Why Older Balances Are Harder to Collect

The longer you wait to send past-due accounts to collections, the less likely you’ll collect.

Recent studies indicate that collectability of accounts within the first 60 days is 90%. Once accounts are more than 90 days overdue, chance of collecting drops to 50%. More than 180 days overdue, and you have a 20% chance of collecting. Wait more than a year, you’ll most likely get nada. 

Why Is Collecting on Older Accounts So Difficult?

So when it comes to collecting debt, time is your enemy. But why are these older balances so hard to collect in the first place? Here are the most common reasons:
  • Patients have forgotten about the healthcare services you provided and may question the legitimacy of the debt.
  • Patients may assume their insurance covered the entire cost of services (or they believe it should have).
  • Patient information is not current and the responsible party cannot be located.
  • Patient financial records may have been misplaced

The Power of the Gentle Reminder

By pursuing payment of a debt within the first 30 days, you’re much more likely to collect. This means keeping a close eye on the age of your accounts receivable, so you can easily identify those that should be pursued first.
Then, deal with the situation head-on. During the first 30 days of delinquency, the best approach is to be straightforward but not aggressive.
 
Gentle reminders are an effective tool during this period. (People do forget, after all.) These quick and courteous reminders are more likely to result in payment than simply waiting around for a check.
 
After that period has passed without result, you should consider sending the account to medical collection experts who are specifically trained in recovering on overdue accounts. Don’t wait until the account becomes more than 90 days overdue and the collectability drops to 50%.

Do the Math

If you want a clear idea of how long it typically takes you’re your practice or facility to receive payment for services, you can use the following standard formula:
Days in Period x Average Accounts Receivable
/ Net Revenue 

= Average Collection Period
 
 
 

​Let’s define each of the formula’s basic elements: 
 
Days in Period — This is the number of days in the particular accounting period being examined. It can be a week, a quarter, annually or whatever works best for you, as long as the other data in the formula spans the same number of days. 

Average Accounts Receivable — You can calculate this number by adding your total accounts receivable at the beginning of your Days in Period and the total accounts receivable at the end of your Days in Period and dividing the sum by two.
 
Net Revenue — This is the total amount of your practice’s gross revenue during the Days in Period minus the total of all credits during that same period.

​Here’s an example of this standard formula using 365 as the Days in Period:
ABC Healthcare Services had $80,000 in A/R at the beginning of the year
​and $90,000 in A/R at the end of the year.

So its Average Accounts Receivable over the course of the year
would be $85,000.
($80,000 + $90,000 divided by 2 = $85,000)

Over the same period, its Net Revenue was $600,000.
 
Plugging these figures into the formula, we get:
365 x $85,000 / $600,000 = 51.7
 
So it takes ABC Healthcare Services an average of 51.7 days
to collect on an account. 
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How’s Your A/R?

According the American Academy of Family Physicians, average collection period for a medical practice should be no more than 50 days; 30-40 days is preferable. If you find that your practice or facility is holding on to overdue accounts past the 60-day mark, CSC can help.

Our first-party outsourcing service offers early intervention that sends a timely message to your patients. This little nudge is often all that’s necessary to resolve overdue accounts and keep them from being placed in full collection.

All our reminder letters include information about the medical bill, available payment options, and return-address envelopes for ease of payment. Your practice’s name, address and logo are evident in all communications, so we’re extra careful to preserve valuable patient relationships.
 
By sending these accounts over to us early in the process, we can optimize the window of opportunity and achieve maximum recovery. This frees up your time so you can focus on what you do best – providing your patients with exceptional healthcare.
 

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