Unpaid patient bills remain a significant challenge for physician practices, especially as high-deductible plans, rising co-pays, and growing patient financial responsibility become the norm. Yet how a practice collects unpaid bills matters, both for patient trust, and for compliance with ethical and institutional guidelines.
As a physician or practice manager, it’s more important than ever to ensure your billing and collections processes are transparent, fair, and clearly communicated. Below we outline what modern best practices look like and how you can build policies that protect your practice and respect your patients.
Why clear, ethical collections policies matter
- Ethics and trust. The AMA’s Code of Medical Ethics makes clear that physicians should be “candid about financial matters,” and that patients must be notified in advance about policies regarding payment, delinquent accounts, interest or finance charges, and when accounts may be sent to collections.
- Patient dignity & access. The AMA also urges discretion and compassion, especially for patients with financial hardship, limited resources, or other vulnerabilities.
- Protecting your practice. Without proper procedures, practices risk patient alienation, reputational damage, and even regulatory/legal challenges. As other providers and hospitals have learned, detailed, consistent policies help avoid “collection drama.”
What a best-practice collections policy should include (from intake to collections)
A robust policy should clearly define the entire lifecycle of billing and collections from the first patient interaction to the point of agency referral. Here’s what that often looks like:
- Pre-registration & intake transparency
- Collect accurate, complete demographic and contact information (address, phone, email, employer, insurance info, etc.) at the time of preregistration or intake. This ensures proper follow-up if payment becomes delinquent.
- Verify insurance coverage before each visit (especially under high-deductible plans or fluctuating coverage).
- Require patients to read and sign a written financial policy at first visit. It should clearly state expectations: when payment is due, co-pays, self-pay procedures, and financial assistance or payment plan options if available.
- Collect accurate, complete demographic and contact information (address, phone, email, employer, insurance info, etc.) at the time of preregistration or intake. This ensures proper follow-up if payment becomes delinquent.
- Upfront and point-of-service payments where appropriate
- Collect co-pays, deductibles, or any past-due balances at the time of service, whenever possible. According to practice-management data, once a patient leaves the office, recovery rates drop dramatically.
- For self-pay or out-of-network patients, consider offering a discount for full payment at time-of-service. Many practices use a consistent fee schedule and provide transparent discounts to self-pay patients.
- Collect co-pays, deductibles, or any past-due balances at the time of service, whenever possible. According to practice-management data, once a patient leaves the office, recovery rates drop dramatically.
- Clear billing & communication after the visit
- Send statements promptly (e.g., monthly) with clear, itemized charges, explanation of what’s owed, and a plain-language summary of payment terms. This reduces confusion and builds trust. The guidelines of American Hospital Association (AHA) emphasize clear and patient-friendly billing communications.
- On the statement, highlight availability of payment plans, financial assistance (if applicable), and contact info for billing questions.
- Send statements promptly (e.g., monthly) with clear, itemized charges, explanation of what’s owed, and a plain-language summary of payment terms. This reduces confusion and builds trust. The guidelines of American Hospital Association (AHA) emphasize clear and patient-friendly billing communications.
- Defined timeline for internal collections efforts
- Your policy should state when follow-up statements or reminders will be sent, how many attempts will be made, and when the account may be considered delinquent. Many practices find a schedule such as 1–2 statements followed by a final reminder effective.
- If the patient hasn’t responded after those efforts, offer payment-plan options before proceeding further, especially for patients with financial hardship. This approach aligns with the AMA’s exhortation to use discretion and compassion.
- Your policy should state when follow-up statements or reminders will be sent, how many attempts will be made, and when the account may be considered delinquent. Many practices find a schedule such as 1–2 statements followed by a final reminder effective.
- Policy for when to refer to third-party collections
- Ensure that no account is sent to a collection agency without the physician’s knowledge. AMA guidance requires physician oversight for collections.
- If you do use a collection agency, choose one that abides by legal and ethical standards (e.g., complies with the Fair Debt Collection Practices Act), and clearly define in your policy what actions the agency may and may not take (e.g., letters/phone calls only, no liens, no wage garnishment without case-by-case review). This mirrors recommendations made under hospital-level guidelines.
- Establish minimum thresholds (e.g., outstanding balance size, age of debt) before referring to collections or require multiple failed internal outreach attempts first.
- Ensure that no account is sent to a collection agency without the physician’s knowledge. AMA guidance requires physician oversight for collections.
- Financial assistance / hardship protocols
- Define a transparent charity or hardship policy (e.g., sliding-scale, discounted rates, payment plans, write-offs) when patients lack financial capacity. AMA ethics and hospital-industry guidelines urge that practices consider patients’ ability to pay and offer fair treatment.
- Be prepared to communicate these options proactively, especially for uninsured, underinsured, or economically vulnerable patients.
- Define a transparent charity or hardship policy (e.g., sliding-scale, discounted rates, payment plans, write-offs) when patients lack financial capacity. AMA ethics and hospital-industry guidelines urge that practices consider patients’ ability to pay and offer fair treatment.
- Documentation, oversight & staff training
- Have physicians or administrative leadership review bills before they go to collections, especially if using a third-party agency.
- Train front desk and billing staff on your policies, payment expectations, billing scripts, payment-plan preset options, collection thresholds, and how to communicate with patients respectfully and clearly. As noted in earlier guidance, many practices under-collect because front-office staff are not comfortable or properly trained to discuss money.
- Reassess your policies annually, especially if there are changes in insurance landscapes, patient demographics, or regulatory guidelines. The hospital billing-collection guidelines recommend annual review by governing bodies.
- Have physicians or administrative leadership review bills before they go to collections, especially if using a third-party agency.
