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Q: I'm looking to measure the effectiveness of our collection agency. Is there a best-practice benchmark for percentage of dollars collected on bad-debt accounts?

Patient Financial Services Weekly Advisor, June 18, 2004

A: Reporting results is one of the hottest topics in healthcare today. It is hard to determine what is a good practice for recovery because there can be several ways to obtain this number. Collection agencies often have multiple reports and often pick the one that looks best. Before you look at the effectiveness of your agency, determine how they are calculating their return so you can benchmark the number.

At our agency, there are two basic ways to calculate the recovery number. The first is a quick compare. Simply put, you take the placements, subtract the returns, and divide by the recoveries. This works well when the placements are steady each month. But if you have a fluctuation then the method will have extreme variance.

The second way-and preferred way in my mind-is called batch tracking. Here you look an each month's placements going back for a few years and compare the recoveries to that month's placements to get the recovery percentage. This is much more accurate because it accounts for large placement fluctuations. This method does not work well if you intermix old cleanup accounts with regular placements for one month.

Based upon these two methods, I would consider an agency working well for a hospital if they performed as follows:

1. Quick compare: 15-20%

2. Batch tracking

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