Billing and Collections

Billing and Collections
Copyright 2016 by Elsevier Inc. All rights reserved. Billing and Collections Chapter 49

Introduction to Billing
Copyright 2016 by Elsevier Inc. All rights reserved. Introduction to Billing If a patient has insurance: The first bill is usually sent to the patient after insurance has paid A copayment is collected at the time of the visit If a patient has a deductible and/or coinsurance, will need to send a bill If a patient does not have insurance: Payment is usually collected at the time of the visit The office often will accept a credit card May make arrangements for payment over time Why does the medical office usually wait to send a bill to the patient until after insurance has paid? What is the advantage for the office if copayments are always requested at the time of the visit? Why is coinsurance usually not requested at the time of the visit? What is the advantage of accepting credit cards, especially if a significant percentage of patients do not have insurance or insurance doesn’t cover procedures?

Introduction to Billing (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Introduction to Billing (Cont.) Periodic bills (usually called statements) usually printed from the computer program Sent to patients in window envelopes If patient’s insurance pays by capitation, records are kept but no bills are sent Billing for large offices affiliated with hospitals usually done at a central location Patient charges are recorded in the medical office Patient payments and insurance payments usually are recorded at the central billing office What other options are available for sending statements other than in window envelopes? How do window envelopes save time for the office? If a medical office is affiliated with a hospital or has several locations, why is it more cost effective to bill from a central location?

Introduction to Billing (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Introduction to Billing (Cont.) Many offices also contract billing to an outside service Information sent electronically Medical assistant (MA) should understand billing process What are advantages and disadvantages of hiring an outside billing service for medical office billing?

Copyright 2016 by Elsevier Inc. All rights reserved.
Billing Cycle Bills can be sent every 2 weeks, monthly, or any other regular period Time between bills is called the billing cycle Balance due: amount of money owed on a bill Monthly bills are most common Bill shows new charges, new payments, and balance due at the end of the billing cycle Bills are only sent if there is a balance due What is the most common interval to send bills (statements) to patients? What is a billing cycle? What should be shown on a patient bill? If transactions from previous transactions are shown, where is the latest activity? How does the patient know how much to pay?

Billing Cycle (Cont.) Patient accounts may be divided so that a portion is billed every week First week: last names beginning A-E Second week: last names beginning F-L Third week: last names beginning M-S Fourth week: last names beginning T-Z Billing weekly spreads the work throughout the month More efficient use of staff time Payments received throughout the month improve cash flow What is the advantage for the office of printing and sending some patient bills every week? Are there disadvantages? If so, what are they?

Billing Process Bills may be typed on a typewriter but usually are printed from a computer program Outside billing service shares billing records May provide paper copies of bills May transfer information electronically If patient has died, charges must be billed to the patient’s estate Why does it save time to use a computer for billing instead of a typewriter? Why is it important for an outside billing service to share billing information with the office? What type of agreement should the office have with the outside billing service to comply with HIPAA regulations? (The medical office must have a written agreement with the billing service requiring the billing service to maintain patient confidentiality. See Chapter 3, p. 52.) How does the medical office handle a bill if the patient has died?

Billing Process (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Billing Process (Cont.) Parents may not be aware of, or responsible for, certain treatment of minors Sexually transmitted diseases HIV testing Treatment of drug or alcohol abuse If a minor is responsible for the bill, bill must be sent to address given by the patient If parents have not consented for treatment, the minor is responsible Because of confidentiality, parents should not know of treatment What special considerations affect billing if a patient is a minor being tested or treated for sexually transmitted diseases? What is the best way to protect the confidentiality of a minor related to billing? (Answer: Notify the minor that if insurance is billed, the parents will receive a copy of the EOB, so the minor may wish to pay in full at the time of service.)

Billing Process (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Billing Process (Cont.) A patient may have a credit agreement Patient may or may not pay interest If patient adheres to terms of the agreement, the bill should not be sent out of the office for collection What is a credit agreement? Do medical offices usually charge interest if the patient receives credit? Why or why not? See Procedure 49-1: Processing Patient Statements.

