What to Look For in a Collection Agency

by Chip Dimaano, Transworld Systems, Inc.

When dealing with past due and slow paying accounts, a collection agency may be your best bet. There are advantages in using agencies over internal efforts, the most obvious being that they SPECIALIZE in collections. But what should you look for in a collection agency?

Low collection fees. Most agencies charge a percentage anywhere between 25%-50%. The national average is 33%. Try to base your decision on more than cost alone. Look for agencies that promise a higher level of customer service and a broad range of products that will suit your practice’s needs. Ask about the agency’s methods.

Note: Percentage Agencies. The average agency collects 14% of all accounts turned over to them. Buyer beware: an account submitted for $100 usually takes a back seat to an account submitted for a $1000 or more, because that agency’s revenue comes from the percentage fee they collect on each account. THE TRUE COST OF COLLECTIONS IS WHAT’S NOT BEING COLLECTED.

Service. Look for an agency that will customize their service to suit your needs. How do they treat your patients? Diplomatically? Aggressively? Do they offer options in how they approach your slow- and non-paying accounts? Understandably, there might be some patients that you do not want back. But what about those that are experiencing financial hardship, divorce or aren’t able to pay due to a “9/11” related experience? If those patients were able to get caught up, wouldn’t you want them back to the practice? It’s not the one payment they owe, but the ongoing revenue stream that the patient represents that matter most, as well as the unrealized revenue you would lose in referral business from that patient.

National Coverage. Many states require collection agencies to maintain a physical office in their state if they are contacting people residing in their state, whether by phone, fax or mail. If an agency is not in compliance with a given state’s requirements and/or collection laws, then their efforts on your behalf could be illegal and you could be held responsible.

Consistent communication. How often will the agency communicate with you? Do you get a detailed report of your accounts? Do they offer online services so you can access your accounts at your convenience?

Reputation and standing in the business community. How long have they been in business? Are they endorsed by anyone? In particular, by any dental associations?

Representation. Can you see a copy of the correspondence or transcripts? Do their methods correspond with your business and accounting philosophies? If there is no response to the first effort, do they offer another option for continued contact until the debt is resolved?

Trust. Where is the money collected being sent: to you, or to the agency? It’s your money. Wouldn’t you like to see it in your office? If it’s sent to the agency, how do you know how much was REALLY collected?