Managing Patient AR: When and How to Utilize an Outside Collection Agency

9/8/20252 min read

Patient accounts receivable (AR) can be one of the trickiest parts of the RCM job. Insurance AR has clear processes, payer contracts, and submission timelines. Patient AR? That’s a mix of billing accuracy, payment options, and — let’s be honest — human nature.

The Reality of Patient AR

Patients are responsible for a larger share of healthcare costs than ever before, thanks to high-deductible health plans and shifting coverage models. Even with upfront estimates and payment plans, balances can linger past due. Over time, those balances:

  • Tie up cash flow

  • Increase administrative workload

  • Reduce the likelihood of full payment

  • Risk patient frustration (or worse, disengagement from your practice)

When to Consider Outside Collections

An outside collection agency shouldn’t be your first stop, but it can be a valuable tool when internal efforts aren’t getting results. Common triggers for outsourcing patient accounts include:

  • Aging balances beyond your standard collection period (e.g., 90–120+ days)

  • Multiple failed contact attempts (letters, calls, portal messages)

  • Returned mail or unreachable phone numbers

  • Payment plans in default

Remember: every organization’s threshold is different, but the sooner you identify accounts that won’t pay with standard follow-up, the more you can recover.

Benefits of Using a Collection Agency

  • Specialized Skills – Agencies have trained staff, advanced skip tracing tools, and tested strategies to locate and communicate with debtors.

  • Improved Recovery Rates – Collection agencies are often more effective at securing payment, especially for older accounts.

  • Time Savings – Free up your internal team to focus on current AR and proactive patient collections.

  • Legal Compliance – A reputable agency stays current on FDCPA, HIPAA, and state-specific debt collection laws.

Choosing the Right Agency

  • Healthcare Experience Matters – Medical debt has unique privacy and compliance concerns.

  • Transparent Fee Structure – Know the percentage or flat fee in advance.

  • Reputation and References – Ask for references from other practices or organizations.

  • Reporting Capabilities – Ensure they provide regular, detailed reports on recovery activity.

Protecting Patient Relationships

Even when you send an account to collections, your reputation is on the line. Partner with an agency that treats patients respectfully and understands that a patient might return for future care. Clear communication before accounts are sent — including final statements and courtesy calls — can soften the handoff.

The Bottom Line

Outsourcing patient AR to a collection agency is not about being aggressive — it’s about being realistic. Some accounts simply won’t be resolve in-house, and the longer you wait, the harder they are to collect.

Handled thoughtfully, a collection agency can be an extension of your RCM team, helping you recover revenue while maintaining compliance and professionalism.

In other words, it’s not “giving up” — it’s giving the account to someone whose whole job is to get it paid.