CHAPTER © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 13 Accounts Receivable Follow Up and Collections

CHAPTER

© 2012 The McGraw-Hill Companies, Inc. All rights reserved.

13Accounts Receivable

Follow Up and Collections


Learning Outcomes

When you finish this chapter, you will be able to:13.1 Explain why it is important to collect overdue

balances from patients.

13.2 Describe the way in which financial policies help establish payment expectations.

13.3 Describe the procedures followed to identify overdue accounts.

13.4 Identify the major federal laws that govern the collection process.

13.5 Explain how letters are used in collecting overdue payments.

13-2


Learning Outcomes (Continued)

When you finish this chapter, you will be able to:13.6 Explain payment plans.

13.7 Discuss the use of collection agencies to pursue patients who have not paid overdue bills.

13.8 Describe the procedures for clearing uncollectible balances and small balances from patients’

accounts receivable.

13-3


Key Terms

• bankruptcy

• collection agency

• collection list

• collection tracer report

• Equal Credit Opportunity Act (ECOA)

• Fair Debt Collection Practices Act of 1977 (FDCPA)

• means test

13-4

• patient refund• payment plan• small-balance account• Telephone Consumer

Protection Act of 1991• tickler• Truth in Lending Act• uncollectible account• write-off


13.1 The Importance of Collectionsfrom Patients

13-5

• Receiving full payment for services is a critical factor in determining the financial success of a medical practice.– Sums that are not collected must be subtracted from

income, reducing working capital.– If payments are not collected, the practice may have

to borrow funds and pay interest on those amounts.

• The average patient is now responsible for paying nearly 35 percent of their medical bills.


13.2 The Financial Policy and Payment Expectations

13-6

• The patient collection process begins with a clear financial policy.

• Clear financial policies:– result in effective communications with patients about

their financial responsibilities,– help patients to understand the charges and the

practice’s policies in advance,– make collecting payments less problematic,– enable practices to add finance charges on late

accounts, when announced in advance.


13.3 Collection Procedures 13-7

• Nonpayment of patient statements initiates the collection process.– Patient aging reports are analyzed to determine which

patients are overdue on their bills and to group them into categories for efficient collection efforts.

• Collection list—tool for tracking activities that need to be completed as part of the collection process

• Tickler—reminder to follow up on an account• In MNP, selections for the Collection List feature

are located on the Activities menu.


13.4 Laws Governing Patient Collections 13-9

• Collections from patients are classified as consumer collections and are regulated by federal and state laws.

• Fair Debt Collection Practices Act of 1977 (FDCPA)—federal law regulating collection practices

• Telephone Consumer Protection Act of 1991—federal law regulating collection practices


13.5 Collection Letters 13-10

• Collection letters are usually a patient’s first notice that their bill is past due. These letters:– are brief and to the point,– preserve a professional and courteous tone,– remind the patient of the practice’s payment options,– remind the patient of their responsibility to pay the

debt.

• Collection tracer report—tool for keeping track of collection letters that were sent


13.6 Payment Plans 13-11

• Payment plan—agreement between a patient and a practice in which the patient agrees to make regular monthly payments over a specified time period– Most practices have a number of different payment

plan options.– If a payment plan is assigned and followed by the

patient, the patient will not be sent collection letters.– Payment plans may be regulated by law.


13.6 Payment Plans (Continued) 13-12

• Equal Credit Opportunity Act (ECOA)—law that prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, or age, or because a person receives public assistance

• Truth in Lending Act—part of the federal Consumer Credit Protection Act that regulates collection practices related to finance charges and late fees


13.7 Collection Agencies 13-13

• Collection agency—outside firm hired to collect on delinquent accounts– Practices should select agencies that have a

reputation for fair and ethical handling of collections.– Collection agencies are often paid on the basis of the

amount of money they collect.

• Office staff members no longer contact patients whose accounts have been referred to a collection agency.


13.8 Write-Offs and Refunds 13-14

• Uncollectible account—account that does not respond to collection efforts and is written off the practice’s expected accounts receivable

• Means test—process of fairly determining a patient’s ability to pay

• Bankruptcy—declaration that a person is unable to pay his or her debts

• Write-off—balance that has been removed from a patient’s account


13.8 Write-Offs and Refunds (Continued) 13-15

• Small-balance account—overdue patient account in which the amount owed is less than the cost of pursuing payment

• Patient refund—money owed to the patient• Uncollectible balances may be removed from

patients’ accounts receivable using MNP’s Transaction Entry dialog box.

• Small balances may be removed using MNP’s Small Balance Write-off feature from the Activities menu.

Documents

CHAPTER © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 13 Accounts Receivable Follow Up and Collections