16. Billing and Collections
INTRODUCTION TO BILLING
If patients have insurance, a bill is not usually sent to the patient until after the insurance company has paid its portion of the bill. If the patient is covered by a managed care policy, the copayment is usually collected at the time of the visit, and a bill may not be necessary. Often, however, the patient has a deductible and/or coinsurance, and a bill must be sent to the patient.
If a patient visit will not be covered by insurance, most physicians’ offices request that payment be made at the time a medical service is provided. Medical offices usually also accept payment by credit card, which makes payment at the time of service possible and convenient for many patients. However, a number of patients still need to make arrangements to pay for their medical services over a period of time. In this case, the office must establish an account for the patient and send periodic bills. These bills are usually generated by computer software. Each bill is then placed in a window envelope and sent to the patient. Even if the patient’s account is being paid by capitation, a billing record is usually kept for that patient, showing the amount of charges and payments.
The billing for physician offices that are affiliated with a hospital or large health group is usually done from a central location, and office employees are responsible only for posting charges. Patients and insurance companies make payments to the central office. Other offices may contract with an outside billing service. The medical assistant should understand the billing process, however, because efficient billing maximizes revenue for the medical practice.
BILLING CYCLE
Bills (also commonly called statements) can be sent to patients every 2 weeks, monthly, or at any regular period, such as once every 3 months (quarterly). The time between bills is called the billing cycle. A bill sent out at the end of a cycle will show the balance owed at the beginning of the cycle, any payments made during the billing cycle, any new charges for new services that occurred during the billing cycle, and the balance due (total amount owed) at the end of the cycle.
Patient accounts are often divided into equal parts, usually alphabetically. Each week a different section of the accounts receivable is billed. For instance, on the first week of the month, patients with a last name beginning with the letters A to E may be billed; the second week, F to L; the third week, M to S; and the fourth week, T to Z. The same cycle is followed each month. Dividing the bills in this way makes more efficient use of staff time because billing is spread out over the month instead of being performed in onlyl week of the month.
BILLING PROCESS
Bills can be produced manually using a word processing program and billing template, but in almost all medical offices they are produced using the medical office practice management program (Figure 47-1). If an outside billing service is used, the service can either send a paper record of all of the bills sent out at the end of each cycle or can transfer billing information from its computer to the office’s computer, linking the information into the patient’s financial record and the office’s bookkeeping software.
At regular intervals, patient financial accounts should be examined and the accounts that must be billed should be processed. Billing insurance companies and billing patients are both straightforward transactions. However, the medical assistant should be aware of some special situations. A patient may have been treated for a final illness just before dying. In this case, any charges will have to be billed to the patient’s estate. (Billing an estate is discussed in more detail at the end of this chapter.)
A patient may be a minor who sought treatment without his or her parent’s knowledge. When minors are brought to a physician by a parent or guardian for treatment, the parent or guardian acknowledges that he or she is the responsible party for financial purposes. However, if a minor is treated without the parent’s knowledge, the minor may be responsible for fees as well. Minors older than age 12 may give consent for certain kinds of treatment including treatment for sexually transmitted diseases (STDs), human immunodeficiency virus (HIV) testing, and treatment for drug or alcohol abuse. Because of confidentiality, the physician may not release information to the parent or guardian about the reason for the visit.
A patient may have a credit agreement with the practice, which allows the patient to pay bills off over time, along with interest on the balance due. This is important because in such situations, even though an outstanding balance may become old, it should not be considered delinquent and sent out of the office for collection (Procedure 47-1).
| PROCEDURE 47-1 Processing Patient Bills | |
| Outcome Process patient bills. | |
| Equipment/Supplies | |
| • Computer | • Statement template for word processing program |
| • Patient accounts | (optional) |
| • Window envelopes with two windows | • Paper or statement forms |
Procedural Step. Locate patient accounts in the computer database.
Procedural Step. Identify patient accounts with an outstanding balance for which insurance payments have been made.
Principle. Patients are usually not billed until insurance payments have been received.
Procedural Step. Create one or more patient bills manually using a statement template and word processing program, or compile outstanding bills using the computer program and view using Print Preview. Check all bills for completeness and accuracy.
Principle. All bills must have the patient’s name and address, previous activity for the account, and the amount due from the patient.
Procedural Step. Print patient statements using the office patient statement form. The statement form may be printed with the bills from the computer program, or statement forms may be loaded in the printer.
Procedural Step. Make sure that statements have printed correctly.
Procedural Step. Fold statements so that the practice and the patient names and addresses will be visible through the windows in the envelopes.
Principle. The practice purchases window envelopes with the windows positioned so that the return address of the practice shows through the upper window and the patient name and address show through the lower window.
Procedural Step. Insert statements in envelopes. Be sure that the names and addresses are visible.
Procedural Step. Place postage on envelopes and mail statements.
PROCEDURE 47-1
Putting It All Into Practice
My name is Christa Wilson, and I have been working in the office of three physicians for the past 5 years. There are three medical assistants, and we all assist the physicians during office hours, but I am responsible for most of the billing.
We use cycle billing in our office. The first week of the month we send out statements for patients whose last names begin with the letters A-F, the second week G-L, and so on. By the end of the month, every patient with an outstanding balance has received a statement, and we begin again. I am also responsible for posting payments received in the mail. Every month, we run an aging report, and I analyze it to see which accounts are overdue. Our computer program lets us add written messages to the statements, but I add colored stickers for accounts that are older than 60 days because I think they are more likely to get the patient’s attention. If there is a balance due from a patient after 90 days, I always follow up with a telephone call. When I first started making these calls, I used to get very nervous, but I have gotten accustomed to it now. I always try to stay calm and keep my cool. I have found that in most cases, there is a financial problem that makes it difficult for the individual or family to keep up with its debts. I try to work with our patients so that they pay something each month and remind them not to “forget” about their copayments. Eventually we do collect most of the money that is owed to us, and we feel that part of the reason is that we stay on top of our billing. ■
BILLING PROBLEMS
Problems with Checks
From time to time the office may encounter a problem either with a check it has written or with one that has been written to the office by a patient.
