1

Patient Billing and

Collections

Chapter 15

© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 15 2

Learning Outcomes

After studying this chapter, you should be able to:15.1 Discuss the ways practices explain their

financial policies to patients.

15.2 Describe the purpose and content of patients’ statements and the procedures for working with them.

15.3 Compare individual patient billing and guarantor billing.

Chapter 15 3

Learning Outcomes (Continued)

15.4 Discuss the responsibilities of a collection specialist, and describe other positions that are typically part of the billing and collections function.

15.5 Describe the processes and methods used to collect outstanding balances due to the medical practice.

15.6 Explain how the medical practice can pursue patients who have not paid

their overdue bills.

Chapter 15 4

Learning Outcomes (Continued)

15.7 Discuss the tools that can be used to locate unresponsive or missing patients.

15.8 Describe the procedures for clearing uncollectible balances from the

practice’s accounts receivable.

15.9 Explain the purpose of a retention schedule and the requirements for retaining patient information.

Chapter 15 5

Key Terms• Bankruptcy• Bad debt• Collection agency• Collections• Collections

specialist• Credit bureaus• Credit reporting• Cycle billing• Day sheet

• Embezzlement• Fair and Accurate

Credit Transaction Act (FACTA)

• Fair Credit Reporting Act (FCRA)

• Fair Debt Collection Practices Act of 1977 (FDCPA)

Chapter 15 6

Key Terms (Continued)

• Guarantor billing• Identity-theft red

flag• Means test• Patient aging report• Patient refunds• Patient statement• Payment plan• Prepayment plan

• Retention schedule• Skip trace• Telephone

Consumer Protection Act of 1991

• Truth in Lending Act

• Uncollectible account

Chapter 15 7

Patient Billing and Collections

As the last steps in the billing process, they involve:

• Generating and mailing patient statements to show the balances that patients owe

• Posting patients’ payments• Examining aging reports for patients’ accounts

and handling collections

Chapter 15 8

Patient Billing

A practice’s financial policy tells patients how the following will be handled:

• Collection of copayments, deductibles, and past-due balances

• Financial arrangements for unpaid balances• Charity care or low-income patient payments• Payments for services not covered by insurance• Prepayment for services• Day-of-service discounts • Acceptance of cash, checks, money orders, and credit

or debit cards• Any special circumstances

Chapter 15 9

Patient Statements

When a claim is filed, and the resulting payment from the patient’s insurance carrier is posted, based on the RA/EOB:

1. The payer’s payment for each reported procedure is entered.

2. The amount the patient owes for each reported procedure is calculated.

3. If any part of a charge must be written off due to a payer’s required adjustment, this amount is also entered.

Also, the PMP updates the day sheet—a summary of the daily financial transactions for the practice.

Chapter 15 10

The Content of Statements

Patient statements include information about:

• The name of the practice and the patient’s name, address, and account number

• A cost breakdown of all services provided• An explanation of the costs covered by the

patient’s payer(s)• The date of the statement• The balance due

Chapter 15 11

Guarantor Billing

Offers the following advantages over individual billing:

• Reduces the amount of time and money spent on billing by reducing paper and mailing costs and by reducing time spent on billing follow-up

• Allows the practice to prioritize its accounts receivable and collection efforts by combining several small bills into one large bill

• Improves patient satisfaction because patients will not receive multiple calls and letters

Chapter 15 12

Organizing for Effective Collections

A patient may not pay a bill for several reasons:• The patient thinks the bill is too high

• The patient thinks the care rendered was not appropriate or effective

• The patient has personal financial problems

• The bill was sent to an incorrect address

• There is a misunderstanding about the amount the patient’s insurance pays on the bill

Chapter 15 13

Staffing Assignments

Each practice’s billing and collection efforts must be organized for efficiency

• Small offices may assign collections duties to coders or billers on certain days of the week

• Large practices may have separate collections departments with these typical job functions:– Billing/collections manager

– Bookkeeper

– Collections specialist

Chapter 15 14

Billing/Collections Manager

Either a physician, a practice administrator, an office manager, or a collections manager handles these tasks:

• Create and implement the practice’s collection policies for all involved employees

• Monitor the results of collections activities• Organize the accounts and develop strategies• Assist and train collections specialists• Supervise and evaluate collections specialists

Chapter 15 15

The Bookkeeper

Managing the finances of the medical practice is a complicated task, and most practices choose to dedicate an employee to this responsibility

• Makes sure that all funds coming into and owed to the practice are accurately recorded

• An outside accountant usually audits this work periodically

Chapter 15 16

The Collections Specialists

Collections specialists are trained to work directly with the practice’s patients to resolve overdue bills

• They are held accountable for their results• Some practices provide incentives such as

additional pay, prizes, or paid time off work• They must always remember to act ethically

and professionally

Chapter 15 17

Avoiding Opportunities for Fraud

Practices can decrease opportunities for fraud by:

• Dividing financial tasks among several people with different responsibilities

• Involving at least two or more people• Depositing funds daily and having two people

responsible for closing a day’s financial records

Bond or theft insurance may be purchased

Chapter 15 18

Collection Regulations

The Federal Trade Commission enforces the Fair Debt Collection Practices Act of 1977 (FDCPA) and the Telephone Consumer Protection Act of 1991, and their guidelines include these rules:

• Contact patients only once daily, and leave no more than three messages per week

• Do not call a patient before 8 A.M. or after 9 P.M.

