What is “Second Placement” in Medical Debt Collections and When Should I Use It?
Healthcare entities large and small have risings costs in today’s economy. All businesses are looking for opportunities to increase revenue and decrease costs through finding new suppliers and vendors. In healthcare, it’s time to put your receivables cycle under the microscope! By reviewing the effectiveness of your “in-house” collection team and “outsourced” third party debt collection agency(s), another option may emerge.
Should you add another debt collection vendor to your receivables cycle?
Let’s talk about the benefits of adding a “second placement” medical collection agency!
What is a second placement medical collection agency?
Most healthcare institutions follow up with patients from their date of service through insurance and self-pay billing (first statement). If the patient fails to pay their self-pay (or co-pay) portion, they turn to an “early-out” workflow of calling patients to remind and recover payments. If the office is unable to follow up internally, they will out-source to an early-out company.
Typically, at 90 or 120 days, past due accounts are sent to a medical debt collection agency for recovery efforts. This is referred to as “first placement.”
“Second placement” is when accounts are not collected from the original medical collection agency and are sent to a second collection agency.
Why use a second placement medical collection agency?
Research published in JAMA found collection agencies held $140 billion in unpaid medical bills. If your healthcare entity is unable to recover past due receivables through internal and third-party collections, it’s time to bring in the relief pitcher!
Second placement agencies are eager to assist and bring a fresh set of eyes and efforts to your older accounts. By “recalling” from your current medical collection agency (the process of stopping current collection efforts) and placing in a new agency, you will see a resurgence of effort. Second placement agencies are required to send a validation letter, thereby sparking a new communication.
When should I use a second placement medical collection agency?
The short answer is… it depends. Most healthcare past dues are sent to a collection agency at 90 or 120 days. Letting the agency work through their process for 9-12 months is a must. If time has gone by and you are no longer seeing those now 12-15 month only past dues being recovered, it’s time for the second placement.
Decline in recovery can happen for a number of reasons. Some collection agencies “debt shelf” what they consider “unrecoverable” by taking older accounts out of the communication cycle. This leads to a decline in recovery for older accounts. Other times, it’s human nature and consumers start to “tune out” the same company’s communication. Either way, mixing it up can bring in revenue you thought was long gone!
What can I expect from a second placement agency?
There are a few key expectations you need to be aware of when moving from your first debt collection agency to your second…
Lower return than when your first agency started: The older the accounts, and the more communication on those accounts, the less recovery you will see. However, the return should be higher than if it was “getting rusty” in the first placement.
Higher commission rate: This may be the third or fourth attempt to connect with the consumer and likely well over a year since the date of service. Expect the agency will have a higher recovery fee. Remember, this is better than NO recovery, which is where the account currently is!
Same expectations for customer service and communication: The service from the second agency should be the same as you have come to expect from your first. Who knows? It may be better as they are eager to win your business!
If you are unsure this is worth the effort for the return, don’t be afraid to try a pilot and send a portion of your accounts. Many larger healthcare institutions trial new agencies. Some even split their accounts between two (or more) agencies, then switch those accounts to the other after 1 year to see which agency is most effective.
Looking for more information on medical collections? Go to Healthcare/Medical Collections | Beyond Green Solutions.