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Debt collection agencies may need special approaches to medical debt

Mar 27, 2013 Philip Burgess

Debt collection agencies may need special approaches to medical debt

For professional debt collection agents, it may sometimes be easy to forget that good customer service is an important part of any job in the collection industry. While dealing with past-due accounts may be second nature to workers, many debtors are likely to be nervous and unsure of how to broach their financial problems. It is important for employees in this field to develop a strong understanding of how to best meet consumer needs, especially when unfortunate circumstances like medical issues are involved.

Collecting with kindness

According to Healthcare Finance News, Hubert Fu, an anesthesiologist in Dallas, Texas, recently decided to create Debt M.D., a physician-run debt collection agency to address the nuances of collecting medical debt. As a doctor who dealt with billing problems daily, he realized that collection can be a difficult issue in the healthcare industry. Instead of owing money due to poor purchase choices, most of these debtors had been forced into their current problems because of unforeseeable events. While he could maintain a strong doctor-patient relationship with debtors when the accounts were still under the hospital's control, he found that many debt collection agencies had trouble dealing with these individuals with due compassion.

"Traditionally, only 3 percent to 10 percent of assigned collections is ultimately collected," Ray Cox, vice president of business development and principal at Debt M.D, told the source. "Even if we take only small amounts of payments, but we are able to collect 20 percent, 30 percent, 40 percent of the money owed - in this industry, that is unheard of."

Cox and Fu plan to do this through offering more flexible plans and prioritizing customer service.

Consumers may be confused
When it comes to medical debt, the rules are sometimes less obvious than when dealing with other lines of credit. According to financial blog MintLife, some people with this type of delinquency may not be immediately aware of the consequences. This may be because healthcare providers will attempt to collect overdue bills on their own for a period of time with no penalties, such as reporting past due accounts to a credit bureau. This lulls some individuals into a false sense of security.

However MintLife stressed that after a few months of attempting to collect, medical facilities are likely to pass the responsibility on to a professional debt collection firm. This is when the game changes and delinquent accounts are reported to major credit reporting agencies. Some people even believe that medical debt is removed from credit reports once paid, the source noted, even though this is not the case. It seems that a good deal of education may be necessary for debtors to adequately address their responsibilities of repayment.

How can collectors help?
In order to ensure more frequent successful debt collection, agencies may benefit from being proactive, and not necessarily when it comes to asking for payment. It could be worthwhile for businesses in this field to help consumers comprehend how medical debt works. Some may still harbor incorrect ideas about the potential impact of overdue healthcare charges on their consumer credit reports, which could be one reason some debtors are lax when it comes to making payments. It is important that they understand medical bills can have just as devastating an impact on their lives as those related to credit accounts. Since debt collection agents are well-versed in how scores work, they can help clients develop fuller knowledge of their situations and hopefully avoid similar ones in the future.

What Fu and Cox have done should serve as a wake-up call to collection agencies. It is essential to collect with understanding and compassion, not just diligence. Debtors are more likely to cooperate if they feel they are respected, and even if they can't pay now, coming up with a tailored plan together may raise the likelihood of future payment.