Thursday, May 22, 2014

Can a Doctor or Hospital Send Medical Bills Directly to Collections Without Notifying You?

No matter how careful you are with your finances, a medical emergency can pose a threat to your credit scores. If a doctor or hospital sends your unpaid medical bills to a debt collector, the collection agency is likely to report those debts on your credit report. Unfortunately, the FICO credit scoring formula doesn't discriminate when calculating your credit scores. Any collection over $100 has the same devastating effect on your credit scores (and sometimes collections under $100 can do the same thing depending on the version of FICO your lender pulls) This means that a collection account for an unpaid medical bill can hurt your credit just as much as a collection for a defaulted credit card.

Every mom in the world is quick to point out to their kids that life isn't fair, but the idea that a medical emergency--something you have no control over--can make lenders consider you just as high
Medical debt can go to collections
a risk as someone who just doesn't pay his bills is really and truly unfair. What's even more unfair is the fact that a hospital doesn't have to give you any notification at all before turning your debt over to a collection agency.

Some Medical Bills Go Directly to Collections

Hospitals are accustomed to billing insurance companies. If you don't have insurance (and yes, there are still plenty of people out there without it) the hospital is supposed to bill you directly. Unfortunately, this doesn't always happen. Sometimes billing errors (or pure unadulterated carelessness) result in you not receiving your bills but sometimes, hospitals send your medical bills directly to a collection agency--without even attempting to get payment from you directly.

Why Hospitals Don't Contact You First About Your Bill 

A hospital may send your bill directly to collections for a number of reasons. The primary reason, however, is convenience. To some hospitals, its worth paying the commission to the collection agency to not have to deal with your account. Billing you directly, negotiating the debt and working out a payment plan all require time and resources on the part of the hospital. It's much easier to simply send the bill directly to a collection agency and let debt collectors do all of the work. This is especially true if you have a coinsurance plan. Your coinsurance has already paid

Another reason a doctor or hospital may send your medical bill directly to collections is that this method robs you of the opportunity to dispute the bill. Medical collection agencies often put extreme pressure on you by giving you a set amount of time to pay the debt before they report the account to the credit bureaus. Once the account appears on your credit report, your credit scores suffer. This limited time frame in which to protect your credit scores doesn't give you the time you need to dispute a medical bills you believe is inaccurate--forcing you to choose between fighting for the correct amount or saving your credit scores.

What Can You Do to Prevent Medical Debts Going Directly to Collection Agencies?

Unfortunately, there are no laws requiring doctors and hospitals to notify you first before sending your bills to collections. Doctors and hospitals are original creditors. This means they aren't bound by the Fair Debt Collection Practices Act, which governs the behavior of all third-party debt collectors.

The best way to ensure that your bills are sent to you rather than directly to a debt collector is to contact the doctor or hospital's billing department and ask about their policies. Make sure that your address is correct in their system and ask if you have any outstanding bills. If you do not, call back a week later and ask again. Keep in mind that, according to your insurance provider's policies, doctors and hospitals can wait up to a year after the date of service to bill you or your insurance company, so don't stop checking up on your debt until the billing office is willing to give you a zero balance statement, in writing, for the medical services you received. In the event a collector tries to collect the debt from you in the future, a zero-balance statement from the hospital is your greatest armor against the collection agency and any potential credit damage connected to your previous medical debt.

Related Posts:

Keeping Medical Debt Out of Collections and Off Your Credit Report

Reader Question: Medical Collections Never Sent Bill


  1. Hi Lee,
    I've just stumbled upon your blog as I was searching for some answers or ideas of how to deal with this exact situation. I took my son to urgent care clinic about a year ago. We had insurance and I paid the copay on the day of the visit. The doctor required us to come for follow up visits two times after the initial visit, on each of which I paid the copay. I was completely unaware that there was an outstanding balance that my insurance didn't cover because I never received a single bill from the clinic. About 5 month after that I started getting collection calls. When I answered, they informed me of the account and said they were mailing me letters. I learned from them that they had incorrect address, probably because of a clerical error at the clinic. I told them the correct address and received one statement in the mail. I went to check my credit report and learned that the account was reported with the credit bureaus over a month prior to me getting the statement. I had no clue what to do and how to react to this unfairness so I left it alone for some time. Several months ago I requested a prepaid legal service company I use to see what they can do about this situation. They mailed several letters to the credit bureaus and the collection agency, but not much has been resolved since. TransUnion deleted the item. The other two didn't. CA mailed back the same statement I already had as a proof that I owe the debt. I don't mind paying the amount (it's under $100), but it feels very unfair that it's now on my credit report and hurting my score quite a bit without me ever having a chance to take care of it before that. Any ideas or advice will be greatly appreciated.

    1. Urgent Care clinics almost always bill through the hospital they're contracted with. Go to the clinic, explain the situation, and get the hospital billing info. The office is likely located in your town. Go down there, bring paperwork proving your case, be civil but demand to know why you didn't get these bills. Demonstrate that you are prepared to pay on the spot but only if you get clear credit as a result (and yes, they contracted with the agency and they have the power to pull that account back, no matter what they say to you). Make it clear again, and again, and again--because they will likely try to blow you off--that this was not a result of your careless but their error and you want to pay your bills and clear your name. And get it all in writing, just in case.

    2. I will try that. Thank you very much for the advice!