Why transparency and patient communication are more critical than ever
Today’s patients are more informed and more sensitive than ever to potential scams, identity theft, and surprise medical bills. Without clear communication, a patient may assume a late payment notice or collection-agency letter is fraudulent. That can erode trust, damage your reputation, and deter patients from returning.
To prevent this:
- Use official office or practice contact channels when sending billing reminders or collection-related notices (e.g., practice-branded email domains, secure patient portal, mailed statements on office letterhead).
- On any email or text, include the date of service, amount owed, and a phone number or portal link where patients can log in to verify balances or ask questions.
- Encourage patients who are unsure to call the front desk directly before responding, and inform them proactively that you may send electronic or written notices, so they’re not surprised.
- Consider providing a short “billing FAQ” on your website that explains how you bill, when bills go out, what a bill or collection notice looks like, and how patients can verify it’s legitimate.
Transparent communication builds trust, reduces confusion (or suspicion of “scam”), and improves the likelihood of payment, or at least a patient conversation about payment plans or hardship.
Aligning Collections with AMA Ethical Standards
According to the latest version of the AMA’s Code of Medical Ethics:
- Physicians must clearly notify patients in advance about their financial and collections policies, including when payment is due, when interest or finance charges may apply, and when delinquent accounts will be referred to collections.
- No bills should be sent to collections without physician knowledge.
- Physicians should use discretion and compassion, especially for financially vulnerable patients and consider financial hardship carefully before applying late fees, finance charges or collection referrals.
- Fees for services must be reasonable and reflect the nature of services provided.
A well-structured collection policy that reflects these principles helps ensure that your practice remains ethically sound, patient-centered, and financially stable.
Key Takeaways
- A written billing and collections policy establishes clear expectations for patients and staff.
- Collecting patient balances at the time of service significantly improves reimbursement.
- Transparent communication helps reduce confusion, disputes, and delayed payments.
- Payment plans and hardship policies promote patient satisfaction while supporting collections.
- Regular staff training ensures financial conversations are handled consistently and professionally.
- Annual policy reviews help practices remain compliant with changing regulations and payer requirements.
Frequently Asked Questions
What is the difference between medical billing and medical collections?
Medical billing involves submitting claims, posting payments, and collecting patient balances as part of the normal revenue cycle. Medical collections begin only after a patient account becomes seriously delinquent and internal collection efforts have been unsuccessful. A strong billing process can significantly reduce the number of accounts that require collection activity.
What should a medical practice include in its billing and collections policy?
A comprehensive billing and collections policy should outline payment expectations, insurance verification procedures, point-of-service collections, billing timelines, payment plan options, financial hardship policies, and when unpaid accounts may be referred to a collection agency. The policy should be communicated to patients before services are provided.
Should patients sign a financial policy before receiving care?
Yes. Every practice should ask new patients to review and sign a financial policy during registration. This helps establish clear expectations regarding co-pays, deductibles, payment deadlines, insurance responsibilities, and collection procedures, reducing misunderstandings later.
When is the best time to collect patient payments?
The most effective time to collect patient financial responsibility is at the time of service. Collecting co-pays, deductibles, and outstanding balances before the patient leaves the office significantly improves collection rates and reduces administrative costs.
How long should a practice attempt internal collections before sending an account to collections?
There is no universal standard, but many practices send multiple statements and reminders over several weeks or months before referring an account to a collection agency. Offering payment plans and discussing financial hardship before escalating collections is considered a best practice.
Can a physician send a patient's account to collections without notifying them?
Patients should be informed in advance through the practice's financial policy that delinquent accounts may be referred to collections. According to AMA ethical guidance, physicians should maintain oversight of accounts sent to collection agencies and ensure patients understand the practice's collection policies.
What should practices do before referring an account to a collection agency?
Before sending an account to collections, practices should verify insurance processing, confirm the balance is accurate, communicate with the patient, offer payment plan options when appropriate, and document all collection attempts.
Should medical practices offer payment plans?
Yes. Offering reasonable payment plans can improve collections while supporting patients experiencing financial hardship. Flexible payment options often reduce the need for third-party collections and help preserve positive patient relationships.
How can front desk staff improve patient collections?
Proper training is essential. Staff should confidently discuss financial policies, verify insurance benefits, collect patient responsibility at check-in, explain payment options, and answer billing questions with professionalism and empathy.
How often should a billing and collections policy be reviewed?
Practices should review their billing and collections policies at least annually or whenever there are significant changes in payer requirements, regulations, or internal workflows. Regular reviews help ensure compliance and improve operational efficiency.
How can outsourcing medical billing improve patient collections?
Experienced medical billing companies can streamline billing processes, improve patient communication, monitor accounts receivable, identify collection trends, reduce claim denials, and implement consistent collection policies that improve cash flow while maintaining a positive patient experience.
How AMS Can Help
At AMS, we understand how challenging and sensitive billing and collections can be for physician practices. That’s why we offer:
- Front-Desk Training: Equip your team with the skills, scripts, and confidence to collect co-pays, outstanding balances, and past-due amounts all with professionalism and sensitivity.
Read More about: Practice Administration Coaching - Revenue Cycle Consulting & Policy Design: We can help you draft a full billing and collections policy that covers preregistration, intake, billing, follow-ups, hardship assessments, payment-plan options, and third-party collections guidelines fully aligned with AMA ethics and modern best practices.
- Billing Support & Collections Management: If you prefer to outsource, we manage billing and collections while maintaining transparency and respect for patients, reducing your administrative burden.
If you’re ready to modernize your collections approach and ensure compliance and patient trust, contact AMS today.