• Do not threaten the patient or use profane language

• Do not discuss the patient’s debt with another person

Chapter 15 19

Collections Procedures

• The medical office tracks overdue bills by reviewing the patient aging report

• The patient aging report includes the patient’s name, most recent payment, remaining balance

• It also divides the information into categories based on each statement’s beginning date:1. Current or up to date: Thirty days

2. Past due: Thirty-one to sixty days

3. Past due: Sixty-one to ninety days

4. Past due: More than ninety days

Chapter 15 20

Collections Letters

For most patients, the collections letter is the first notice that their bill is past due. Collections letters should:

• Be professional, courteous, brief, and to the point

• Remind the patient of the practice’s payment options and their financial responsibility

• Become more aggressive for accounts that are farther past due

Chapter 15 21

Collections Call Strategies

General strategies for collections specialists to follow on patient phone calls include:

• Be straightforward, honest, and informative• Maintain a professional attitude• Allow time for the patient to respond, and do not

provide excuses for the patients• Stay in control off the conversation• Do not intimidate, yell, or be disrespectfulAfter the call, the conversation is documented, using

standard abbreviations such as HU for “hung up.”

Chapter 15 22

Credit Arrangements and Payment Plans

Practices may decide to extend credit by:• Setting up prepayment plans based on an

estimate of charges• Allowing patients to pay their bills over time

via a payment plan• Following Truth in Lending Act if more than

four installments are planned

Chapter 15 23

Credit Counseling

Consumer credit counseling services and debt management programs are nonprofit organizations that can assist patients struggling to pay their bills

Chapter 15 24

Collection Agencies

These reasons could force a practice to send patients’ bills to a collection agency:

• Attempts to contact have been unsuccessful, and phone calls and letters unanswered

• A patient has declared he/she will not pay a bill• A patient’s check has been returned for lack of funds in

the account• A patient failed to honor a payment plan• A patient has received payment from the insurance

company but withholds payment to the practice• The patient cannot be located or contacted

Chapter 15 25

Selecting a Collection Agency

When choosing a collection agency, practices should consider the following:

• The agency represents the practice, and should have a history of fair and ethical practices

• Some agencies specialize in handling medical office accounts, and are generally preferred

• Reviewing an agency’s references and statistics• The advantages of local and regional agencies• The cost of the agency vs. their expected results

Chapter 15 26

Credit Reporting

• One advantage of using a collection agency is its ability to use credit reporting as a collection tool

• Crediting reporting on a patient’s account will:– Place unpaid medical bills on their record

where they can be viewed by creditors– Hinder their ability to receive future credit

Chapter 15 27

Skip Tracing

When the standard attempts to contact a patient are unsuccessful, it may become necessary to skip trace the debtor

• Sometimes patients have forgotten their bill and will gladly pay

• Other patients will purposefully avoid contact with the medical office in an attempt to escape their overdue bills

The FDCPA guidelines still apply to calls

Chapter 15 28

Tracing a Debtor

The following methods can be used to locate a debtor:

• Contact the post office to find a new address for the patient, or clear up any errors in the address on file

• Search telephone directories for relatives with the same last name

• Run an Internet search with a free person-finding service

• Examine public state and federal records

Chapter 15 29

Other Skip Tracing Methods

Professional skip tracing assistance• Large practices or those with many skip traces

consider hiring a specialized external agency

Online directories and databases can be used for skip tracing at a fee

• These services may allow the practice to search for a patient by their name, address, telephone number, relatives, and/or neighbors

Chapter 15 30

Writing Off Uncollectible Accounts

If a practice has exhausted all of its collection efforts and a patient’s account is still unpaid, it may be labeled an uncollectible or write-off account

• Practices decide which debts to write off and whether to continue to treat the patients

• After an account is determined uncollectible, it is removed from the practice’s expected accounts receivable and classified as a bad debt

Chapter 15 31

Common Types of Uncollectible Accounts

The most common reason an account becomes uncollectible is that a patient cannot pay the bill

• Other reasons why an account may be written off include:– The patient cannot be located through skip

tracing– The patient has died with an unpaid bill– The patient has filed for bankruptcy

Chapter 15 32

Dismissing Patients Who Do Not Pay

A physician has the right to terminate the physician-patient relationship for any reason under the regulations of the state

• If a patient is to be dismissed, this action should be documented in a letter to the patient that:– Offers to continue care for a specific period of time

– Provides referrals to other physicians

– Does not state a specific reason for the dismissal

– Is signed by the physician and mailed certified

Chapter 15 33

Record Retention

Patients’ medical records and financial records are retained according to the practice’s policy

• The practice’s policy is summarized in a retention schedule, a list of the terms from a record that are retained and for how long

• The retention schedule protects both the practice and the patient