The clinical slide of your work is just one half of the equation if you run a small medical practice. The other half – billing, coding, collections – is where a lot of practices bleed their revenue. 

According to data from Kodiak Solutions, the initial claim denial rate hit 11.81% in 2024, up from around 10.2% just a few years prior, so we can see that even a modest denial rate turns into a serious cash flow disruption when you’re seeing patients every day.

So let’s break it all down:

– What medical billing and collections involves

– What the legal landscape looks like

– How to make sure your practice doesn’t leave money on the table

What Is Medical Billing and How Does It Connect to Collections?

Medical billing is the process of translating the care you provide into standardized codes and submitting those to insurance payers for reimbursement. When a claim is paid in full, that’s the best-case scenario. When it isn’t – denied, partially paid or ignored – that’s where collections come in.

Collections are where you recover the outstanding balance from either the payer or the patient. These are two very different conversations, since payer disputes mean navigating the insurer-specific appeals process and understanding exactly why a claim was flagged. 

Patient collections, on the other hand, are governed by federal law and require a more careful approach.

Why Claims Get Denied in the First Place

Denials usually come down to a handful of recurring issues. Missing or incorrect patient information is the most common culprit – a 2023 AKASA report found that eligibility errors and missing prior authorizations were the top drivers of denials. 

Coding inaccuracies are a close second. In 2023, MDaudit data showed that 56% of medical coders failed audits, which gives you a sense of how high the stakes are when it comes to documentation accuracy.

But there are other fairly common causes:

– Prior Authorization Issues: Either missing or not updated in the payer’s system

– Coverage Verification Errors: Billing a service not covered under a patient’s current plan

– Duplicate Claim Submissions: Often a system error, but still a denial trigger

– Timely Filing Violations: Submitting outside the payer’s deadline window

The reality is that many of these are entirely preventable with the right processes in place, which we’ll come onto later. A clean claim – one submitted the first time correctly – significantly reduces all that back-and-forth that drains your staff time and delays reimbursement.

Understanding the Collections Process

When a balance isn’t resolved through initial billing, your practice has to start thinking about collections. This breaks into two phases: 

1. Internal collection efforts (your staff following up with patients and payers directly)

2. External collections (turning accounts over to a third-party agency)

Internal Collections

Most practices handle the first round of patient outreach in-house – statements, payment reminders, phone follow-ups. This works reasonably well for patients who intend to pay but need a nudge. 

The challenge is that medical debt is extraordinarily common. A 2024 survey found that 36% of U.S. households had some form of medical debt, and 21% had a past-due bill. That’s a significant slice of the patient population your practice is dealing with on any given day.

External Collections and the FDCPA

When internal efforts stall, some practices hand accounts to a third-party collection agency. The moment that happens, federal law kicks in – specifically the Fair Debt Collection Practices Act (FDCPA), which is enforced by the FTC and CFPB. 

The FDCPA sets firm rules: 

– No contact before 8 AM or after 9 PM

– No more than seven calls in a seven-day period about the same debt

– No threatening arrest or actions the collector can’t legally take

– Mandatory written debt validation within five days of first contact

HIPAA adds another layer. Any agency handling your patient accounts is technically a Business Associate under HIPAA, which means a fully executed Business Associate Agreement (BAA) must be in place before a single account is transferred. Getting this wrong creates legal exposure for your practice.

Why Outsourcing to PMN Makes Sense for Small Practices

For a small practice, managing billing in-house sounds practical until you start adding up the cost of denials and all the ongoing training needed to stay current with payer requirements. This is exactly where PMN comes in.

PMN handles all the administrative paperwork – billing, coding, claim submission and follow-up – so your team can focus on patients. With over 20 years of experience across a range of medical specialties, we understand the nuances that cause claims to get rejected and build that knowledge into every submission. 

Our goal is to make sure you have clean claims that get paid promptly, with minimal denials and no unnecessary delays. If you’re spending more time chasing reimbursements than you’d like, let’s have a chat and see how we can help.

Are you interested in learning more about how our medical billing and coding services work? Get in touch by calling (949) 215-5055 or visiting our office in Laguna Hills, Orange County, California!

FAQs

What’s the difference between medical billing and medical collections?

Medical billing is the process of submitting claims to insurance payers for reimbursement after a patient visit. Collections begin when those claims go unpaid – whether by the insurer or the patient – and involve the process of following up to recover the outstanding balance. The two of these are closely linked, since better billing typically leads to fewer collection issues down the line.

Can a collection agency contact patients however they want about a medical debt?

No. Third-party debt collectors are bound by the FDCPA, which limits when and how often they can contact patients, prohibits threats or deceptive tactics. It also requires them to provide written validation of the debt within five days of initial contact. HIPAA also applies, since patient accounts contain protected health information.