Insufficient Funds in the Office Account
It is illegal to write a check for more than the amount of money in a bank account. However, this occasionally happens because of an arithmetic error in calculating the balance while writing checks or because of failure to reconcile a bank statement. If the office’s account accidentally becomes overdrawn, the bank may refuse to honor any check written after the account is overdrawn. In this case the check will be returned to the person or company that deposited it marked NSF (“non-sufficient funds”) in the payer’s account to cover the check. A check written on an account without adequate funds to cover it is called an overdraft.
It is a good practice to have overdraft protection for any office checking account. Although this protection may never be needed, it will prevent a check from bouncing in the event that the person who pays the bills in the medical office writes a check against an account without adequate funds to cover the check. In that case, funds will automatically be transferred from another office account, such as a savings account, and the bank will charge a small fee.
Stopping Payment
From time to time it may become necessary to ask the bank to stop payment on a check. A check might have been lost and a new check issued, or there may be a dispute between
PATIENT STATEMENT
WESTERN MEDICAL CENTER Account # 1015
109 RIVER STREET Date: 7/24/XX
WESTERN, OH 44770
DARLA SISSLE AMOUNT PAID
10 MAPLE STREET WESTERN, OH 44770
| Description | Charges | Credits | Balance | |
| 5/22/XX | Balance forward | $ 35.00 | ||
| 6/26/XX | Prob Focused OV | 65.00 | 90.00 | |
| 6/26/XX | EKG | 65.00 | 165.00 | |
| 6/26/XX | Patient payment – check | – 20.00 | 145.00 | |
| 7/15/XX | Insurance payment | – 45.00 | 100.00 | |
| 7/15/XX | Insurance adjustment | – 60.00 | 40.00 | |
| PLEASE PAY THIS AMOUNT | $ 40.00 |
| 0- 30 DAYS | 31 – 60 DAYS | 61 – 90 DAYS | > 90 DAYS | > 120 DAYS |
| 5.00 | 35.00 | 0.00 | 0.00 | 0.00 |
Figure 47-1 A sample patient bill.
the practice and a vendor about a purchase or a previous payment. Banks charge a fee for stopping payment, so this practice should be used sparingly.
Insufficient Funds in a Patient Account
The bank may not honor a check deposited by the practice because a patient’s account has insufficient funds. If a check is returned marked NSF, do not hesitate to call the patient and tell him or her of the problem. This may be the first of many checks that are being returned, and it is important for the person to find out why he or she is writing checks against insufficient funds. The bank usually charges fees both to the individual who wrote the check and to the medical office that tried to deposit the check. The amount of the NSF check must be added back to the balance owed by the patient as a positive adjustment that increases the amount owed. The fee charged by the bank is also added to the patient’s balance, usually as a separate fee. As an example, assume that the patient paid a copayment of $20.00 at the time of the visit. The bank returned the check for insufficient funds and charged the medical office checking account a $15.00 fee. The medical assistant would charge the patient’s account $35.00 to cover both the amount of the returned check and the additional fee charged by the bank. Most offices have a sign posted in the waiting room notifying patients of the additional charge for each returned check (Procedure 47-2).
Overpayments and Refunds
If the total of patient payments and insurance payments exceeds the allowed charge, it is called an overpayment. This might happen, for example, if a patient thought that he had not yet paid his annual deductible, when in fact he had. After all the payments have been posted, the balance on the account will be a negative number, or credit balance, indicating that the medical office owes money to the patient. Sometimes a small credit balance is left in place when a patient has a visit scheduled in the near future because new charges will be applied. Usually, however, the medical assistant will process a refund for the patient. The amount of the refund is posted to the patient’s account, bringing the account balance to zero. The medical assistant sends a letter and a check to the patient with a brief explanation about the overpayment (Procedures 47-3 and 47-4).
Outcome Post a check returned for NSF.
Equipment/Supplies
Computer • Day sheet (optional)
Patient accounts • Calculator
Returned check
to the old balance and record in the new balance column.
Principle. The bank fee is a new charge to the patient’s account. Depending on office policy, the amount charged for the NSF check may be considered a fee or a debit adjustment.
Procedural Step. If using a computer program, be sure that the box indicating that insurance should be billed is not checked.
Principle. Insurance is not responsible for the charge for a returned check.
Procedural Step. When totaling the columns of the day sheet at the end of the day, subtract any debit adjustment from the total of all credit adjustments.
| 6. Procedural Step. Notify the patient by telephone or letter that the check was returned and a fee has been charged. If sending a letter, enclose a patient statement with the letter showing the total amount of the returned check and the fee.
Example: Darla Sissle’s check for $15.00 was returned by the bank marked NSF. The bank also charged a fee of $15.00.
PROCEDURE 47-2
Procedural Step. When the NSF check has been received, locate the patient account in the computer database. If using a day sheet, label the first open line with the name of the patient whose check was returned and enter the old balance in the old balance column.
Procedural Step. Create a new billing for the patient and post the returned check using the code for NSF check or “adjustment—charge” and entering the amount of the check. If using a day sheet, write “NSF check returned by bank” and the check number in the professional service column. Place the amount of the check in the adjustment column in parentheses to indicate that the amount is a debit adjustment (i.e., added to the patient’s balance). Add the amount to the old balance and enter it in the new balance column.
Principle. The amount of the returned check must be added to return the patient balance to the amount before the check was deducted.
Procedural Step. Post the amount charged by the bank as a charge using the code for a returned check fee.
