By John Dunn, M.D., J.D.

In the past, an area of management challenge has been the aged account receivable. No doubt many hospital executives are well-versed in comprehensive strategy development for managing receivables, but still there is the question about what to do with the receivable that is more than 180 days old and shows no sign of life.
       Assuming a best-effort approach to collect the 90-day co-pay. self-pay or deductible has been followed in a thorough manner, the account now also has spent the proper amount of time at the collection agency. The next step is calling a new resource - the purchaser and collector of aged and inactive accounts. Yes, there is someone out there who will pay you for the privilege of taking the files and working with them.

The Aged Accounts Receivable
Old receivables do provide chief financial officers and receivables managers with a lot of entertainment and no small headache. The pile of old accounts does not self-destruct like a Mission Impossible instruction tape; it still is there when the office staff returns on Monday. The files may move around or just stay in one place, but they do not go away. After 150 days, they are still there - a nagging buzz in the back of the CFO's head, collecting dust, occupying space and distracting the staff when there is plenty of other work to do. There are new accounts to move on to and better ways to spend staff time; so what to do about the buzz, the nagging headache?
       Fortunately, the inventive American financial and business community has created a disposal company that pays for the paper it hauls away. The new hauler is the aged or dead receivable purchaser and manager- a company that pays a hospital or a provider a discounted, nonrecourse fee for the account. The purchaser then attempts to work the account with special expertise in such a way that it does not cut a bad swath through the provider's community relations and vandalize its public image.
       The benefits to governance, good accounting and collections are achievable when - and if - the provider entity, large or small, finds a purchaser with financial strength, experience and competence. The hospital customer wants a good price and a reasonable collection effort that allows for continued monitoring, readjustment and fine-tuning. The idea is a long-term deal that mutually is beneficial. Pricing is key, so the purchaser must be experienced enough to know how to pay the right price and keep the hospital customer happy. Doing this is not as hard as a full twisting double back summersault, but close.
Unless you have a rich uncle or a very large hospital endowment -and even if you do, the selling of old accounts receivable may seem like a natural effort to get rid of a headache. A good medical debt recovery company may be just what the doctor ordered.

The Problem
Most hospital CFOs have a receivables management system that identifies self-pay accounts, and may impose a tighter schedule of collections and management. The average age of accounts referred to the primary collection agency is 165 to 170 days and are made up of a mix of co-pays, self-pays and deductibles.
      Based on the date of discharge, collections schedules are variable with the insurance and managed care accounts, but in a sophisticated system, self-pay accounts may be referred to a collection agency service earlier and then referred to debt purchaser organizations at about 300 days. The purchasing partner buys the account with transparent purchase pricing based on a demographic site and local specific actuarial analysis.
      The data collection and actuarial analysis is zip code-based and historically derived, providing a client and the purchasing partner the basis for the pricing of the accounts, which is clear to the seller and the basis for a long-term arrangement. This approach prices accounts to avoid high-pressure collections. In fact, the account contract is entered into with the goal of a long-term, stable and mutually rewarding aged account management relationship.

The Doctor's Prescription
Why sell a dormant receivable?
• Time, expertise and effort can extend limited business office resources.
• Some cash flow now is better than none.
• Some accounts are high risk for no return.

If another entity has the expertise and can do the job well - outsource.
There are a number of competitors in the receivables purchasing and management sector. What should you look for in a purchasing partner?
• Track record of years of service with difficult accounts.
• HIPAA compliant.
• Good and happy references.
• Multiple divisions of a larger parent company that have software, administrative and support resources, making your partner a robust provider.
• Financial track record and resources that assure stability and professionalism and assure avoidance of desperate, aggressive collection attempts.
• A collection philosophy that does not endanger the client's patient base.
• A business philosophy based on stability, reliability, professionalism, expertise, financial wherewithal, honest pricing, mutual candor and transparency of financial information.
• The ability to service varying provider needs and various components within the institution or the entity.
• Experience in data and actuarial analysis that avoids guesswork in the purchase of accounts and allows honest and open auditing as well as exchange of information.
• A willingness to take aged accounts as far back as five years to get more actuarial data and to help the client find possible veins of income previously undiscovered.
• A 30-day out provision.
• Employs and trains individuals to provide intelligent and competent analysis and account service.

By John Dunn, M.D., J.D., director of the Brownwood Regional Medical Center's emergency department In his role as director, Dr. Dunn frequently deals with the managerial challenge and responsibility of accounts receivable collections and bad debt. Dr. Dunn has 20 years of managerial experience in the operation of hospital emergency departments and previously has worked with emergency physician groups that have used MEDCLR, a corporate member that purchases dormant bad debt on a nonrecourse basis at no risk to hospitals.

This article was provided by MEDCLR. For more information please contact Gene Deutscher at 254-773-0591.