Medical Debt Collection Cost

How Much Does it Cost to Hire a Medical Debt Collector?

Medical debt collection is an essential aspect of healthcare revenue cycle management that ensures service providers are compensated for their services. But just like any business service, it has associated costs. Understanding these costs can help medical institutions make informed decisions when selecting a debt collection agency. At Fair Medical Debt Collection, we understand the importance of this knowledge and have prepared a comprehensive guide to inform and enlighten you.

What Does a Medical Debt Collection Agency Do?

Debt collection agencies specialize in collecting debts of accounts that are past due. These agencies work on behalf of healthcare providers to collect unpaid medical bills. The activities performed by these agencies include:

  1. Tracking unpaid accounts.
  2. Contacting patients via letters, phone calls, emails, or SMS.
  3. Negotiating payment plans and settlements.
  4. Complying with all legal requirements.
  5. Recording all interaction for future reference.
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Factors That Determine Medical Debt Collection Costs

Several factors influence how much a medical debt collection agency will charge for its services:

  1. Collection Strategy: Some agencies charge based on the complexity of the collection strategies they employ. More complex strategies require more resources and will therefore cost more.
  2. Volume and Age of Debt: The number and age of the debts you want to collect also affect the cost. High-volume, older debts typically cost more to recover.
  3. Contingency Fees: Many debt collection agencies work on a contingency basis, charging a percentage of the debt they recover. This percentage can range anywhere from 20% to 50%, depending on the specifics of the debt and the agency’s policy.
  4. Fixed Fees: Some collection agencies charge a flat rate per account. These rates can range anywhere from $10 to $15 per account, regardless of the amount owed.
  5. Legal Fees: If the debt recovery process involves legal action, additional fees might be charged to cover legal costs.

Cost Analysis: Contingency vs. Fixed Fees

  1. Contingency Fees: This is a no-success, no-fee model. If the agency doesn’t recover the debt, you owe them nothing. This is an attractive model as it reduces the risk for the service user. However, if the agency is successful, the fee can be substantial, especially for large debts.
  2. Fixed Fees: These are ideal for businesses with a high volume of low-value debts. They allow you to budget effectively for debt recovery, but they don’t provide the same motivation for the agency to recover the debt as contingency fees.

Choosing a Medical Debt Collection Agency

When choosing a medical debt collection agency, cost should not be the only deciding factor. Other considerations include:

  1. The agency’s track record in medical debt collection.
  2. Their understanding of and compliance with the Fair Debt Collection Practices Act (FDCPA) and Health Insurance Portability and Accountability Act (HIPAA).
  3. Their methods of communication and customer service.
  4. The transparency of their processes and reporting.

Budgeting for Debt Recovery

Medical debt collection costs can be a significant line item for healthcare providers. Understanding the costs involved and what factors contribute to these costs is crucial when budgeting for debt recovery. It is also important to compare these costs against the potential recovery to ensure you are making the best decision for your healthcare practice. At Fair Medical Debt Collection, we are committed to providing transparent, efficient, and cost-effective debt collection providers that comply with all industry and legal standards.

Calculate The Cost of Medical Debt Recovery Services

In general, the cost of medical debt recovery will fall between 10% to 20% of the revenue collected. Keep in mind that the actual cost of medical debt recovery may vary depending on several factors such as the age of the debt, total debt volume, your specific arrangement with the collection agency, and whether legal action is required. However, here are average expectations of the cost to collect medical debt:

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Contingency Fees

Contingency fees vary greatly depending on the factors mentioned above. However, here are some general guidelines:

  • For debts less than 90 days old, you might expect to pay around 20-25% of the collected debt.
  • For debts 90-120 days old, the percentage may rise to about 25-30%.
  • For older debts, say 1-2 years, the percentage can climb to 30-50%.
  • Debts older than 2 years can attract rates as high as 50% or more due to the increased difficulty and resources required to collect.

It’s important to note that in the contingency fee model, if the agency fails to collect the debt, you don’t owe them any fees.

Fixed Fees

Fixed fee services often provide services up-front for a set cost per account. Here are some general guidelines:

  • For low balances (below $200), you might expect to pay a fixed fee of around $10-$20 per account.
  • For moderate balances (between $200-$1000), the fixed fee might be between $20-$30 per account.
  • For higher balances (above $1000), fees can range from $30-$40 or more per account.

Legal Fees

If a debt needs to be collected through legal action, there can be additional costs:

  • Attorney fees can range from $150-$500 per hour, depending on the complexity of the case and the lawyer’s experience.
  • Court filing fees vary by jurisdiction, but they generally range from $50-$500.
  • Other costs may include process server fees (around $50-$100), and fees for witnesses, depositions, and other court costs.

Remember, these are generalized cost structures, and your costs may vary depending on your specific circumstances and the agency you work with. Always ask for a detailed fee structure and make sure you understand all potential costs before engaging a collection agency.

It’s crucial to weigh these costs against the potential return you’ll get from successfully collecting the debt. Your internal cost of collection, time, resources, and the impact on patient relationships are also important considerations when deciding to use a collection agency.