Record the total of the amount of the fee charged by the office for any returned check as a charge (fee). If recording on a day sheet, post the charge for the fee charged by the bank in the fee column. Add the amount
| Charges: | ||||||||||
| Date | Procedure | |Diag 1 | Diag 2 | Diag 3 | Provider | |pos | |Units | Amount | |Total | |
| | 1/30/XX | 99212 | |I12.9 | ||rw | 11 | 1 | |55.00 | 55.00 | |||
| Payments and adjustments: | ||||||||||
| Date | Pay/Adj Code | Paid By: | Description | Amount | Total | |||||
| 1/30/XX | Check | Darla Sissle | Patient Payment, Check | -15.00 | 40.00 | |||||
| 2/4/XX | NSF | Check returned by bank | 15.00 | 55.00 | ||||||
| 2/4/XX | FEE | Bank fee for NSF check | 15.00 | 70.00 | ||||||
The NSF check and bank fee are posted to the patient’s account.
What Would You Do? What Would You Not Do?
Case Study 1
The bank returns a check from a patient for NSF. The amount on the check is $25.00, and the bank includes a notice that the practice will be charged $15.00. Christa makes a telephone call to the patient, and she asks the patient to send the office a bank check or money order in the amount of $$40.00 The patient becomes very upset. She says, “The bank will charge me the fee for the returned check, not you. All you have to do is send the check through again. There is money in the account now because I deposited my paycheck yesterday. You can’t charge me a fee for this. You are just trying to make money out of this situation.” ■
PROCEDURE 47-3 Processing a Credit Balance
| Outcome Process a credit balance. | |
| Equipment/Supplies | |
| • Computer | • Day sheet |
| • Patient accounts | • Office policy manual |
| • Payment check(s) | • Calculator |
PROCEDURES 47-3 and 47-4
Procedural Step. When a payment has been made, locate the patient account in the computer. If using a day sheet, enter the patient’s name on a new line and enter the previous balance in the old balance column. Principle. Both insurance payments and patient payments must be entered in the correct patient account.
Procedural Step. Compare the amount of the payment against the total amount owed.
Principle. The total amount owed will be the balance due and charges for new services.
Procedural Step. Even if the payment is greater than the charges, post the payment to the computer system using the correct code (i.e., patient payment, check, insurance payment) and link to the visit for which the payment is made. If using a day sheet, post the payment on the line with the patient’s name in the payment column.
Procedural Step. If an overpayment has occurred, note that the account balance in the computer is preceded by a minus sign. This means that the medical office owes the patient money. On the day sheet, subtract the amount of the payment from the patient’s previous balance and record in the new balance column. Place a negative number in parentheses. When totaling the new balance column at the end of the day, subtract any negative number from the total instead of adding it. Principle. A negative balance is indicated in accounting by enclosing it in parentheses. Care must be taken when totaling columns on a day sheet to subtract a negative number from the total.
5. Procedural Step. Take steps to clear the balance from the system according to your office policy. If the patient has another appointment scheduled, the negative balance may be carried for a short time. In most cases, a refund should be issued promptly (see Procedure 47-4).
Principle. Office policy guidelines indicate the proper management of a credit balance in a patient account.
PROCEDURE 47-4 Processing a Refund
| Outcome Process a refund. | |
| Equipment/Supplies | |
| • Computer | • Day sheet |
| • Patient accounts | • Office policy manual |
| • Payment check(s) | • Calculator |
Procedural Step. Locate the patient account in the computer. If using a day sheet, enter the patient’s name on a new line and enter the amount of the credit balance in the old balance column.
Principle. All financial transactions must be entered in the correct patient account.
Procedural Step. Calculate the amount to be refunded (usually the amount of the negative balance).
Procedural Step. Create a new transaction for the patient in the computer account and choose “Refund” for the code. If using a day sheet, write “Refund for Overpayment” in the professional service column.
Procedural Step. Enter the amount of the refund in the “Amount” box of the transaction screen, and verify that
the patient balance becomes zero. On the day sheet, record the amount of the refund in the adjustment column. Add this number to the patient’s old balance (a negative number) so that the new balance becomes zero, and enter zero in the new balance column. Example: The patient Edmund Hall paid $50.00 on his account followed by an insurance payment of $55.00, resulting in an overpayment of $15.00. A refund was issued for $15.00.
5. Procedural Step. Write a check for the refund amount including the date, amount in numbers, and amount in words on the line below. Leave the signature line blank.
Principle. The medical assistant is generally not authorized to sign checks for the medical office.
Procedural Step. Record the check number, date, payee, and reason for the check on the check stub in the checkbook or in the check register.
Procedural Step. Subtract the amount of the check from the balance in the check register.
Procedural Step. Write a letter informing the patient of the refund, and prepare an envelope.
9. Procedural Step. Sign the letter and your title, or obtain the physician signature depending on office policy.
10. Procedural Step. Leave the check, letter, and envelope in the correct place to obtain an authorized signature on the check.
| WESTERN MEDICAL CENTER PATIENT ACCOUNT LEDGER As of 4/19/20XX | |||||
| Date | POS | Description | Procedure | Provider | Amount |
| EDMUND HALL | |||||
| Last Payment: | -50.00 on 4/19/20XX | ||||
| 3/21/20XX | 11 | 99213 | RW | 65.00 | |
| 3/21/20XX | 11 | 88051 | RW | 25.00 | |
| 3/30/20XX | 11 | Ins payment | INS | RW | -55.00 |
| 4/19/20XX | 11 | Patient payment | CHECK | RW | -50.00 |
| 4/19/20XX | 11 | Refund | REFUND | RW | 15.00 |
| Patient Total | 0.00 |
PROCEDURE 47-4
Verify that the patient’s account balance becomes zero.
ACCOUNT AGING
Account aging is the process of determining how long specific account balances have been outstanding.
Accounts Receivable Aging Records and Reports
An accounts receivable aging record should be created to identify accounts that are overdue. Accounts are aged in 30-day intervals. Figure 47-2 shows a sample accounts receivable aging record (see also Procedure 47-5).
