such as employee self-serve online portals to download pay stubs or personal tax information.

Perform a cost-benefit analysis of any function you are considering for outsourcing. Tally up the salary and benefits of a full-time equivalent employee to do the job correctly as well as the cost of system upgrades, training, supplies and office space. Then look at the percentage a vendor will charge to do the function for you. A good billing company, for example, can reduce accounts receivable of more than three months old below national benchmarks provided by the Medical Group Management Association. Compare accounts receivable in your practice now to national benchmarks to determine if outsourced bookkeeping could be a hidden source of cash flow — especially if the billing company chosen uses certified medical coders to appropriately code the practice’s work.

What other technologies increase health practice productivity?

Although it’s not usually what most practitioners prefer to focus on, the business bottom line is a huge concern — whether practices remain independent or have M&A as part of their growth or succession plans.

The right key performance indicators (KPIs) may vary by practice, but in general a dashboard program that outlines KPIs can be very effective for practice owners to get a baseline of health for their practice and to discuss areas for improvement.

The best dashboards offer:

  • 12-24 critical core performance indicators that match top organizational goals
  • Information organized for quick and easy comprehension
  • Integration with daily practice management and culture, so that individual physicians get into the habit of monitoring KPIs.

According to a presentation by QHR Learning Institute, one of the biggest sources of practice loss is productivity levels vs. compensation — accounting for 59% of practice losses.

Therefore, it’s not a surprise that the majority of KPIs will fall into the revenue cycle. As measurable indicators, KPIs can include, but are not limited to:

  • Gross charges
  • Net charges
  • Gross/Net collection percentages
  • Work Relative Value Unit per provider (wRVU)
  • Charges per wRVU
  • Collections per wRVU
  • Accounts receivable aging overall and over120 days
  • Charge entry lag
  • Days in accounts receivable by payor
  • Denial rate by payor
  • Self pay balances
  • Bad debt write-off
  • Patient encounters per day
  • No show rates
  • New patients as a percentage of total visits

KPIs like these will ultimately answer the question: Is this a profitable practice?  If the answer is no, there are certainly areas for improvement that can be monitored and measured through a focus on KPIs. For example, a focus on wRVUs per provider will show true work output of each provider and create an opportunity for setting productivity goals. It can also pinpoint real barriers to productivity. Without the baseline measurement, however, physicians won’t know if they need to boost productivity or if perhaps the practice is underpricing services.

Tracking wRVUs can also tie into appropriate physician compensation measured against national benchmarks, and if the practice needs to hire more staff.

KPIs can also bring to light operational inefficiencies that make a big difference on cash flow. Tracking “charge entry lag” can show how soon charges are entered into the system after the date of service. The management team will quickly see that a lag of 3 days can lead to a lag on A/R and cash flow over time.

Best practices dictate that KPIs are reviewed weekly to help practices make improvements over the short-term. This diligence avoids long-term impact on profits. By the time quarterly financial reports come out, it is too late to make adjustments and you have little more than a historical record to file under “missed opportunities.”

Physician Shortages Tied to Cost vs. Compensation

It is no secret that the cost and time to obtain a medical license is less attractive than it used to be. The guarantee of a healthy salary to offset college expenses just isn’t there anymore. The American Association of Medical Colleges projects a 17 percent increase in demand for physicians through 2025, despite higher use of non-physician clinicians, greater use of alternate care settings, delayed physician retirement and changes in payment and delivery systems. Addressing the shortage, AAMC advocated for greater use of technology and more efficient use of physicians and care teams.

Current and future physicians and dentists overall need to recognize the increasing impact of the business of medicine on their practice, but also on their own health and wellbeing. Alarming rates of physician burnout are only adding to the challenges in the industry. It doesn’t necessarily mean that medical students should add more business and finance courses to their demanding curriculum. Like any smart professional, they can leverage technological and outsourced support.

Cornwell Jackson’s Business Services Department offers a wide range of outsourced financial services to serve small medical and dental practices — including outsource payroll processing and solutions to improve cash flow and productivity. While you focus on care outcomes of your patients, we can address the business side of a healthy practice. Contact us for a consultation.

Scott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in auto, healthcare, real estate, transportation, technology, service, retail and manufacturing and distribution. Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.

