Healthcare debt collections refer to the process by which medical providers or institutions attempt to recover unpaid bills from patients for medical services they have received. When patients cannot pay their medical bills in full, they may end up with medical debt, which can be turned over to collections agencies or managed internally by the healthcare provider.

Billing and Payment

When a patient receives medical services, the provider bills the patient or their insurance company for the services rendered. The patient is generally responsible for any co-pays, deductibles, or expenses not covered by insurance.

Unpaid Bills

If the patient cannot pay their medical bill in full or disputes the charges, the bill can go unpaid. This can lead to the accumulation of medical debt.

Internal Collections

Many healthcare providers have internal processes for handling unpaid bills. This can involve sending reminder notices, making phone calls, and working with patients to set up payment plans.

External Collections Agencies

If the provider is unable to collect the debt internally in healthcare revenue cycle management, they might choose to enlist the services of a third-party collections agency. These agencies specialize in debt recovery and are contracted to pursue the debt on behalf of the provider. The collections agency will often charge a fee or take a percentage of the amount they are able to recover.

Healthcare debt collections can have a significant impact on credit scores, similar to other types of debt collections. Here's how it generally works:

Initial Impact

When you have an outstanding medical bill that goes unpaid, the healthcare provider may eventually send the debt to a collection agency. This agency will then attempt to collect the debt from you.

Collection Account

Once healthcare debt collection is with a collection agency, it can appear as a separate entry on your credit report. This new entry is called a "collection account." This negative mark can significantly lower your credit score.

Credit Reporting

The collection agency will report the collection account to the major credit bureaus (Equifax, Experian, and TransUnion). This reporting will typically include information about the debt amount, the date it went into collections, and the details of the original creditor (the healthcare provider).

Credit Score Impact

The presence of a collection account on your credit report can cause a significant drop in your credit score. This drop can vary depending on your credit history and the scoring model used, but it's not uncommon for scores to drop by 50-100 points or more.

Credit History

The negative impact of a collection account lessens over time as it ages on your credit report. However, it can still remain on your report for up to seven years from the original delinquency date, even if you pay off the debt.

Paid vs. Unpaid Collections

While paying off a collection account of healthcare debt collection is generally seen as a positive step, it might not entirely erase the damage done to your credit score. Some scoring models may still consider the fact that the collection occurred in the first place, even if it's been paid. However, having a paid collection is usually viewed more favorably than an unpaid one.

Credit Repair

If you believe there's an error with the collection account or you've resolved the debt, you can work on repairing your credit. You can dispute inaccuracies with the credit bureaus and provide documentation of your payment to the collection agency.

Wrapping Up

It's important to note that credit scoring models can vary, and different models might treat medical debt collections differently. Additionally, newer credit scoring models, like FICO 9 and VantageScore 4.0, weigh medical debt collections less harshly than other types of debt collections. Nevertheless, it's still essential to address any collection accounts as they can have a lasting impact on your creditworthiness and your ability to secure favorable terms for loans and credit in the future.