Examining Accounts for Those Overdue
An account is considered overdue if it is not paid within 30 days of the date billed unless there is an outstanding credit
What Would You Do? What Would You Not Do?
Case Study 2
A patient calls the office to say that she has received her bill, and it does not show a payment of $10.00 that she made in cash at the time of the visit. The patient is upset, and she says, “I knew I shouldn’t pay cash, because now I can’t prove that I made that payment. I don’t see why you can’t keep accurate records.” Christa asks the patient if she received a receipt for the cash payment. The patient says, “How do you expect me to remember that? This happened over a month ago.” ■
PROCEDURE 47-5 Creating an Accounts Receivable Aging Record
Outcome Create and examine an accounts receivable aging record.
Equipment/Supplies
Computer • Office policy manual
Patient accounts • Pen
Accounts receivable aging record analysis form (optional)
PROCEDURE 47-5
Procedural Step. Using the reports function of the computer billing program, create an aging report for patients and for insurance companies. It is also possible to create such a report manually using individual patient ledgers.
Principle. In a computerized billing system, the computer program can generate the report of all overdue accounts.
Procedural Step. Review the accounts on the report and mark the proposed action for each account according to your office policy.
Principle. Efforts to collect outstanding accounts should become increasingly more active as the account ages. Office policy may vary in respect to specific actions.
Procedural Step. Mark all accounts that are less than 31 days old “No Action Needed.”
Principle. Accounts that are less than 31 days old are considered current.
Procedural Step. Mark bills with unpaid insurance claims that are older than 31 days “Follow up with insurance.”
Principle. Patients usually do not pay on bills with outstanding insurance claims until they find out how much the insurance will pay. These bills, if overdue, need to be followed up with the insurance company.
Procedural Step. Mark accounts that are 31 to 60 days old, according to office policy. For example, a note may be attached to the statement saying, “Payment is now due.” It may be possible to include payment notices in the computer program so that they print on the statement automatically if the account is overdue.
Procedural Step. Mark accounts that are 61 to 90 days old, according to office policy. For example, a note may be attached to the statement saying, “Payment of this bill is now overdue. Please pay the balance or contact the office.”
Procedural Step. Mark accounts that are 91 to 120 days old, according to office policy. It may be office policy to place a telephone call to the patient at this point to discuss the account. Follow up with a letter confirming any agreement made.
Procedural Step. For accounts older than 120 days, review previous collection attempts. Unless there are known circumstances that warrant a delay in collection activity, send a collection letter stating that if payment is not received by a certain date the account will be given to a collection agency or pursued in small claims court (depending on the procedure used by the office to collect delinquent accounts).
Principle. After 120 days without activity, especially if the person owing money has been contacted by telephone and letter, it is unlikely that the bill will be paid without more aggressive collection measures.
Procedural Step. Record all action taken beside each account on the report.
Principle. This provides a written record of actions taken and results of telephone conversations.
10. Procedural Step. rs to document
in writing any agreements made during telephone conversations. Attach a copy to the patient’s medical record.
Principle. A written record of verbal communications regarding bills and payments provides evidence in case further legal action is necessary.
agreement. Accounts for which all the charges are from the previous billing period are considered current (0 to 30 days). Overdue accounts are categorized as 30 to 60 days, 60 to 90 days, and longer than 120 days.
An account with an outstanding balance after 120 days requires additional collection activity, such as sending the account out to a collection agency or writing a demand letter informing the account holder that a lawsuit will be brought if the account is not brought up to date. Most of the time, the balance of medical office accounts is small enough to permit legal action in small claims court. (Small claims court is discussed in more detail at the end of the chapter.)
COLLECTION ACTIVITIES
Many people who owe money have every intention of paying their bill but are unable to do so in the short term because of some emergency. As accounts age, it is appropriate to increase the forcefulness of any message to the patient that the account is overdue. Patients should always be invited to call the office and make arrangements to pay over time if they have had a true emergency. Sometimes it is medical bills themselves that are piling up, especially in the case of a patient with a chronic illness who does not have adequate insurance.
Patients are also encouraged to discuss accounts for which insurance payment is expected but delayed. By working with the insurance company, the patient can more easily determine whose responsibility the bill is.
Past Due Accounts
Messages encouraging payment of the bill (often called claim messages) can be attached to bills or included in the billing envelope. Some computer programs will print a message on the bill itself.
A bill that is 60 days overdue should be accompanied by a claim message reminding the patient that the bill is overdue. Many offices use a series of messages that become more forceful as time passes without payment.
Bills that are 90 days overdue should be followed up with a telephone call. By contacting patients directly, the medical assistant can determine why there has been no activity related to the account. The medical assistant must be careful to follow legal guidelines when discussing accounts with patients. The Fair Debt Collection Practices Act of 1966 identifies activities that are permitted and not permitted when contacting individuals who owe money. Most states also have debt collection laws with which the medical assistant should be familiar.
Collection Letters
Bills that are aged 120 days should either be accompanied by or followed up by a collection letter, such as the one shown in Figure 47-3. When writing a collection letter, the medical assistant should gather information related to the account before composing the letter. The recipient should be clearly informed about what action is expected, as well as the deadline for action. The letter should not threaten legal action or transfer to a collection agency unless the office is prepared to follow through.
Each medical office has its own policy about who should sign a collection letter. In many offices, the medical assistant signs the letters. In other offices there may be an office manager or billing specialist, or each physician may prefer to sign letters to his or her own patients (Procedure 47-6).
If the collection letter does not receive a response, another letter should be sent stating either that the account is now being turned over to a collection agency (a company that collects overdue bills for other companies) or that a lawsuit will be filed in small claims court if the account is not paid by a certain date. Some offices will continue to see patients with accounts in collection, but they usually require the patient to pay any current charges before the patient can be seen.