Insufficient Funds in the Office Account
Copyright 2016 by Elsevier Inc. All rights reserved. Insufficient Funds in the Office Account Occasionally a check might be written when there are no funds in office account Arithmetic error in calculating balance Failure to reconcile bank statement Usually an error, because it is illegal to do this intentionally What are examples of things that might result in a check accidentally being written against an account with insufficient funds? Can this happen with an office checking account? Can this happen with a patient check?

Insufficient Funds in the Office Account (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Insufficient Funds in the Office Account (Cont.) Overdraft: a check on an account without adequate funds to cover it Bank returns check to payee marked NSF (not sufficient funds) Charges a fee to payee Charges a fee to the account the check was written on What does the term overdraft mean? When a check is written that overdraws an account, what charge does the bank apply? When an NSF check is deposited, what charge does the bank apply? Why do you think the charges for an overdrawn check are so high?

Insufficient Funds in the Office Account (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Insufficient Funds in the Office Account (Cont.) Overdraft protection is recommended for office checking account Money automatically transferred from savings account to cover NSF check Usually in increments of $100.00 May be a charge for the service when it is used What is overdraft protection? Why is overdraft protection recommended for the medical office? For individual checking accounts? When is a fee charged for overdraft protection? Is the fee less than the fee(s) for an overdrawn check?

Stopping Payment Bank can be asked to stop payment on a check
Copyright 2016 by Elsevier Inc. All rights reserved. Stopping Payment Bank can be asked to stop payment on a check Check might have been lost and a new check written May be a dispute with a vendor about a purchase or previous payment Bank charges a fee for this service Use this service sparingly What are examples of appropriate occasions to stop payment on a check?

Insufficient Funds in a Patient Account
Copyright 2016 by Elsevier Inc. All rights reserved. Insufficient Funds in a Patient Account Bank may refuse to honor a deposited check because of insufficient funds If a check returned marked NSF, notify the patient Patient needs to know that checks are being returned Patient needs to make arrangements to provide funds Bank charges fees to patient and office What should the medical office do if a patient’s payment check is returned for insufficient funds? Why should the office be cautious about redepositing the check? If a patient has given the office an NSF check in the past, should the office accept checks from the patient afterward? Why or why not?

Insufficient Funds in a Patient Account (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Insufficient Funds in a Patient Account (Cont.) Most offices have a sign in waiting room to notify patients of fees for returned checks Fee paid by the office must be charged back to the patient (but not insurance) NSF check entered as a debit adjustment that increases the patient’s balance Entered as a negative number on the day sheet. Bank fee added either as a new fee or part of the adjustment Bank fee may not be charged to insurance How is the NSF check entered to the patient’s account? How is the NSF check entered on the day sheet? (Positive or negative number?) Why must the bank fee to the office be added to the patient balance? Is it added as a fee or part of the adjustment? Why should the medical assistant be sure that the bank fee is not charged to the patient’s insurance? See Procedure 49-2: Posting a Check Returned for Non-Sufficient Funds (NSF).

Overpayments and Refunds
Copyright 2016 by Elsevier Inc. All rights reserved. Overpayments and Refunds Overpayment: total of patient payments and insurance payments exceed the allowed charge Patient might think he or she had not yet paid annual deductible Patient might send a check before insurance has paid Credit balance: balance on an account is a negative number showing that money is owed What are examples of ways that an overpayment may occur in a patient account? How is a credit balance indicated on a manual daysheet? What does a credit balance show?

Overpayments and Refunds (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Overpayments and Refunds (Cont.) Credit balance may be left in place if patient has an upcoming appointment Usually a refund is issued to bring the account balance to zero Refund entered in patient’s account as a credit adjustment Entered as a positive number on the day sheet Check issued to the patient Check sent with a brief letter of explanation Why do most businesses issue a refund instead of carrying a credit balance? How is a refund entered on a manual day sheet? Why should a letter be sent with a refund? See Procedure 49-3: Processing a Credit Balance and Refund.

