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Working in healthcare is a very rewarding and fulfilling profession. Whether you own your clinic or work at a hospital, you often encounter patients who require urgent medical attention. But, sometimes, when these very patients refuse to pay their hospital bills, you need the services of medical debt collection agencies.

But what is a medical debt collection agency? How do they work? Are they an ethical choice? How do you choose the right agency?

We will answer all these questions and more about medical debt collection companies.

What Is A Medical Debt Collection Agency?

A medical debt collection agency assists healthcare providers in recovering unpaid medical bills from patients. Hospitals, doctors’ offices, and clinics may have to engage with these agencies to collect their outstanding patient account balances.

Medical debt collection agencies provide services such as –

These debt collection agencies have experience in local and national laws and can help you retrieve outstanding payments legally. Healthcare collection agencies are not a one-size-fits-all. It’s important to understand how they work and select the one that best suits your organization’s unique needs.

Now, let’s understand the general workflow and what you should expect when working with collection agencies.

How Do Medical Debt Collection Agencies Work?

How do medical debt collection agencies work?

You can hire a medical debt collection company when you have patients who refuse to pay their medical bills, even after your staff has made multiple attempts to contact them.

When you register a debt with the healthcare collection agency, they take the following measures to collect the payment from patients –

1. Initial Patient Communication:

The collection agency for medical bills will contact your patient through letters, emails, or phone calls to inform them about the outstanding debt. They establish an open communication channel to educate the guarantor that there is an outstanding balance and why. They may provide itemized bills and discuss your current financial situation.  

2. Payment Plans:

A medical bill collection agency understands the complexities of each patient’s unique situation and offers guidance on bill repayment. If the patient cannot pay the whole due amount at a time, the agency helps create a payment plan that suits their financial situation. This way, the patient feels better knowing they are doing the right thing by paying for a service they’ve already received. 

When a guarantor defaults on a payment plan, the collection agency may re-establish the plan by contacting the guarantor and when the balance is above $500, they may also report the debt to the credit bureaus to prompt payment in the future.

3. Legal Action (If Necessary):

If the standard communication and negotiation methods don’t lead to a resolution, the agency may recommend legal action. They may have resources to do this for you or you can choose an Attorney you are comfortable working with that is local to your organization. Depending on the situation, this may involve filing a lawsuit, adding a lien on your assets, wage garnishments, or obtaining a court judgment to compel payment.

4. Recovery and Remittance:

As the payments are collected, the agency remits money back to your organization on a monthly basis. They can take their fees immediately from the recoveries or they can send you 100% of the collectables and send an invoice for the fees due back to them.

This is the general process that medical debt collection agencies follow to get payments. But keep in mind, that although the overall process remains the same, it has to be customized to suit the requirements of each healthcare organization. For example, the debt collection process for patients with aged accounts would differ from those that are closer to the original date of service.

It is essential to find the right medical collections company that understands your organization’s mission and vision while supporting your solid community reputation. We encourage you to research to find the best collection agency for medical bills by using the steps outlined above.

Step-by-step Guide To Find the Best Medical Debt Collection Agency

A step by step guide to finding the best medical debt collection agency

Selecting the right medical debt collection firm is absolutely crucial. The company communicates with the patient on the organization’s behalf. The sensitive nature of medical information requires strict compliance to protect patient confidentiality. 

You need an agency that respects the patient’s financial situation and communicates with them in a respectful manner. It’s important for you to choose a reputable agency to collect medical bills that align with your values and practices. Otherwise, it could harm your organization’s reputation.

Here is how you can find the best medical debt collection agency for your needs- 

1. Define Your Needs:

It is important to be clear about your requirements, so you can hire the agency that aligns with your goals. Clearly outline your requirements in a document. Include details like the number of unpaid accounts, the types of medical debts, average account age and balance, the timeframe to work your accounts, and the specific medical debt collection services you need. This will help simplify your research and shortlisting process.

2. Research and Shortlist:

Research and create a list of reputable medical debt collection agencies in your region. In this stage, you need to create filtering criteria. Consider factors such as experience, industry reputation, healthcare exclusivity, client testimonials, patient testimonials, and appropriate licenses.

3. Check Compliance and Licensing:

Ensure the agency is licensed and compliant with relevant regulations like Reg F, the Fair Debt Collection Practices Act (FDCPA), and the Health Insurance Portability and Accountability Act (HIPAA) to name a few.

4. Personalized Services:

Ask the agency if they are willing to create a personalized strategy for you. A one-size-fits-all approach does not generally yield results in debt collection. You need a collection agency that creates a custom strategy considering your needs, community demographics, and your patient’s profile.

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5. Discuss Legal Measures

Most reputable medical debt collection agencies prioritize amicable resolutions over legal action. However, if the patient is not compliant, you may need to take a legal course of action. Make sure to consider how this may impact your reputation within your community and discuss beforehand how the agency will assist you in such cases.

6. Data Management And Security

The medical debt collection agency you work with will have access to sensitive patient records, including personal health information such as social security numbers, date of birth, home addresses, and diagnosis/treatment details. Therefore, it is vital that the company has a stellar data management and storage system in place so that your practice’s records and patient information are safe.

7. Get a Detailed Cost Breakdown

Lastly, request a complete breakdown of the agency’s fees. Collection agencies for medical bills may have hidden charges and expenses. So, ask them to provide a detailed fee structure that includes all upfront costs and mentions all the fees that could occur during the medical debt collection process.

Following the steps mentioned above, you can find the best medical debt collection agency for your organization. Make sure to thoroughly check the background of the collections company before hiring them. You can even consider talking to previous clients to understand how the agency works on a daily basis.


Outstanding debt can create a myriad of problems for healthcare providers. Without proper compensation, you may not be able to grow your practice and help patients in need. By hiring the top medical debt collection company, you can leave the collection of payments to them and focus on your patient’s recovery.

Want a technology-forward debt collection agency?

MDS is an industry leader in the collection of medical debts, providing smarter, AI-powered solutions to streamline your payment collection process. We can help you set up automated processes to track and collect payments, verify insurance details, screen patients, and provide an unparalleled patient experience.