As in any case where it is important to have documentation that a letter was received, the letter should be sent Certified Mail, with a Return Receipt requested. If the patient is being asked to find a new provider, the letter should allow the patient at least 2 weeks to arrange alternate care.
Western Medical Center 107 River Street Western, OH 44770
4/10/20XX
[Patient Address]Dear [Patient Name],
Your account in this office is now more than 120 days overdue. We have made several previous attempts to set up a mutually agreeable payment schedule with you, but you have not followed through on your commitment. This will be your final notice. If you do not contact our office within 7 days of receipt of this letter, we will have no choice but to turn over this account to our collection agency. Please call us at (490) 220-1156 or send a check to pay the balance of your account if you wish to avoid collection activity.
Yours truly,
Richard Warner, MD Richard Warner, MD RW/mt
Figure 47-3 Sample collection letter.
Highlight on Guidelines for Telephone Collections
Things to Do
A creditor (person or company who is owed money) may contact the person who owes money by telephone during reasonable hours. The medical assistant should gather accurate information before placing the telephone call about an overdue account:
Who owes the money?
How much money is owed?
How long has the money been owed?
Is there any insurance claim pending?
Has the insurance company processed the claim and/or made any payment?
A creditor may take measures to locate a person but may not divulge that he or she is trying to collect a bill to anyone other than the person who owes money. The medical assistant should ask to speak with the patient or the person responsible for the account when placing the call.
A creditor may not misrepresent himself or herself in order to trick the person who owes money into taking the call. After asking for the person responsible for the account, the medical assistant should identify himself or herself and the office or physician.
A creditor may not harass or intimidate a person who owes money. The medical assistant should speak calmly and professionally. The conversation should include a discussion of the different options for payment, including full payment, partial payment, and monthly installments. If possible, the medical assistant should obtain a verbal commitment for a date and amount of at least a first payment and/or a payment plan.
Although a verbal agreement is legally binding, a written agreement is easier to enforce if legal action becomes necessary. It is important to follow up any verbal agreement with a letter referring to the conversation and the agreement. If an arrangement was established for monthly payments, a truth-in-lending statement must be included, even if the patient will not pay interest.
Although it is not permitted to harass the patient, the medical assistant may contact him or her again if payments are not made as agreed. Often, the knowledge that attention is being paid to the account will encourage the patient to adhere to the repayment schedule.
Things Not to Do
A creditor should not call too early in the day or too late at night.
A creditor should not divulge to employers, neighbors, or other third parties that he or she is trying to collect a bill from the patient.
A creditor should not threaten.
A creditor should not end the conversation on vague terms.
A creditor should not call repeatedly. ■
Credit Agreements
Credit agreements are documents that allow patients to set up a schedule to pay off their bills as long as they make the specified monthly payments (Figure 47-4). If a patient decides independently to pay his or her bill in installments (i.e., without discussing it with the medical office), no credit agreement is necessary. If the office and patient make an agreement regarding installment payments, even if no interest is charged, the agreement must be in writing. An interest charge is often added to the balance due at the end of each billing cycle when a written agreement exists.
A credit agreement with a medical office is a type of revolving credit, like a department store or gasoline company charge card. As long as the monthly minimum is paid, the account is considered in good standing.
Truth in Lending Agreements
Because a credit agreement is a type of revolving credit, it falls under federal and state government fair lending practices. Therefore a truth in lending statement must be supplied to the patient when the agreement is made. Truth in lending refers to the legal requirement to disclose the terms of a loan to borrowers so that they can understand them.
This truth in lending statement includes facts about such things as the maximum amount the patient may charge to the account, the interest rate, how the interest is computed (e.g., average daily balance, or balance at the end of the billing period), and how the minimum monthly payment is computed (e.g., percentage of outstanding balance). Figure 47-4 shows a sample credit agreement.
Policy for Patients with Outstanding Balances
Most medical offices insist that a patient close out any current balance due before a credit agreement is written with that patient. If the practice has had trouble collecting bills from a patient in the past, it may write the credit agreement for a lower maximum balance. But the practice cannot charge a different interest rate or compute the minimum payment in a different way for different patients depending on past payment history.
Other Collection Techniques and Special Circumstances
Tracing “Skips”
Occasionally a bill is returned to the medical office from the post office with the notation “address unknown.” This may be an innocent mistake—the result, perhaps, of an incorrect address on file or the patient’s failure to notify the office after moving. On the other hand, it may be a deliberate attempt to “skip out” on the medical office’s bill and the bills of other professionals and/or merchants.
A potential “skip” (account for which no billing information is available) should be followed up immediately.
Blackburn Primary Care Associates, PC 1990 Turquoise Drive Blackburn, WI 54937 608-459-8857
Federal Truth in Lending Statement
Patient _____________________________________________________________________
Address_____________________________________________________________________
Fee for service of _____________________________
Amount down ———————————-
Amount financed ———————————–
finance charge _____________________
total of payments 3 + 4 —————————————–
number of payments ———————————————
amount of each payment________________________
Total no. of payments__________________ payable over_________ monthly installments
In the amount of $___________________ The first payment is due____________ .
Date_____________________ Signed____________________________________________
Figure 47-4 Sample credit agreement.
PROCEDURE 47-6
The first step is to call the patient’s phone number: It is very common to keep the same telephone number even if a person moves, or a person may have had the phone company use a “new number” message to forward calls. Because caller ID is a feature on many land lines and cell phones, a telephone call from a creditor may be ignored or the person answering the call may say that it is a wrong number.
If the patient cannot be contacted using the telephone number given at the office visit and if there is no new number listed, the next step is to call the patient’s place of business and ask to speak with the individual. The medical assistant can try to get in touch with the person by contacting professional associations, unions, or other organizations with which the person is associated.
The medical assistant should never tell a third party that an individual owes money to the medical office and should not identify the employer; the medical assistant should say only that he or she wishes to speak with the person. Also, it is illegal to call a third party more than once in an attempt to trace a skip unless that person asks the medical assistant to call back. For example, the medical assistant may speak with a third party where the individual with an overdue account works, and that third party might ask the medical assistant to call back at the end of the day when he or she is not so busy.
