Unique aspects of patient debt collection

Practice Management. By Pamela Lewis Dolan, AMNews staff. Jan. 29, 2007.

A recent report looking at accounts receivable management practices in the health care industry estimates that there is roughly $129 billion in bad health care debt in United States today. That's about 7% of industry revenues, and more than double its 3% net profit margin.

For the nation's physicians and hospitals, that's a lot of money to have to swallow. For the accounts receivable management industry -- also known as collection agencies -- it's a growth opportunity.

But fortunately for physicians, even as collection agencies grow larger, they still understand that collecting from a patient is not like collecting from someone who has fallen behind on credit card bills. In fact, the report recommends physicians and others in health care find ways to work with collectors to make sure that more debt is collected, in the most understanding way possible.

The bad debt figure -- which refers to money patients owe, but physicians and hospitals have mostly written off collecting -- comes from a report by the Atlanta-based company Kaulkin Ginsberg, which advises the accounts receivable management industry on mergers and acquisitions and other business strategies.

The figure is linked to growing unemployment rates, high-deductible insurance plans and increased co-pays, according to the company's "Healthcare ARM Report, 2006." The health accounts receivable management business had $2.4 billion in revenue in 2005, an amount likely to increase in 2006, the report said.