A third-party billing company is contacting you because the hospital or provider has assigned or sold your unpaid bill to a debt collection agency. After exhausting its own collection efforts, the provider typically transfers accounts to a commissioned collector based on the dollar amount of the bill. This does not automatically mean you owe the full amount, or that you owe anything at all.
Nearly seven in ten consumers with medical debt reported being asked to pay a bill that insurance should have covered, according to the CFPB. Debt collectors often pursue these debts without verifying what insurance already paid. Collecting amounts already paid is illegal under the Fair Debt Collection Practices Act, and you have legal rights to challenge the debt and demand proof before paying.
Table of Contents
- How and Why Hospitals Hand Off Bills to Collectors
- Why Medical Collections Are Often Wrong
- Your 30-Day Window to Challenge the Debt
- What to Do When You Receive a Collection Notice
- Collection Calls and Your Rights
- Frequently Asked Questions
How and Why Hospitals Hand Off Bills to Collectors
hospitals and medical providers use two strategies to recover unpaid bills: in-house collection teams and third-party agencies. When a provider's own attempts fail—typically after 60 to 180 days, depending on the facility—the account may be assigned to or sold to a collection agency.
Accounts below a set dollar threshold are written off instead of collected. Third-party collectors are paid on commission, earning a percentage of what they recover rather than a salary. This structure means that very small balances or high-risk accounts are the ones most likely to be handed to collectors, because the provider has already decided the cost of in-house collection exceeds the likely recovery. The bill reaching a collector's desk does not mean it has been validated—only that the provider stopped trying to collect it directly.
Why Medical Collections Are Often Wrong
The numbers are striking. medical debt collection complaints made up 11 percent of the 68,000 debt collection complaints the CFPB received in 2023, with wrong amounts and non-owed debts as top issues. Consumers with medical collection entries are 62% more likely to report the collector is pursuing the wrong amount compared to other debt collections—a documented pattern showing that medical collections fail accuracy checks at higher rates.
The reason is simple: nearly seven in ten consumers with medical debt reported being asked to pay a bill that insurance should have covered, and many collectors pursue these debts without first checking whether the claim was paid. A bill marked unpaid in the provider's system may actually have been settled by your insurer weeks or months later, but if the accounts never communicated, the collector may never know. You are not responsible for what insurance already paid.
Your 30-Day Window to Challenge the Debt
Federal law gives you 30 days from receipt of a debt collector's first written notice to dispute the debt or request validation, and the collector must pause collection while it investigates, according to the National Consumer Law Center. A written dispute or validation request within that window triggers a legal hold.
Collection letters that demand payment within a shorter timeframe violate the FDCPA, and the notice must explain this right clearly. This means the collector cannot continue pursuing you or report the debt to credit bureaus while verifying what you actually owe. If the collector cannot provide proof of the debt within this window, you have grounds to challenge it further.
What to Do When You Receive a Collection Notice
Your first step is to verify the debt yourself: Do not ignore the notice or assume the amount is correct. In writing, dispute the debt and request validation. Keep a copy of everything you send. Once you have disputed the debt in writing, the collector cannot continue collection without providing proof, and violations of the Fair Debt Collection Practices Act can expose the collector to damages and attorney fees.
- Request an itemized bill and validation of the debt in writing, using certified mail so you have proof of delivery. Ask for proof of which provider and which insurer claim is involved.
- Contact your insurer directly and request your Explanation of Benefits for the date of service. If your insurer already paid the claim, the collector should not be pursuing you.
- Compare what the collector is demanding against what your insurer shows. Documentation that the claim was paid stops collection immediately.
Collection Calls and Your Rights
If the collector calls you, understand the rules that protect you. Collectors may not contact you before 8 a.m. or after 9 p.m. your local time, threaten criminal prosecution (medical debt is civil), or continue collection after you have disputed the debt in writing without providing proof. A violation of the FDCPA can result in the collector owing you damages.
If a collector calls, you can ask them to contact you by mail only instead, which forces them to provide written documentation. Document the date, time, company name, and what was said in every call so you have a record if you need to file a complaint.
Frequently Asked Questions
What if I ignore a collection letter?
Ignoring a collection letter allows the collector to continue pursuing the debt and may result in a judgment against you, damaged credit, or wage garnishment. Responding in writing—even to dispute the debt—is your strongest protection.
Can a debt collector take me to court over medical debt?
Yes. If the collector obtains a judgment, they can pursue wage garnishment, bank account levies, or liens on property. This is why responding within 30 days is critical.
What if the collection agency can't prove I owe the debt?
If the collector cannot validate the debt after your written request, you have grounds to dispute it with the credit bureaus. The CFPB receives thousands of complaints each year from consumers whose collectors could not provide proof of what was owed.