Nov./Dec. 2009

Medical Collections: Emotional Aid Required

By T. Steel Rose and Cindy Pickett

As the federal healthcare debate rages, we delve into the current state of medical collections. Fortunately, at the ACA International convention this summer, we met some of the top people in the business. Jay Gonsalves, president of Action Collection Agency of Boston and ACA president for 2008 to 2009, needs no introduction for ACA members. To our 18,000 other readers, let me just say, he is truly one of the nicest, most professional people you will ever meet. I'm not just saying that because he shares my mother's maiden name. His firm in Massachusetts already has seen the future of healthcare reform. Massachusetts currently has mandates for medical insurance provided by employers and offers coverage through the state option. Whatever changes the federal government implements, Massachusetts is ready.

Dennis Donohue, vice president and general manager of Associated Collectors, Inc. (ACI), hails from Janesville, WI. ACI has been serving healthcare, communications, government and commercial markets throughout the Midwest since 1955. Terry Catlin is corporate trainer and assistant manager of A1 Collection Agency in Colorado. She knows the benefit of technology for medical collections and the necessity of adequate training. As she says, the collector's job title is "financial counselor" and a patient-friendly attitude is imperative.

With cost-shifting and conflicting third-party interests, the healthcare system can be confusing to patients. So, let's take a look at how the experts handle it.

Collection Advisor:  What is the secret to success in medical collections? How does the approach differ from collecting on other consumer debt?

Terry Catlin: A patient-friendly attitude and the willingness to assist and work with the consumer are our most successful tools. Our collector's job title is financial counselor, which sets the tone internally and externally. Often, the bill is not as straightforward as a simple charge account or bad check. It can be complex with multiple third-party payers involved. Most of the time the debt results from services the consumer felt forced to receive for health reasons, so they do not give it the same priority as debts they actively choose to incur. Consumers might not feel an immediacy to pay because future necessary services can't be denied based on past payment.

Dennis Donohue: One of the unique things about medical debt is that consumers often have a third-party (insurance of some sort) that will pay part of the debt. The collector must know how much of the debt has been paid by an insurer before the first collection call because the consumer's first response will be, "My insurance should have paid that." Most medical insurance coverage has co-pays and deductibles that increase every year, so some consumers are genuinely confused about their bills.

Jay Gonsalves: We train collectors to recognize the subtleties and nuances of medical debt, which is instrumental to our success. We want our collectors to treat the debtor as we would want our family members treated if they were in the same situation.
The most important approach to collecting medical debt is recognizing that it is different from other debt in that it isn't debt of choice. Most consumers owe medical debt for reasons that are unplanned, unpleasant and highly emotional. Our collectors attempt to be sensitive to the emotional and personal sides of how the consumer incurred the debt.

Collection Advisor:  How has the federal healthcare debate affected attitudes toward existing medical debts?

Terry Catlin: Many consumers seem to feel that national healthcare programs would be magically retroactive. This causes them to feel even less responsible for medical debt. The plethora of information in the media has heightened awareness of the weaknesses of the current system, so many use that logic to justify nonpayment.

Dennis Donohue: We have seen no appreciable difference in debtor attitudes toward medical debt because of the public debate.

Jay Gonsalves: In Massachusetts, we are less affected by the healthcare debate because our state already has taken steps toward a system similar to that which President Obama recommends. We have mandates for employers to provide insurance to employees and for individuals to have some type of insurance coverage or be covered through our state option. We still see the same type of accounts, from the same clients, for the same size balances. The healthcare debate isn't much of an issue for us from a collection standpoint.

Collection Advisor: What strategies are successful for collecting uninsured medical debt?

Terry Catlin: The majority of self-insured (or uninsured) consumers are aware that the bill is owed. Overcoming the objection to the high cost and offering discounts for full payment or negotiating affordable payments is key. Working closely with clients to gain negotiation authority helps, as does getting preauthorization to discount the debt.

Dennis Donohue: It depends on the amount of the debt. If, for example, the consumer took a child to the emergency room for stitches and an x-ray, the bill could be $500 to $600. Depending upon the provider's own collection criteria, after asking the debtor for payment in full, we try for a good first payment and agree upon a monthly payment thereafter.

If the uninsured patient had been hospitalized for a few days and had various tests done, the bill could be close to $10,000. Most uninsured people do not have high wages. With that in mind, many of our medical clients have urged us to suggest their charity care programs to those debtors. If the debtor applies and is successful in getting his bill reduced by 50 percent, he could make reasonable payment arrangements.

Jay Gonsalves: With the mandates in place in our state, we don't see a lot of uninsured medical debt. Most of our collections are balances not paid by insurance. However, with unemployment in this country being almost 10 percent, understanding why the debt exists is important: Is it because of unemployment? Did the consumer choose to forego coverage? Why is coverage lacking? If unemployment is the case, we try to find reasonable payback solutions and offer prompt pay discounts or other incentives.
Collection Advisor: What technology is most important for medical collections?

Terry Catlin: Using a predictive dialer internally for the volume of business is critical. We also have in-office access to many client databases to quickly provide statements to the consumer. This enables us to readily resolve insurance objections, such as the following: Was it billed to my insurance? Did my insurance fail to pay? Affordable skip tracing programs and tools with leading-edge information also are musts.

Dennis Donohue: Having a computer system that is able to obtain as much information as possible at the time the account is listed and having that information readily accessible to  collectors is important.

Jay Gonsalves: Although technology is important for what we do, the most important asset for our business is our collectors. Their knowledge of the debt and how it came to exist and their ability to understand the human side of the situation are the most important skills for collecting this type of debt. The technology only enhances collection efficiency.

Collection Advisor: What trends are you seeing in medical collections?