Another way to attempt collection is to send a letter by Registered or Certified Mail, with a Return Receipt requested, to the individual at the old address. Even if the person did not ask the post office to forward all mail, he or she may have asked for certain types of mail to be forwarded. In this case, the letter should be placed in a plain envelope, with just the return street address and no office name. This minimizes the chances that the individual will refuse to accept the mail.
The medical office may also use one of several Internet resources to trace skips. These services usually charge a fee. The more information the office has about the individual, the more likely it is that the individual can be located.
If all of these efforts fail, the bill should be turned over to a collection agency used by the office as soon as possible. Most collection agencies handle far more “skips” than individual medical offices do and sometimes use other, more aggressive techniques. The sooner the collection agency receives the account, the better chance it has to collect the bill.
Sending Accounts to a Collection Agency
Collection agencies are in business specifically to collect accounts that have “aged out.” This means that by the time a collection agency receives a delinquent account, the business such as a medical office has given the person who owes the money fair warning that the bill is overdue and that a professional collector is going to become involved.
Each state has specific laws under which collection agencies must work. These laws define when collection agency personnel can call, what they can say, and what other tactics they can use to collect the bill.
Collection agencies generally charge 20% to 40% of the amount they collect. They are not allowed to “cut a deal” with a patient and accept less than full payment unless the medical office has agreed to the arrangement for payment.
If a patient’s account is in collection, usually the office has a policy not to see the patient unless any new charges are paid in full before the patient is seen by the physician. Other offices notify patients in writing that they will not be seen by any physician in the office until their outstanding balance has been collected.
When an account is turned over to a collection agency, the patient balance in the computer system is often adjusted to zero. The amount owed by the patient can still be seen clearly in the patient ledger, but the current balance is zero. This prevents bills to the patient from being generated, and the account no longer appears as overdue on account aging reports. The medical assistant should become familiar with the exact procedure used in his or her medical office. The medical office makes no further attempts at collection, and any payments received from the patient are sent directly to the collection agency. When a payment for the patient’s account is received from a collection agency, it should be recorded on the daily ledger. In addition, it should be posted to the account for which it was collected. The patient’s account balance, which is usually zero, is first increased (as a positive or debit adjustment) by the amount of the payment. Then the payment is posted as a payment, bringing the current account balance back to zero (Procedure 47-7).
PROCEDURE 47-6 Writing a Collection Letter
Outcome Write a collection letter.
Equipment/Supplies
Accounts aging report • Letterhead stationery
Computer • Envelope
Patient accounts • Printer
1. Procedural Step. After the accounts receivable aging need a letter. In general, this will be the accounts that record has been created, determine which accounts are 90 to 120 days old.
Principle. A letter is usually sent after reminders have 4. been sent and a telephone call has been made to collect an outstanding account balance.
Procedural Step. Review each account for the amount due, how long it has been due, any previous activity, and special situations. If the account is due from the estate of a deceased patient or insurance, or if there is a known reason why delayed payment is acceptable, do not take action on the account.
Principle. There may be circumstances that justify the 5. delay in payment. 6.
Procedural Step. Otherwise, prepare a letter for each outstanding account. The letter should state clearly the 7. amount of the outstanding balance, the date that the charges were incurred, the service provided, and the amount paid by insurance. It should also describe any previous conversations and/or agreements. The letter should clearly state that the outstanding balance is due and identify the date by which it is expected to be paid (usually in 10 days). 8.
Principle. Even though the bill is overdue, the recipient of the letter is given a reasonable amount of time to respond to this letter.
Procedural Step. Enter the typed signature as indicated by office policy (the medical assistant, office manager, billing specialist, or physician). If you do not sign the letter yourself, place the name of the authorized individual on the written signature line and prepare a reference line using your own initials.
Principle. The letter should be signed by a person who is authorized by the medical practice to collect outstanding accounts.
Procedural Step. Prepare an envelope.
Procedural Step. Obtain the written signature on the letter.
Procedural Step. Place a copy of the letter in the patient’s medical record. Place a notation that a letter was sent on the aging report and in the computer account if possible. You may also file a copy of the letter in a collection follow-up file.
Principle. Future activity to collect on the account should be based on a review of your current activity. Procedural Step. Place the letter in the envelope and mail the letter.
PROCEDURE 47-7 Posting a Collection Agency Payment
Outcome Post a collection agency payment.
Equipment/Supplies
Computer
Patient accounts
Payment check(s)
Day sheet
Office policy manual
Calculator
Procedural Step. When a payment has been made from a collection agency, locate the patient account in the computer.
Principle. All financial transactions must be entered to the correct patient account.
Procedural Step. Be sure that the patient’s balance was adjusted to zero at the time the account was sent to collection. On the day sheet, label the first open line with the name of the patient whose check was returned and enter zero in the old balance column. Principle. It is standard procedure to write off the patient balance when an account is sent to collection. This decreases the total accounts receivable accounts by an amount that the medical office does not expect to be able to collect.
Procedural Step. Create a new transaction for the patient and select the code for reverse collection.
Enter the amount of the check and verify that the computer shows a positive patient balance after this entry.
Principle. The reverse collection code is used to increase the patient’s balance before entering the payment.
4. Procedural Step. On the day sheet, enter the amount of the collection agency check in the adjustment column. The amount should be written in parentheses because it is a debit adjustment.
Principle. The patient balance, which has previously been adjusted to zero, must be increased to the amount of the collection agency check before posting the actual payment. In the computer, selecting the correct code automatically increases the patient balance. When using a day sheet, an adjustment must be added to the patient balance.
PROCEDURE 47-7 Posting a Collection Agency Payment—cont’d
Procedural Step. When totaling the adjustment column of the day sheet, subtract the debit adjustment from the total of the credit adjustments.