Accounts Receivable Aging Record and Reports
Copyright 2016 by Elsevier Inc. All rights reserved. Accounts Receivable Aging Record and Reports Account aging: process of determining how long specific accounts have been outstanding Usually created using 30-day intervals Computer can usually print account aging report by patient or insurance Follow up outstanding insurance amounts with insurance company Follow up outstanding patient amounts with patient Why might the office want to print separate aging reports for insurance aging and patient aging? Why is a 30-day interval useful for an account aging report?

Accounts Receivable Aging Record and Reports (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Accounts Receivable Aging Record and Reports (Cont.) Sample Account Aging Report What information is contained on the computer aging record that is not contained on the manual aging record? What does the percent of total aging refer to on the computer aging report? How can this information be useful? See Procedure 49-4: Creating and Examining an Accounts Receivable Aging Record.

Examining Accounts for Those Overdue
Copyright 2016 by Elsevier Inc. All rights reserved. Examining Accounts for Those Overdue Account considered overdue if not paid within 30 days of date billed Exception if there is a credit agreement Accounts for which all charges within last billing period are considered current Current accounts are 0-30 days Overdue accounts categorized as days, days, days, and greater than 120 days Why is an account not overdue after 30 days if a patient has a credit agreement? When is an account categorized as days overdue?

Examining Accounts for Those Overdue (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Examining Accounts for Those Overdue (Cont.) Overdue accounts, especially greater than 120 days, require collection activity Send account to collection agency Write a demand letter to inform that legal action will be initiated Follow up with legal action, such as a lawsuit in small claims court Why is it important to follow up in the medical office before accounts become greater than 120 days overdue? What options does the medical office have for accounts that are older than 120 days?

Collection Activities
Copyright 2016 by Elsevier Inc. All rights reserved. Collection Activities Patients should be encouraged to pay their bills as their accounts age The office should increase forcefulness of messages that the account is overdue as the bill gets older Patients may be having financial difficulties Patients with chronic illness may have many medical bills What are examples of reasons why patients may get behind in paying their medical bills? Why is it always better if patients do not fall too far behind in paying for medical care?

Collection Activities (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Collection Activities (Cont.) Encourage patients to discuss overdue accounts for which insurance payment is expected Patients may need to work with the insurance company It may be necessary to clarify which part of the bill is the patient’s responsibility Why is it helpful if the patient contacts the insurance company about a disputed bill in addition to the medical office? If the insurance company denies a claim, what portion of the bill is usually the patient’s responsibility? How does the medical office make this clear to the patient?

Past Due Accounts Claim messages: messages on the bill encouraging payment of the bill Can be stickers attached to the bill Can be generated by the computer program on overdue bills A series of more forceful messages may be used Why is it easier to used messages that print automatically in the practice management software? Why are stickers sometimes more effective than printed messages?

Past Due Accounts (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Past Due Accounts (Cont.) Bills that are 90 days overdue should be followed up with a telephone call Discussion with a patient clarifies reason for lack of payment Adhere to legal guidelines of The Fair Debt Collection Practices Act of 1966 Also follow state debt collection laws Why is it helpful to telephone the patient when a bill is 90 days overdue? What law regulates the practices the medical office must follow when placing telephone calls to patients about bills?

Collection Letters Should be sent if an account is more than 120 days old Include action that will be taken if payment is not received and deadline for payment Have letter signed according to office policy MA Office manager Billing specialist Physician What can the medical office do if an account is more than 120 days old? Why is the patient usually notified in writing before an account is turned over to a collection agency? Is this legally required? See Procedure 49-5: Writing a Collection Letter.

Collection Letters (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Collection Letters (Cont.) If no response to collection letter, inform a patient in writing when action is taken Account turned over to collection agency Lawsuit filed Include in follow-up letter that patient should find a new physician Notify where medical records should be sent Send this letter by Certified Mail with Return Receipt requested Give patient at least 2 weeks to arrange a new provider Why are patients often instructed to find a new physician when their accounts are turned over to collection? What information should be included in a letter instructing a patient to find a new physician? What could the physician be sued for if he or she does not notify the patient that he or she will no longer be the patient’s physician in writing? Where should the Return Receipt be filed? Why?

