7 Service Terms to Include in Your Patient Debt Collection Agency Services Contract

Outsourcing patient collections enables labs to generate needed cash flow and concentrate on clinical operations. That, at least, is the theory. But the strategy does not always work. One of the key factors of success is the actual services contract the lab signs with the agency. Many a lab has seen the anticipated benefits of outsourcing go up in smoke because of a bad contract. In the first installment of this series, we explained the three legal protections to include in your services contract. Now let’s concentrate on the seven business provisions you need to ensure that your agency delivers you the highest quality services and support.

1. Services Agency Will Provide
Problem: Do not assume that the agency’s form contract is limited to collecting patient debts. Many agencies offer a full range of services from patient collection to full management of the patient revenue cycle and just about anything in-between, including medical coding and billing, interfacing with insurers and third-party payers, patient accounting, etc.

Solution: You need to read, understand, and, if necessary, modify the part of the services contract that describes what services the agent will provide you to ensure you do not sign up for services that you do not need.

2. Agency’s Obligation to Report Collections Information
Problem: The key data for measuring collection agency performance are the reports the agency provides. But agencies may not provide you the information you need to measure their performance.

Solution: Although methods differ, medical debt collection agency quality review should measure timeliness of collection, documentation, accuracy in resolving accounts and appropriateness of patient interactions. Make sure your services agreement requires the agency to give you clear, timely, and comprehensible:

  • Account status reports—indicate how often you want to receive status reports and in what electronic format (or in paper);
  • Confirmation of placements;
  • Inventories; and
  • Remittance statements.

3. Agency’s Obligation to Report Patient Contacts
Problem: You must monitor how the agency is dealing with your patients. Is it honoring its promise to refrain from abusive and deceptive tactics? Is it treating patients with the necessary dignity and respect?

Solution: Make the agency promise to furnish you regular reports on its contacts with patients, including copies of patient complaints, concerns, or questions, and patient contact logs documenting the date, time, duration, and nature of each attempt to contact the patient and a brief summary of the outcome.

4. How the Agency Is Paid
Problem: Medical debt collection agencies are typically paid a commission based on the percentage of accounts they collect. There are lots of different ways to structure that commission.

Solution: The agreement should address four aspects of the agency’s payment:

  1. Upfront fees—consider not only direct but indirect charges like your lab’s obligation to buy account transmittals;
  1. Commissions should be based on the amount of money the agency successfully recovers;
  1. Commissions should reflect the effort required to recover. Standard agreements provide for three phases of collection
    Phase—Effort Level Collection Fee
    Phase I: Letter only Minimal fee
    Phase II: Phone calls added to letter series > Phase I but < Phase II fee
    Phase III: After 90 days, accounts transferred to receive
    extensive, personal follow-up, and credit reporting
    Up to 50%
  1. The agency should bill you monthly rather than withhold its fee from the patient payments it remits.

5. How Patient Payments Are Remitted
Problem: Remittance of money recovered is another key business term to deal with. Solution: The remittance clause should address three things:

  1. Timing: Monthly remittance is fairly standard practice for medical debt collection, although you can always negotiate for a shorter cycle. For your protection, the agreement should require the agency to keep collected funds in an escrow or trust account until the remittance date arrives;
  1. Information Reported: Each payment should be reported with the name, agency account number, payment receipt date, commission rate, and apportionment between you and the agency; and;
  1. Remittance Amount Recovered: Do not agree to a provision that lets the agency deduct its fee from the remittance amount. Although they do not affect the amount you receive, deductions from remitted collections create administrative and accounting headaches for your staff. So try to get the agency to send you a monthly bill instead.

6. Client Support Services Problem: While most agencies recognize the importance of customer service, attitude and commitment may not be enough to deliver the service you want and expect.

Solution: In addition to laying the basis for a successful partnership, specifying the kind of client support you want makes life easier for both sides. Services you might want to include as part of the core services package, without additional charge:

  1. Direct access to agency supervisors or managers if you have a question or concern;
  1. A dedicated phone line that your employees or patients can use if they have any questions (assuming your account is big enough);

    Model Language
    Agency agrees to have in operation within five (5) days after the execution of this Services Agreement a toll free telephone number, which shall be without cost or expense to the caller, which will be staffed during regular business hours by an employee of Agency who will answer any questions regarding the debt or other services provided by Agency under this Services Agreement. The phone number shall be published on all statements sent by Agency in its collection efforts under this Services Agreement and Agency shall make all reasonable efforts to ensure that calls received after regular business hours be returned the next business day.

  1. Support for your in-house debt collection efforts and maybe even seminars and training for your staff.

7. Termination of the Agreement Problem: You need an exit strategy in case the arrangement does not work out.

Solution: The termination clause is the escape hatch. There are two things it should include:

  1. Your right to terminate immediately and at any time for cause, including but not limited to agency violations of its compliance obligations under the services agreement, the HIPAA business associates contract (which we talked about in Part I) and other applicable laws; and
  1. Your right to terminate without cause upon 30 days’ notice.

Agencies should have little trouble accepting these terms as long as they are mutual. If the agency does give you a hard time, it should send up a red flag.


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