Terry Catlin: Everything is tighter: more regulations, recovery declines, higher costs. These trends will continue, but changing strategies and innovations will continue to keep pace.

Dennis Donohue: The average balances of the debts are increasing as co-pays, deductibles and the cost of healthcare increase. On the other hand, not-for-profit hospitals are more willing to offer uninsured discounts and charity write-downs to their patients.
Jay Gonsalves: The type of debtor we are dealing with is much different than five years ago. Increased unemployment has affected who owes debt. We are seeing increased placements but decreased liquidations. We are trying to collect the same dollar as the cable company, the cellular phone company and the credit card company and trying to make the debtor understand that paying our client is no less important.

Collection Advisor:  Are you handling more first-party collections on behalf of doctors and hospitals?

Terry Catlin: Our company has seen rapid expansion of first-party billing. As clients seek to become more cost-efficient, outsourcing is key.

Dennis Donohue: Not a lot more. We've been doing early-out work for a while. We are seeing some medical clients offering financing programs wherein the client charges interest on the patient's unpaid balance.

Jay Gonsalves: Hospitals have been outsourcing for a while, but we have seen an increase in physicians outsourcing their collection efforts because of increased volume and lack of internal resources. They recognize that our experience and the technology and training that we employ make us better-equipped to handle this effort on their behalf.

Collection Advisor: How are you most affected by HIPAA, Foti and GLBA restrictions?

Terry Catlin: Training and compliance continue to be imperative. More time and resources are being spent on implementing and understanding these regulations.

Dennis Donohue: A sound FDCPA compliance program, which we have, almost guarantees a sound HIPAA compliance program. The exception is for a HIPAA violation because the cleanup is different. The Foti decision has made us tighten up how we leave messages, both live and prerecorded. GLBA has not been a huge factor.

Jay Gonsalves: GLBA has not affected us. As for Foti, the ongoing discussion is whether or not to use the Foti disclaimer. We would like to have a safe harbor legislatively to help determine when to leave a message with a third-party to the consumer or on an answering machine. We are affected by HIPAA and will be more so with the HITECH Act, which removes the business associate status and makes the collection agency subject to the same covered entity requirements as any provider. We always have taken great strides to safeguard consumer information and will continue these efforts internally to maximize data security.

Collection Advisor: How do you handle debtor complaints?

Terry Catlin: That depends on the style of the complaint. We have several layers of action and a lengthy training guide to help each counselor determine which plan of action  to take.

Dennis Donohue: We determine the exact nature of the complaint and address it. The basic questions are: "Do you owe the debt?" "Have you paid the debt?" Once we have determined that the complaint is a legitimate objection rather than a stall, we check to see if we have the answer available in the listing information. If we don't have it, we get the appropriate statements from our clients and mail them to the debtor. We document everything. Prompt follow-up is essential.

Jay Gonsalves: We have been lucky in that we don't receive many complaints. Most of the complaints we see are about why the provider placed the debt, more so than how we have handled the collection effort. When we receive complaints, however, we investigate them thoroughly and correspond directly with the complainant about what we find and the resulting outcome.
Our training is an important factor in reducing the number of complaints we receive. We record all our collectors and monitor them closely to make sure we are representing the providers and our clients in the best way possible. We also are considering creating a portal on our Web site where consumers can file complaints.

Collection Advisor: How do you feel about the proposed debt collector registry to self-regulate the industry?

Terry Catlin: I have worked in other industries in which self-regulation was a good tool when used to supplement outside regulatory agencies. In our industry, we are highly aware of how the renegades and uninformed can harm our reputations and ability to do business. Self-regulation can bring about consistency and develop educational tracks so that we all can continue to improve. Not all companies, however, will participate. Nevertheless, membership and the agreement to higher standards and ethical concerns can be a selling feature to clients.

Dennis Donohue: I think it's a good idea. The FTC supports the move, and membership in the registry will make all members better.
Jay Gonsalves: I support it whole-heartedly. We already are held to the requirements of the FDCPA, which helps identify the collectors who are performing as they should and those who aren't. The registry would assist us in refining our hiring practices.

Collection Advisor: What is the future of medical collections?

Terry Catlin: In the short term, we will have higher volume, increased work loads and more refined technologies to maintain recovery rates. In the long term, our industry choices might be more out of our hands than ever before depending on the direction of healthcare reform.
I have family in Europe and Australia using nationalized healthcare. National healthcare plans in those places do not eliminate individual healthcare costs. If our plan follows those guidelines, we might see fewer medically poor people placed for collections for basic services. People still will have supplemental plans with co-pays and uninsured services. Nationalized healthcare will drastically change our industry.  Adapting to the changing market will be mandatory.

Dennis Donohue: Going to a single-payer government system would be the main change that would impact medical collections. I doubt this would happen. Whatever happens in Washington, co-pays, deductibles and insurance companies that don't pay customer bills for whatever reasons still will exist. I don't see the immediate future much different than the present.

Jay Gonsalves: This segment of the collection industry will remain strong, and we will continue to see increased placements. I don't believe that healthcare reform, if it is at all similar to the reforms in Massachusetts, will have far-reaching effects on this portion of the industry.

Collection Advisor: How do you spend your free time?

Terry Catlin: In Colorado, the outdoors beckons us with seasonally changing choices. I love to travel and have been to New Mexico, Utah, California and China this year.

Dennis Donohue: With a wife, two teenage daughters, an 11-year-old son and two golden retrievers, I don't have much free time. When I do, I enjoy reading, doing yard work, exercising and sports.

Jay Gonsalves: The moments when I get to enjoy myself, I like to hang out with my family, play golf and tennis and play music in my church.