Credit Agreements Written credit agreements validate that patients have permission to pay bill in installments Required even if no interest Not required if patient independently pays in installments without a formal agreement As long as the monthly payment is made, the account is considered in good standing Do physicians allow patients to make payments without a formal agreement? Why or why not? What is the advantage to the patient of having a written agreement?

Truth in Lending Agreements
Copyright 2016 by Elsevier Inc. All rights reserved. Truth in Lending Agreements Credit agreements are a type of revolving credit Subject to fair lending practices Require written agreement Truth in lending: legal requirement to disclose terms of a loan to borrowers What are other examples of revolving credit?

Truth in Lending Agreements (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Truth in Lending Agreements (Cont.) Truth in lending statement discloses the terms of the credit agreement Maximum amount patient may charge to account Interest rate (if any) How any interest is computed How the minimum balance is computed or what the monthly payment is Will the patient be allowed to add additional charges to a credit agreement if the patient has to see the physician before the outstanding balance has been paid off?

Policy for Patients with Outstanding Balances
Copyright 2016 by Elsevier Inc. All rights reserved. Policy for Patients with Outstanding Balances Usually patient must pay the outstanding balance before a credit agreement is arranged Office may write a credit agreement for a lower maximum balance than in the past Office may not change the interest rate on the basis of past payment history Why must a patient with an outstanding balance usually pay off the old balance before a credit agreement is made? What factors affect the amount of interest the office can charge?

Tracing “Skips” “Skip”: account for which no billing information is available Bill of new patient returned by post office May be an innocent mistake Patient may have given inaccurate information What is a skip? Why is a skip harder to trace if the patient was a new patient than if the patient was an established patient?

Tracing “Skips” (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Tracing “Skips” (Cont.) First, call any telephone number the patient has given Patient may have moved and left forwarding telephone message Patient may have moved and kept the same telephone number Why is it always recommended to call all telephone numbers a patient has given for a skip?

Copyright 2016 by Elsevier Inc. All rights reserved. Tracing “Skips” (Cont.) If home telephone does not find the patient, call work telephone number Identify self and ask to speak with the patient Do not tell a third party that the patient owes money Illegal to call more than once unless asked to call back Can the medical assistant call a patient at work to discuss an outstanding bill? If so, under what circumstances? What can the medical assistant say if a third party answers at a work telephone number?

Copyright 2016 by Elsevier Inc. All rights reserved. Tracing “Skips” (Cont.) Send a letter by Registered or Certified Mail because this may be forwarded Place letter in a plain envelope with no office name so that patient will accept it Be sure to request a Return Receipt as proof of receipt If a letter is sent Certified Mail in a plain envelope, why is a patient more likely to accept it than if the medical office is identified?

Copyright 2016 by Elsevier Inc. All rights reserved. Tracing “Skips” (Cont.) Use Internet resource to trace a skip Usually charges a fee Will have more resources to trace an individual More effective if there is information about the individual What kind of businesses trace skips? Are there resources on the Internet to trace individuals that require payment? Do you have any experience with them?

Copyright 2016 by Elsevier Inc. All rights reserved. Tracing “Skips” (Cont.) If other efforts fail, turn the account over to a collection agency Collection agency: business that collects accounts More effective with accounts that have not been overdue for a long period of time Why is turning an account over to a collection agency usually the last step in trying to collect on a patient account? Why do some physicians ask to approve all accounts that will be turned over?

Sending Accounts to a Collection Agency
Copyright 2016 by Elsevier Inc. All rights reserved. Sending Accounts to a Collection Agency Collection agencies specialize in collecting delinquent accounts Regulated by each state Generally charge between 20% and 40% of any amount collected Must try to collect full payment from individual who owes money Must obtain permission to accept an amount less than payment in full How much do collection agencies charge? Is it likely that the collection agency will ask for permission to accept an amount less than payment in full? If so, under what circumstances?