Posted on Dec 12, 2016

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Everyone has an opinion on improvements in health care, but not everyone witnesses the day-to-day realities of running a health care practice. Particularly for independent practitioners, the vision is to provide a positive patient experience, comply with the newest outcome-based payment programs and leverage technology to reduce expenses. Although patient care may be their strong suit, practitioners who lack support on compliance and technology investments are the least likely to succeed. The future of independents may rest on this three-legged stool, but they don’t have to balance it alone. In this article, we’ll review the trends in patient experience, compliance and technology investments to help health care practices improve their overall business structure.

What is a great patient experience?

According to the International Consortium for Health Outcomes Measurement (ICHOM), there are three tiers of outcome measures that patients truly care about when rating their experience with any health care provider.

  1. Health Status is Achieved or Maintained: Did the patient survive and sustain a degree of health and recovery?
  2. Process of Recovery: How long was the duration of recovery or time to return to other activities? Were there errors, complications or adverse effects during recovery?
  3. Sustainability of Health: Were there recurrences of illness or care-induced illnesses that affected long-term health?

When the outcomes that patients truly care about are reported back into the health care system and used to communicate potential outcomes with new patients, it results in a more informed patient experience as well as an opportunity for health care providers to support improvements in care, according to ICHOM.

Admittedly, these specified outcome measures are very individualized. A patient with diabetes is very different from a patient with poor oral health. However, both patients have the same expectations of recovery and sustained health. They also expect that the physicians they see are communicating with each other to integrate care. The best solution ties to data collection — tracking the patient experience from the start of the encounter through recovery and follow-up care.

Practitioners want the collection of data to be easy and efficient. A primary tool has been adoption of Electronic Health Records (EHR) systems. According to the Office of the National Coordinator for Health IT, adoption rates among physicians are progressing rapidly. That’s due in part to government incentives. However, dental practices have been slow to adopt due to less historic eligibility for cash incentives, cumbersome EHR options and no penalties.

Most EHR systems are not designed to fit dental practice models despite the fact that dentists are open to technology that can make their practices more efficient and profitable. But there are some champions of EHR for dentists such as vendors who are integrating popular electronic dental records systems with secure information transport services. These systems can allow dentists to securely send patient dental data electronically to other medical specialists.

Aside from investing in EHR, practices can implement other low-tech tools to measure the patient experience:

  • Bedside Manner – Ask questions such as, “Is there anything I didn’t ask that you’d like to talk about?” This dialogue helps patients feel more comfortable sharing other details about their health.
  • Surveys – Electronic or paper surveys can collect data on perceived quality of care, accessibility and courtesy of staff. Some of these surveys are provided for practices as part of affordable care organization models. A survey is only as good as its follow-up analysis and tracking of improved outcomes.
  • Phone Calls – Patient advocates or support staff can check in with patients for a quick interview on their experience and to identify any needs that require follow-up appointments.

Two of the main challenges of these tools are (1) to collect enough data to provide a representative sample of the patient population and (2) to analyze the data gathered into an accurate summary of satisfaction. At minimum, practices should explore some measure of patient satisfaction that can give practitioners and staff a guide to understand where they rank among other care providers and to make tangible improvements.

A great patient experience is a competitive advantage. Small medical groups can’t afford frequent no-shows or disputed bills. Patient satisfaction tools can improve communication between patients and other specialists while enhancing feedback to improve care.

Continue Reading: Which technologies can support compliance as well as practice management?

Cornwell Jackson’s Business Services Department offers a wide range of outsourced financial services to serve small medical and dental practices — including outsource payroll processing and solutions to improve cash flow and productivity. While you focus on care outcomes of your patients, we can address the business side of a healthy practice. Contact us for a consultation.

Scott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department, which includes a dedicated team for outsourced accounting, bookkeeping and payroll services. He provides consulting to clients in auto, healthcare, real estate, transportation, technology, service, retail and manufacturing and distribution. Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.

Posted on Jun 20, 2016

FMLA Fraud, FMLA Abuse

The Family and Medical Leave Act (FMLA) protects jobs when employees need extended time off because of their own or a family member’s health problems.

Who Qualifies for FMLA Leave

Employees are eligible for FMLA leave if they worked for a covered employer for at least 12 months and at least 1,250 hours during that time. The months do not have to be consecutive, but work periods before a break in service of seven years or longer don’t have to be counted unless:

1. The break is to fulfill a National Guard or Reserve military obligation, or

2. There is a written agreement stating the employer’s intention to rehire the employee after the break.

There are restrictions on family leave when spouses work for the same employer. Leave is limited to a combined total of 12 weeks for the birth and care of a newborn child, placement of a child for adoption or foster care, or to care for a parent. Leave for a birth or placement must end within 12 months.