Procedural Step. Enter the amount of the check in the new balance column. This figure is obtained by adding the adjustment to the previous balance of zero. If using a day sheet, on a new line enter “Collection Agency Payment” in the professional service column.
Procedural Step. In the computer, on a new line, select the code for collection agency payment and enter the amount of the collection agency check.
Procedural Step. Verify that the patient balance returns to zero in the computer account.
Procedural Step. On a new line of the day sheet, enter the patient’s name and enter the amount of the collection agency check in the old balance column.
Procedural Step. Enter “Collection Agency Payment” in the professional service column of the day sheet.
Procedural Step. Enter the amount of the check in the payment column of the day sheet.
Procedural Step. Enter zero in the new balance column of the day sheet after subtracting the payment from the previous balance.
Principle. After posting the collection agency payment, the patient’s balance should again be zero. Example: The account of Robert Ricigliano, which was adjusted to zero when the account was turned over for collection, is increased to $25.00 using the code for reverse collection. Then a collection agency check for $25.00 is posted to the account leaving a zero balance.
| Charges: | ||||||||||
| Date | Procedure | |Diag 1 | |Diag 2 | Diag 3 | Provider | POS | |Units | Amount | Total | |
| 2/22/20XX | 99212 | |l12.9 | RW | 11 | 1 | |55.00 | 55.00 | |||
| Payments and adjustments: | ||||||||||
| Date | Pay/Adj Code | Paid By: | Description | Amount | Total | |||||
| 2/22/20XX | WO | Send to collection | -55.00 | 0.00 | ||||||
| 4/18/20XX | REVERSE | Reverse collection | 25.00 | 25.00 | ||||||
| 2/4/20XX | AGENCY | ABC Collection Agency | Collection agency payment | -25.00 | 0.00 | |||||
There is a zero balance after posting the collection agency check.
Small Claims Court
Small claims courts exist in each state. They are special sessions of the local district court that deal only with civil lawsuits involving small amounts of money. Most small claims lawsuits involve disputes over payments. Each state has its own rules for the maximum claim that can be brought in small claims court. This maximum amount runs from about $1500 in some states to as much as $15,000 in others.
The question for a medical practice when choosing to use the court system is always whether it will sacrifice more in “good will” than it will gain in money if the collection is successful. Many offices bring suits in court only after a patient has left the practice without paying a bill in full. Furthermore, winning a judgment in small claims court is only the first step. The office must still collect the judgment.
Small claims courts are set up to reduce the legal fees for those seeking to collect relatively small amounts of money. Because there is no lawyer, the plaintiff (an individual or business) must represent himself or itself. The office manager or medical assistant might have to assume this duty if the office uses small claims court to try to collect on patient accounts. A collection agency cannot represent the office.
The clerk of the court has all of the documents necessary to file a small claim and can usually walk a first-time claimant through the process, explaining how to fill out the forms and which documentation to submit to back up the claim. Only the defendant can appeal a small claims court judgment; for the plaintiff, a negative judgment is final.
Billing an Estate
Patients do sometimes die without having paid their medical bills in full. In this instance the office will have to collect the balance due from the estate. Estates fall into an area of the law known as probate, and probate law is administered by a special section of the court system in each state.
It is not appropriate to send a bill to a deceased patient’s estate immediately after the death while the family is grieving; however, the bill should be sent within 30 days. The bill should be sent to “The Estate of” the patient at the patient’s address rather than to a family member or other individual unless that person has made a written promise to cover the deceased’s medical costs.
If the deceased patient had a will, it usually has a provision that the costs of the patient’s final illness be paid by the estate outside of the probate process. In such a case the bill will probably be paid promptly. The will should be filed within 30 days, and the clerk of the probate court should then be able to furnish you with the name of the executor or administrator (the person responsible for handling the estate’s business dealings). An itemized final bill should then be sent to this individual by Certified Mail with a Return Receipt requested.
If the patient did not have a will, the medical practice’s bill will be put in with other creditors’ bills and paid only when payment is approved by the probate court and the administrator appointed by the court.
Bankruptcy
Bankruptcy laws are federal laws, meaning that they apply equally regardless of the state in which the bankrupt person lives. Bankruptcy is a means for an individual or business
Christa Wilson: During my externship, I observed billing activities and I was allowed to assist in some ways. For example, I got a lot of practice at making sure that all bills printed correctly, checking each bill to make sure that there was an outstanding balance and that the insurance had already paid, and folding the bills to place them in window envelopes. The computer system used by the office where I did my externship printed the bills with an itemized statement of all activity on the account. The patient was expected to pay the balance on the bottom line of the statement. Sometimes patients called the office because they didn’t understand what amount to pay. They usually spoke to the medical assistant at the office. I noticed that she was always polite and professional when she spoke to patients. The office also taught me how to post patient payments that were sent by check. I have to say I did not realize how important good billing practices are until my externship. I was grateful that I had experience at an office with a smooth-running system. ■
to “get out from under” a crushing load of debt, either by reorganizing the debt or by liquidating assets and dividing the funds among all of the creditors.
Individuals file for personal bankruptcy under either Lecture 7 or Lecture 13 of the bankruptcy code.
A Lecture 7 bankruptcy is a liquidation of assets. Under such a bankruptcy, only secured creditors will be paid from the proceeds from the sale of any assets. If the bankrupt patient had a credit agreement, the medical office is a secured creditor. But if the office is merely trying to collect a bill, the office is an unsecured creditor and will not receive payment.
A Lecture 13 bankruptcy is an “Adjustment of Debts” bankruptcy. In such a bankruptcy, the debtor (patient) pays a particular amount determined by the bankruptcy court to the court-appointed trustee, who then distributes the money to creditors. The debtor, if he or she has a regular income, can be required to make payments from that income into the trustee account for 3 years, and the trustee makes payments to creditors under payment plans he or she works out.