Sending Accounts to a Collection Agency (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Sending Accounts to a Collection Agency (Cont.) Most offices refuse to see patients whose accounts are in collection unless current charges are paid in full Some offices notify patients in writing that patients will not be seen at all while account is in collection Patient balance usually adjusted to zero when account turned over to collection Enter negative (credit) adjustment in the amount the patient owes Prevents account from showing up on aging reports as overdue Prevents computer from creating a bill to the patient Why do some offices continue to see patients whose accounts are in collection? Why do they require payment in full for current charges if the patient’s account is in collection? Why is the patient balance adjusted to zero when an account is turned over to a collection agency? Does this mean that the account has been written off? Why or why not? If a patient’s account is in collection, will part of the amount due have to be written off eventually? Why or why not?

Sending Accounts to a Collection Agency (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Sending Accounts to a Collection Agency (Cont.) Office makes no further attempts at collection and sends no bills for the overdue account Patient deals only with collection agency Collection agency makes periodic payments depending on what it has collected Increase patient account balance by the amount of the payment (reverse collection) Post the collection agency payment to bring the account balance back to zero If a patient whose account is in collection calls the office about making a payment, what should the medical office tell the patient? If the medical office receives a payment from a patient whose account is in collection, what should the medical assistant do? How is a collection agency payment posted?

Small Claims Court Small claims courts deal with civil lawsuits for small amounts of money Specific laws in each state Usually no lawyer involved Collection agency cannot represent the office May not be considered worth it to sue patients in small claims court Loss of good will Even if case is won, must still collect the judgment What is the difference between small claims court and other courts? Why do some medical offices avoid using small claims court?

Small Claims Court (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Small Claims Court (Cont.) An office employee files the case with the clerk of the court Must fill out documents Must provide documentation to back up the claim A negative judgment in small claims court is final for the medical office Plaintiff cannot appeal the decision Defendant has the right to appeal What paperwork is involved in a case in small claims court? What does it mean if the plaintiff cannot appeal a decision? Is this the same as or different from a regular court case?

Billing an Estate If the patient has died, the estate must be billed
Copyright 2016 by Elsevier Inc. All rights reserved. Billing an Estate If the patient has died, the estate must be billed Bill should be sent within 30 days, but not immediately Bill sent To the Estate of... Use the patient’s address Bill may be sent to an individual who has agreed in writing to cover the deceased patient’s medical costs What should be done with the bill of a patient who has died? Where should the bill be sent? Why should the office always send a bill if the patient has died? What might happen if the office is unaware that the patient has died?

Billing an Estate (Cont.)
Copyright 2016 by Elsevier Inc. All rights reserved. Billing an Estate (Cont.) There may be a provision in the will that costs of final illness will be paid outside of the probate process Once will has been filed, can find out the name of the executor of the estate Send an itemized bill Certified Mail with Return Receipt requested Otherwise, the bill will not be paid until estate is settled by probate court What is probate court? How can it affect the medical office if the patient’s entire estate must go through probate?

Bankruptcy Bankruptcy laws are federal laws that apply equally in all states Declaring bankruptcy is a means to reorganize debt or liquidate assets among all creditors Two kinds of personal bankruptcy Chapter 7: only secured creditors share liquidated assets Chapter 13: payments made from a trust to all creditors What is/are reasons for declaring bankruptcy? What is the difference between bankruptcy under Chapter 7 versus Chapter 13?

Bankruptcy (Cont.) If patient declares bankruptcy under Chapter 7, the medical office is not paid unless there is a credit agreement If patient declares bankruptcy under Chapter 13, the medical office may receive partial payments over time If patient is in bankruptcy, the medical office usually requires payment in full at the time of service How does it help the medical office if a patient who declares bankruptcy has a written credit agreement? Why should the office require payment in full for services to the patient or family members if the patient is in bankruptcy?

Laws Affecting Credit and Collection Activities
Copyright 2016 by Elsevier Inc. All rights reserved. Laws Affecting Credit and Collection Activities Equal Credit Opportunity Act Fair Debt Collection Practices Act Federal Truth in Lending Act Fair Credit Reporting Act Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 Discuss how these laws affect credit and collection activities.

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