In-House vs. Outsourcing: Navigating the Maze of Medical Debt Collection

Medical debts account for a significant portion of overdue debts in the U.S., posing a unique challenge for healthcare providers. Recovering these funds is vital to the financial health of any medical institution. However, the question remains – should you handle medical debt collection in-house or outsource it to a professional agency? Both approaches have their merits and shortcomings. This article will delve into these two options, helping you make an informed decision.

In-House Medical Debt Collection


  1. Control: In-house debt collection provides control over the entire process. You can set your protocols, adjust them as needed, and closely monitor every step.
  2. Patient Relationship: Your staff already has a relationship with patients and may have a better understanding of their situations, which could lead to more empathy and a better approach to debt collection efforts.
  3. Cost: There’s a potential for cost savings since you’re not paying a percentage of the collected debt to an agency.
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  1. Time-Consuming: Medical debt collection can be a lengthy process. Your team might spend a considerable amount of time on tasks that are not their primary duties.
  2. Regulation Navigation: Medical debt collection is highly regulated under acts such as the Fair Debt Collection Practices Act (FDCPA) and Health Insurance Portability and Accountability Act (HIPAA). Failure to comply can lead to hefty fines and damage to your reputation.
  3. Resource Intensive: Effective debt collection requires dedicated tools and resources. You’ll need a well-trained staff, a robust system to manage and track collections, and possibly legal assistance.

Outsourcing Medical Debt Collection


  1. Expertise and Efficiency: Debt collection agencies are experts in their field. They have proven strategies, experienced personnel, and the necessary tools to optimize the debt recovery process.
  2. Regulatory Compliance: Professional agencies are well-versed in laws surrounding debt collection, reducing the risk of legal complications.
  3. Focus on Core Tasks: Outsourcing allows your staff to focus on their primary responsibilities such as patient care, instead of chasing overdue accounts.


  1. Cost: Most collection agencies work on a contingency fee basis, taking a percentage of the collected debt. This could be a significant cost depending on the size and volume of the debts.
  2. Patient Relations: Outsourcing can potentially risk the patient-provider relationship, as the agency might not handle patients with the same level of care and understanding as your staff.
  3. Lack of Control: Once you outsource your debt collection, the process is largely out of your hands. While most agencies provide regular reports, you may not have the same level of control and insight into the process.

Weighing the Options

Whether to opt for in-house or outsourced medical debt collection largely depends on the specific needs and capacities of your healthcare practice. Consider factors such as the volume and age of your debts, the resources you have available, the potential impact on patient relationships, and your comfort level with the regulatory landscape.

For many practices, a hybrid model often works best. They handle early-stage collections in-house to maintain control and patient relationships, and outsource older, more difficult debts to a collection agency. This combines the best of both worlds, capitalizing on the expertise of professional collectors when needed while maintaining a level of control.

Remember, the goal is to recover as much debt as possible without compromising your relationship with patients or straining your resources. Assessing your specific situation against the advantages and disadvantages of each option will help guide you to the most beneficial choice.

Flat Fee Collections: An Overview

In the realm of debt recovery, there are different pricing models adopted by collection agencies, one of which is the flat fee collections model. This model is gaining traction due to its simplicity, cost-effectiveness, and predictability. This article will provide a brief yet comprehensive understanding of what flat fee collections are and how they operate.

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Understanding Flat Fee Collections

Flat fee collections are a pricing model used by debt collection agencies where a fixed price is charged for each account placed for collection. This fee is paid upfront and is independent of the debt’s size or whether the agency successfully recovers it.

Unlike contingency-based models, where the agency takes a percentage of the recovered debt, the flat fee model offers a more predictable and often less expensive approach to debt recovery.

How Flat Fee Collections Work

Once you’ve handed over the accounts to the collection agency, they begin the debt recovery process, which usually involves contacting the debtor through various means and negotiating a settlement or payment plan. This process remains the same regardless of the size of the debt or how long it takes to recover it. You pay a set fee per account, allowing for more predictable budgeting.

Advantages of Flat Fee Collections

  1. Cost Predictability: With a flat fee, you know exactly how much each collection effort will cost, aiding in accurate budgeting and forecasting.
  2. Simplicity: The flat fee model is straightforward. You pay a one-time fee, and the agency handles the rest, which can simplify the process.
  3. No Recovery, No Additional Loss: If the agency is unsuccessful in collecting the debt, you don’t incur additional costs as you would with a percentage-based collection model.

Disadvantages of Flat Fee Collections

  1. Upfront Cost: The fee is usually paid upfront, which might not be favorable for businesses with tight cash flow.
  2. Risk of Service Quality: There’s a potential risk of lower service quality since the agency’s payment is not tied to successful recovery. This may lead to less motivation for the agency to aggressively pursue harder-to-collect debts.

Flat fee collections can be an attractive option for businesses looking for cost-effective and straightforward debt recovery solutions, particularly when dealing with high volumes of low-value debts. However, like any financial decision, it is crucial to weigh the advantages and disadvantages against your business needs and circumstances.

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