Collections: How to Make a Fair Comparison
By Sara Greff Dannen
I am sure you've heard the phrase “apples-to-apples comparison,” but before you can make a true apples-to-apples comparison, you have to first determine certain facts. Are you looking at a Granny Smith apple, a Fuji, or maybe a Red Delicious? How old are the apples you are comparing? Have you looked at the size of each apple? What about their crispness and sweetness?
Why all of the questions about apples? It is simply to illustrate that, although people may
think all collections agencies are created equal, there are many variables that need to be taken into consideration in order to make a fair comparison. Even an apples-to-apples comparison is never as simple as it sounds.
At the top of your comparison factor checklist should always be compliance, especially on the heels of all the security breaches in the news lately. Are the agencies you are working with collecting on your accounts in a compliant manner or are they cutting corners to make the numbers better? Is your data secure with your agencies? How are your patients being treated? What other services make your agency a valuable business partner?
Many healthcare facilities use two or more collections agencies. They divide their overdue bills into equal batches, and give each agency one batch. This allows the healthcare facility to monitor collection performance over two to three months and compare which agency produces the best results. While looking at a straight comparison of numbers to see which agency is recovering more dollars is a good practice, it is easy to overlook some important considerations.
First, are you sending both agencies similar accounts? To make a fair comparison, be cautious not to make a separation of accounts by payer, demographic information, or account age. The best option is an alpha-split by patient last name. For example, A-L would go to one agency and M-Z to the other. All accounts should be approximately the same age in the billing cycle and have run through the same internal processes.
Once the accounts are listed with the designated agencies, how do the programs compare? All agencies should have a minimum account standard that all accounts go through. Ask your agencies, what their specific standards are. Do they send one, two, or three letters on every account? How many phone calls do they make on an account? When do they decide to take advanced action on an account? While these programs can be hugely beneficial, they do make it difficult to measure performance and costs if both agencies are not doing the same.
Comparing Time Frames
When evaluating results, you need to consider whether or not the agencies are being compared on the same time frame. An agency that has worked with a facility longer may have more accounts, which means more ways to recover funds. However, even if a line in the sand is drawn, an agency with a longer history with a facility will likely have payment arrangements in place on older accounts that would not be included in the comparison time line.
Which leads into the next question: How is the money that the agencies are recovering for you being posted? Are payments being posted on a first in, first out basis? While this method is fair and common, it may hinder the comparison process if one agency is doing it differently than the other.
You also have to ask, where is the money that the agencies are collecting coming from? Many agencies will accrue interest on your principal balances. This interest is used as an effective negotiating tool in the collections process. Some agencies will share both principal and accrued interest with you and other agencies keep any accrued interest internally. Either method is legal, however your knowledge in how agencies report their collections numbers is vital in any comparison process. Agencies should be capable and willing to illustrate where all of their reported numbers originate.
It is good practice to make agency comparisons, but all the different variables need to be factored into the equation. There is very little information about fair comparisons on the internet. Working with your agencies to find a common ground is i always the best practice.
Sara Greff Dannen, AAA Collections, General Counsel and Compliance Officer