When Spectrum Health, a seven-hospital system in western Michigan, decided agencies last year, it used a much more extensive selection process than ever before to seek bids from collect.

In the past, selection was based primarily on two factors: the vendor's track record for collections and the total cost to Spectrum Health, says Joseph J. Fifer, FHFMA, vice president of hospital finance. The most recent selection process, by contrast, used a score sheet to compare potential vendors on a wide range of factors.

"This is directly related to where I think this industry is going," says Fifer. "There is so much more transparency in the whole collection process. This time, we used many more qualitative factors, but we reduced how we made the selection to a science."

Ami Kihn, Spectrum Health's director of patient financial services, says neither the amount of money collected nor the cost of collections were foremost factors in the decision.

"Our community relationship is very important to us, and it was important that value be carried all the way through the collection agency process," she says. "So, yes, if it meant paying a little bit more for that, it was worth it."

 

 Criteria for Turning Accounts Over to Agencies

Kihn spearheaded the process of choosing and contracting with two new collection agencies. Spectrum Health uses the collection agencies only for accounts that are not collected through several in-house protocols. When a patient schedules an appointment, Spectrum estimates the out-of-pocket responsibility and offers the patient payment options-up to a no-interest payment plan that extends out 25 months.

At least three billing statements are mailed to patients who have not worked out payment in advance, followed by phone calls from Spectrum Health staff or, for smaller balances, via an automated dialer campaign. Then, if necessary, two additional letters are sent, notifying the patient that the account is about to be turned over to a collection agency.

 

 The Agency Selection Process

Spectrum Health went through several steps before choosing two collection agencies:

Requests for proposals distributed. A lengthy request-for-proposal questionnaire was distributed to possible candidates. Responses were graded on a score sheet that allowed Spectrum Health to compare strengths and weaknesses on various attributes. Categories evaluated included:

  • Organizational experience with various service lines (for example, acute care, long-term care, and skilled nursing facilities)
  • Organizational values
  • Key performance indicators, such as recovery rates, netbacks, complaints related to the Fair Debt Collection Practices Act, and accounts per collector
  • Online/system capabilities and access to reports/account data
  • Collection staff qualification requirements/training

Presentations by candidates. The top candidates were invited to make a presentation to a group of Spectrum Health staff members who represented various service lines throughout the continuum of care. "We made it very clear that we wanted them to bring in an individual who would be handling our account and actually talking to our patients," says Kihn. "We didn't want to only hear from their sales staff."

Site visits. A team from Spectrum Health made site visits to each of the finalists. "You really learn a lot about collection agencies when you listen to the actual calls that they're making and hear the conversations that they're having with patients," she says. "We could see the kind of safeguards they were taking for patient privacy and protections against any kind of identity theft, and also how they were handling the actual collection of the debt."

The process was time consuming, but Kihn was never asked to justify the amount of effort involved. "It's really important to get this right," she says. "If we don't, we could negatively impact people emotionally or financially, and that doesn't fit with our core values."

Publication Date: Friday, May 01, 2009