There is a distinct difference in the approach and functions of a billing company and that of a collection agency. Anesthesia practices need to know the difference, in order to set appropriate expectations for each.
Many anesthesia groups often wonder why it is difficult for billing companies to collect on patient balances. It is a reasonable query, the answer to which goes to the complexity of American healthcare economics and the distinction between the nature of a billing company and the fundamental role of a collection agency. Each type of organization is structured to provide a specific scope of services and although there might appear to be some overlap, there actually is not.
Billing companies have a very clear objective. They are designed to deliver an appropriate claim to a valid payer as expeditiously as possible and ensure that payment is timely and correct. However worthy this objective, it is complicated to achieve 100% of the time. From a client’s perspective a billing company is intended to provide as complete and as cost effective a service as possible. What clients are paying for is an extensive team of specialists who are qualified to identify all appropriate charges for billing, to submit valid claims to each patient’s insurance so long as such information is provided, to monitor payment patterns and to make a reasonable effort to collect patient balances. Large national billing companies, such as Coronis, have been investing in their software and refining their processes for years in an effort to optimize client cash flow. What clients get for this fee is consistent cash flow, a tremendous amount of timely management information and the proven advice of industry experts.
The Hard Truth
It is true that if the billing company received complete and accurate information for every case, and if patients truly appreciated the value of the services they received and had the ability to pay their share there would be no need for collection agencies to explore alternative approaches to obtaining balances due. Sadly, this is just not always the case. The fact is that in the current environment there are myriad exceptions to this ideal. Studies have shown that a significant percentage of patient demographic information obtained by hospital admitting clerks is simply inaccurate. Insurance plans capriciously question and deny valid claims. In this era of cell phones and caller ID, patients with overdue bills have become quite adept at ignoring calls from numbers they don’t recognize.
The biggest challenge for virtually all anesthesia practices is the percentage of patients for whom there is no insurance coverage. It is always easier to collect from a patient’s insurance than from the patient. Sometimes insurance coverage can be found through diligent research, but most of the self-pay patients are truly uninsured and personally responsible for their medical bills. It has become well known that the high cost of American medicine is gradually overwhelming to many patients. In fact, it is the number one reason for bankruptcy filings in the country. The fundamental problem is that when there is no insurance coverage the anesthesia practice has little or no leverage. Their only hope is to appeal to the ethical responsibility of the patient. In many cases trying to establish contact with such patients and trying to convince them to pay is a fruitless scavenger hunt. While large national billing companies, such as Coronis, employ a variety of strategies, such as predictive dialers to contact such patients, as well as various methods in which to deliver the statement to the patient, the results are not usually impressive.
Finding What Works
While the processes of the billing company are labor extensive those of the typical collection agency are labor intensive. This is why they charge considerably more. Their fees are intended to provide a different incentive. Their fees are supposed to cover the cost of exploring a variety of alternative strategies to contact and motivate patients to pay their outstanding bills.
Successful and effective collection agencies draw on three strategies that are not typically part of the billing company scope because they would change the fee structure significantly. First, they have teams of collectors who spend their days dialing for dollars. Second, they may have access to other accounts such as the hospital, which may give them alternative approaches to patients. Third, many also use a variety of legal resources to leverage patients with liens and judgements.
Closing the Loop
What needs to be understood is that the collection agency is an option of last resort for accounts that have not responded to the normal approach and billing company processes. While billing companies should collect more than 90% of what is collectable, collection agencies rarely collect more that 30% of what is referred to them.
As is true of so many aspects of business, one cannot manage what one does not measure and monitor. Just as you monitor billing company performance, so too, it is important to monitor the collection agency performance. It is always important to ensure that the strategies and approach of the agency are consistent with the values and objectives of the anesthesia practice.
If you have any questions on this topic, please reach out to your account executive.
With best wishes,