The One Question Healthcare Providers Must Ask When Choosing a Revenue Cycle Partner

In the wake of the June U.S. Supreme Court decision that upheld the major provisions of the Patient Protection and Affordable Care Act, healthcare providers across the country continue to face some troubling yet indisputable facts when it comes to managing their cash flow and patient A/R: more healthcare utilization on the part of a growing population of baby boomers and their increasing medical needs; a massive number of uninsured or underinsured individuals; larger co-pays and higher deductibles passed on from employers to employees and Medicare-eligible seniors; and the resulting boom in self-pay populations. Even more discomfiting, perhaps, is the knowledge that the ACA does little–if anything at all–to relieve the burden of existing medical bad debt for providers.

While many hospitals and physician groups handle the collection of patient receivables–at all stages of the revenue cycle–in house, many healthcare organizations leverage partnerships with external service providers–billing companies, third-party debt collection agencies, specialized medical debt buyers–to assist with the recovery of delinquent patient accounts, especially as those receivables age longer and longer past the initial point of service.

A key part of choosing the best outsourcing partner involves asking the right vetting questions of potential candidates. Hospital CFOs, boards of directors, vendor managers, and Directors of Patient Financial Services need information about revenue cycle management companies’ liquidation performance, data security policies, employee compliance training, etc., as well as assurances that these outsourced business services partners will treat the hospital or clinic’s patients with the utmost respect. These are important questions to be sure, but a recent news story about West Virginia Attorney General Darrell McGraw points to another vital litmus test that healthcare finance professionals should apply when selecting a partner to help manage past-due patient accounts: individual state licensing. And it is perhaps a story that flew under the radar for many hospital business offices because it did not directly involve a healthcare debt collection agency.

On July 3, 2012, West Virginia AG McGraw announced that his office has settled with a debt collection agency because the business was not properly licensed in the state. Many state attorneys general–and McGraw in particular–have ramped up efforts to quash debt collection operations based on violations of state licensing laws. Most states (and some municipalities) require companies whose primary business is debt collection to be properly licensed in the state in order to engage in collection activities with state residents, regardless of whether the particular collection agency is headquartered in or has a physical office in the state. Many medical debt collection agencies collect patient accounts on behalf of out-of-state providers, and many of these companies are nationally licensed businesses.

Regardless of whether your organization is a multi-state hospital system, a regional 150 bed hospital, a local physician group, or an individual practice–you may elect to outsource some or all of your patient collections to a local agency, a larger company in a neighboring state, or a large, national revenue cycle management firm located halfway across the country.

The decision to outsource itself may vary based on the unique characteristics and financial circumstances of your organization. But the need to know–definitively–that a potential outsourcing partner is in fact licensed to collect money from your patients (where they reside) should never be left to an optional answer.

Placing your accounts with an unlicensed collection agency not only increases the risk of poor performance results, it threatens the reputation of your hospital, clinic, or practice in the eyes of state officials, local communities, and the individual patients under your care.

“Are you licensed to collect patient accounts in my state?” Ask it–every time.

Michael Klozotsky is the Chief Content Officer at insidePatientFinance.com & insideARM.com. For more information on choosing a medical debt collection agency, download the free white paper How to Select a Debt Collection Agency – Healthcare Edition published by @insidePF.