During the period the debtor is under the jurisdiction of the bankruptcy court, no creditor may try to collect a debt outside the bankruptcy process. However, a medical office can demand payment in full for any additional service it provides to a patient from whom it is collecting old debts under a bankruptcy agreement.
What Would You Do? What Would You Not Do?
Case Study 3
On the day that Judith Mason is scheduled for an appointment, Christa notices that she has an outstanding balance of $58.00 from charges that were incurred 4 months ago. It is office policy that patients with a balance over 120 days are not seen until the balance has been paid. ■
MEDICAL PRACTICE and the LAW
Several laws affect credit and collection activities.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act is a federal law that prevents discrimination based on the following when offering credit:
Sex, marital status, race, national origin, religion, age
The fact that the applicant receives public assistance income
The fact that the applicant has exercised rights under consumer credit laws
An applicant must be informed if credit is denied and has 60 days to request, in writing, the reason for denial of credit.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act is a federal law that requires the fair treatment of debtors and prevents unfair debt collection measures, including harassment, false statements, and threats.
The debt collector may not make frightening, verbally abusive, or threatening calls.
The debt collector may not call before 8 am or after 8 pm.
The debt collector may not threaten action that cannot legally be taken or is not intended to be taken.
MEDICAL PRACTICE and the LAW—C
Federal Truth in Lending Act
Installment agreements of more than four payments (or fewer if interest is charged) must be written. The Federal Truth in Lending Act is administered by the Federal Trade Commission. It requires creditors to provide applicants with a form disclosing in a clear and obvious way all finance charges and terms.
Fair Credit Reporting Act
The Fair Credit Reporting Act requires credit bureaus to supply correct and complete information to businesses to use in evaluating a person’s application for credit, insurance, or employment.
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is a revision of federal bankruptcy laws that attempts to make it more difficult for individuals to file for bankruptcy under Lecture 7, by which most of the debts are forgiven by establishing a means test to determine if individuals are able to pay some of their debts. It also makes the process of filing for bankruptcy more difficult and expensive. Debtors are still able to file for bankruptcy under Lecture 13. ■
What Would You Do? What Would You Not Do? responses
Case Study 1
Page 1111
What Did Christa Do?
Reassured the patient that the situation is upsetting, but it can happen sometimes.
Explained that most banks charge both the account of the individual who writes a check against an account with insufficient funds, as well as the account where the check was deposited.
Explained that the office had a policy of not sending a check through the bank a second time or accepting a personal check for payment after one check was returned.
Suggested that the patient might want to consider overdraft protection.
Explained politely that the office was only recovering its out-ofpocket expenses and was not, in fact, charging an additional fee.
What Did Christa Not Do?
Did not get angry or raise her voice.
Did not imply that the patient was trying to avoid payment or was a bad money manager.
Did not make statements such as, “This better not happen again!” or “How do you expect us to pay our bills if our patients’ checks bounce?”
What Would You Do/What Would You Not Do?
Review Christa’s response and place a checkmark next to the
information you included in your response. List the additional information you included in your response.
Case Study 2
Page 1113
What Did Christa Do?
Told the patient that she would check the receipt book, then went through the duplicate receipts of the day of the patient’s visit.
If a copy of the receipt for a cash payment was found, told the patient and entered the payment into the patient’s account.
If no copy of the receipt was found, explained to the patient that it is office policy to issue a receipt for any cash payment from a book where a duplicate is made automatically.
If no copy of the receipt was found, suggested tactfully that the patient may not remember this specific visit, and perhaps she was unable to pay her copayment that day or forgot to pay it.
If the patient continued to insist that she paid cash, offered to discuss the matter with the office manager or physician.
What Did Christa Not Do?
Did not get angry at the patient or raise her voice.
Did not say that unless the patient could show her a receipt, the office would automatically assume that she had not paid.
Did not accuse the patient of trying to get out of paying the copayment.
What Would You Do/What Would You Not Do?
Review Christa’s response and place a checkmark next to the
information you included in your response. List the additional information you included in your response.
What Would You Do? What Would You Not Do? responses—contd
___________________________________________ l m.______________ m.__
Case Study 3
Page 1121
What Did Christa Do?
Attempted to contact Ms. Mason by telephone to inform her of the office policy so that the patient could be prepared to settle her outstanding bill.
If the patient could not be contacted before the appointment, took her to a private room when she arrived at the office to discuss her account.
Strongly encouraged Ms. Mason to settle the account by check or credit card before she was seen by the physician.
If Ms. Mason stated that she could not pay the balance on that day, left the final decision about whether she would be seen to the physician because the patient had not been informed of the office policy before coming to the office.
What Did Christa Not Do?
Did not take the sole responsibility to tell the patient that if she did not pay, under no circumstances would she be seen by the physician.
Did not raise her voice or get angry with Ms. Mason.
Did not discuss Ms. Mason’s financial matters where others could overhear the conversation.
What Would You Do/What Would You Not Do?
Review Christa’s response and place a checkmark next to the
information you included in your response. List the additional information you included in your response.
TERMINOLOGY REVIEW
Medical Term Word Parts Definition
Account aging Balance due Bankruptcy Claim message Collection agency Credit balance
Overdraft
Skip
Truth in lending
The process of finding out how long specific account balances have been outstanding.
Total amount owed.
Legal process by which the debts of an individual or business are resolved if they cannot be paid. Messages encouraging payment of a bill, usually attached to or printed on the monthly statement. A firm that is in the business of collecting overdue accounts.
A negative balance on a patient account (i.e., money is owed by the medical office), usually a result of an overpayment.
A check (or draft) that exceeds the amount of funds in a bank account.
Account for which no billing information is available.
Legal requirement to disclose the terms of a loan in terms that the borrower can understand.
For information on the Federal Trade Commission:
Federal Trade Commission: www.ftc.gov