To help prevent such abuses, the law allows you, as an employer, to insist that employees supply medical certifications verifying the seriousness of their conditions. The Labor Department regulates both the process you must follow and the information you can request when asking for certification.The law allows employees as many as 12 weeks of unpaid medical leave in any 12-month period to take care of qualifying medical conditions. While in most instances these leaves are legitimate, there are employees who try to take advantage of the system.

Generally speaking, a health care provider must attest that the employee or a qualifying family member has an illness, injury, impairment or physical or mental condition that involves one of these two conditions:

A period of incapacity or treatment that requires overnight stays in a hospital or residential medical care facility, or

Continuing treatment that causes incapacity, such as:

  1. A treatment and recovery lasting more than three consecutive days. There must either be two or more treatments or one treatment followed by a regimen such as prescription medications or physical therapy.When there is more than one treatment, the first must occur within seven days of the day the employee becomes incapacitated. When there are two treatments, both must occur within 30 days of the incapacitation.
  2. Pregnancy or prenatal care (a visit to a health care provider is not necessary for each absence).
  3. A chronic health condition that continues over an extended period and requires at least two visits a year to a health care provider. This may include such episodic conditions as asthma or epilepsy and does not require a visit to a health care provider for each absence.
  4. Permanent or long-term conditions for which treatment may not work and that require supervision by a healthcare professional. This includes such conditions as terminal cancer, Alzheimer’s disease or a stroke.
  5. Restorative surgery after an accident or injury, or conditions that would likely result in incapacitation for more than three days if not treated, such as radiation or chemotherapy for cancer or dialysis for kidney disease.

The Certification Process

If you require certification, employees must provide it within 15 days. As an employer, you must:

  • Use either the Labor Department’s WH 380 Certification of Health Care Provider forms or devise your own. If you use your own, you cannot ask for more information than the government forms require.
  • Ask for certification within five business days after the leave request or after the start of the leave if it was unforeseen.
  • Tell employees that you can deny FMLA leave if the certification is incomplete, insufficient or unclear.
  • Give employees a written notice of the problems with the certification and allow seven calendar days to fix them.

In some cases, the employee’s medical condition may be considered a disability under the Americans with Disabilities Act (ADA). In such situations, information obtained through ADA procedures may be used in the FMLA leave determination.

You can directly contact the employee’s medical provider for clarification through a health care provider, human resources professional, leave administrator or management official. The employee’s direct supervisor, however, cannot contact the provider for clarification.

You may require annual certifications if an employee’s need for FMLA leave lasts longer than a year. And you may ask for certification at a later date if you doubt the appropriateness or duration of the leave.

FMLA leave is an entitlement, but it can be abused. Talk to a professional about these and other procedures that can help prevent misuse of the law and cut the unnecessary costs and workplace disruptions that can stem from illegal, lengthy absences.

Posted on May 18, 2016

Medical Debt Collectors

On a regular basis, most physicians have patients that refuse or forget to pay bills. Every business deals with this problem, but medical practices have their own unique set of problems with unpaid bills. First, you can’t retrieve the service you provided. Second, unless the patient is a deadbeat, you probably want to keep the individual as one of your patients. Is working with medical debt collection firms to resolve the unpaid charges the best option for your practice?

First-Party versus Third-Party Collections

First-party collections refer to the physicians or someone on their staff who attempts to retrieve payment from the patient. Third-party collections refer to hiring another individual or company to collect the money.

In the United States, The Association of Credit and Collection Professionals (ACA) is the trade organization for third-party collection agencies. The Consumer Financial Protection Bureau (CFPB) is the primary regulator of third-party collections. The CFPB regulates debt collectors on the federal level, but states also have their own laws. Some states comply with the federal rules and others go further.

Federal laws known as the Fair Debt Collections Act and the Consumers Protect Act are the main laws the CFPB uses to regulate collections. These laws include things such as preventing a collection agency from contacting consumers on their cell phones using an automated device, even though the agencies can utilize an auto dialer.

Currently, medical debt doesn’t fall under the CFPB. The CFPB oversees credit reporting, and some legislators argue that if medical debt were included on a credit report it would likely have an impact on the individual’s ability to get a loan or credit.

Ins and Outs of Third-Party Collections

Generally speaking, third-party collectors receive commissions, taking a percentage of whatever they collect. In the physician collections arena, it’s generally a private negotiated rate that typically ranges from 10 to 25 percent or more depending on the amount of debt, type of debt and the ease of collections.

A key word is “negotiated.” The physician should be willing to negotiate a rate, rather than accept the rate the collection agency offers. The negotiated rate will often be based on the time period involved in the outstanding balance. For example, an outstanding balance of 60 days would have a lower commission than one that is 120 days or longer. The more difficult it is to get the money, the higher the percentage the physician is going to pay simply because it’s more work for the collection agency to acquire the funds.

Partly because of the personal nature of medicine, physicians often have a say in how a collection agency approaches retrieving funds. These typically start with letters and alternate with phone calls.

A common practice for a collection agency is to activate the collections after a set period, generally after the physician’s initial payment statement is sent. One method is to alternate. For example, one collection agency has a series of three letters and two phone calls that alternate, letter, phone call, letter, phone call, letter. This approach accelerates the urgency on the part of the doctor’s office getting paid.

One collection agency approach is to operate under the physician’s office name so that the patient is not aware that the debt has been turned over to a collection agency. In particular, if patients merely forgot or had a temporary problem resulting in lack of payment, they are less likely to be offended than if their doctor sent their accounts to a third-party collection agency.

Alternately, collection agencies may have services that operate under their own names, which increases the urgency. Again, they alternate letters and phone calls. Once patients pay, physicians have the option of sending a card or e-mail that states, in part: Thank you for your payment. As part of the message, the doctor may add additional thoughts such as: Please call if you need our services. Thank you for choosing us as your health care provider.

This underlines the importance of the collection agency understanding the value of physician-patient relationships. Physicians have a brand to promote and protect, and it’s important that a collection agency doesn’t negatively impact that brand. The physician-patient relationship is a significant part of the brand and should be protected.

Representation and Respect

When hiring a third-party collection firm, remember that the firm represents you and your medical practice. Every collection agency is different. The physician needs to be comfortable with the way the collection agency operates and presents itself. Are they respectful to the patients? Are they direct and straightforward? Are they timely? What is their customer service like?

Physicians need to maintain good relations with their patients. You absolutely do not want a collection agency that antagonizes them.

When choosing a collection agency, ask your peers for recommendations and inquire:

Are you happy with the service?
Is the service effective?
Can you negotiate with them?
Does the agency represent your practice in a way that is appropriate?
Medical debt has its own vocabulary and with the changes from ICD-9 to ICD-10, it is more complicated than ever. So look for a collection agency that specializing in medical practices … not just medicine. A collection agency that handles medical practice debts works differently than one that handles hospital debts. Hospitals are often very aggressive in collecting debt, partly because on the whole they are dealing with very large numbers. Physicians in private practice can be more flexible.

Offer Workarounds

One thing physicians often do and should do, is to try and avoid the need for a collection agency. Of course, a lot of small payments that are ignored can accumulate in a big way, but looking at outstanding claims and understanding which ones are collectible is an important consideration. It can sometimes be worthwhile to write off an outstanding debt because it wasn’t reasonable, there was a mistake, or there’s so little money involved that it’s not worth the hassle.

But if you let too many payments slip away, you may suffer financially. Consider negotiating payment with the patient. Contact the patient and suggest a payment plan. Ask them what they can afford to pay. It’s a way to keep the patient involved with the practice unless it’s obvious they are deadbeats who have no intention of paying their bills.

Evaluate your front-office policies as well. Consider getting a patient’s credit card so that once the insurance company pays their part, you can directly charge the patient’s credit card. Then, provide a receipt to the patient that their card has been charged per their insurance plan.

Make sure the office collects all the patient’s important financial information, including demographics and insurance data. Understand how much the insurance deductible or co-pays are and inform the patient how much they owe before they leave your office. Be diligent in collecting as much money owed upfront so you don’t have to chase it on the back end.

If possible, understand why patients aren’t paying. Are they unemployed? Confused about their insurance coverage? Or are they unhappy with the care they received?

This last issue can be complicated, but it emphasizes the importance of understanding why the patient isn’t paying. If for some reason, the patient is legitimately unhappy with the level of care and you then send that patient’s bill to a collection agency, you could be increasing the likelihood of a lawsuit.

It’s best to be judicious about which bills you go after. And know that you’ve really done the best you can for patients — while still getting paid.