CHAPTER 14

1. Patient Billing and Collections CHAPTER 14

2. See the ten-step Revenue Cycle figure (at the beginning of the chapter). • This chapter focuses on the following steps: • Preregister patients • Establish financial responsibility • Check in patients • Review coding compliance • Review billing compliance • Check out patients • Prepare and transmit claims • Monitor payer adjudication • Generate patient statements • Follow up payments and collections Chapter 14: Patient Billing and Collections

3. When you finish this chapter, you should be able to: 14.1 Explain the structure of a typical financial policy. 14.2 Describe the purpose and content of patients’ statements and the procedures for working with them. 14.3 Compare individual patient billing and guarantor billing. 14.4 Classify the responsibilities for each position that are typically part of billing and collections. Learning Outcomes (1)

4. When you finish this chapter, you should be able to: 14.5 Describe the processes and methods used to collect outstanding balances. 14.6 Name the two federal laws that govern credit arrangements. 14.7 Discuss the tools that can be used to locate unresponsive or missing patients. 14.8 Describe the procedures for clearing uncollectible balances. 14.9 Analyze the purpose of a retention schedule. Learning Outcomes (2)

5. Key Terms (1) • bad debt • bankruptcy • collection agency • collection ratio • collections • collections specialist • credit bureau • credit reporting • cycle billing • day sheet • embezzlement • Equal Credit Opportunity Act (ECOA) • Fair and Accurate Credit Transaction Act (FACTA) • Fair Credit Reporting Act (FCRA) • Fair Debt Collection Practices Act (FDCPA) of 1977 • guarantor billing • means test • nonsufficient funds (NSF) check

6. Key Terms (2) • patient aging report • patient refund • patient statement • payment plan • prepayment plan • retention schedule • skip trace • Telephone Consumer Protection Act of 1991 • Truth in Lending Act • uncollectible account

7. Patient billing and collections, the last steps in the billing and reimbursement process, involve: • Calculating what patients still owe after their insurance has paid on claims • Generating and mailing patient statements to show the balances that patients owe • Posting patients’ payments • Examining aging reports for patients’ accounts and handling collections • Effective patient billing begins with sound financial policies and procedures 14.1 Patient Financial Responsibility (1)

8. Medical practices use many methods to inform patients of their financial policies and procedures: • Payment policies are explained in brochures and on signs in the reception area as well as orally by registration staff • Patients are often asked to read and sign a statement that they understand and will comply with the payment policy • Checks may be accepted, but occasionally this results in a practice’s having to deal with a nonsufficient funds (NSF) check—a check that the bank does not honor because the account lacks funds to cover it 14.1 Patient Financial Responsibility (2)

9. The PMP uses information from an RA to update the patient ledger and the day sheet • Day sheet—report summarizing the business day’s charges and payments • These data are used to generate a patient statement—document that shows services provided to a patient, total payments made, total charges, adjustments, and balance due • Patients may owe coinsurance, deductibles, and fees for noncovered services 14.2 Working with Patients’ Statements (1)

10. Patient statements are designed to be direct and easy to read, clearly stating: • General information about the practice • Cost breakdown of all services provided • Balances owed • Date of the statement and sometimes the due date for the payment • Accepted methods of payment 14.2 Working with Patients’ Statements (2)

11. Cycle billing—type of billing which divides patients with current balances into groups to even out monthly statement printing and mailing • Spreads out the workload • If the billing cycle is weekly, for example, the patient accounts are divided into four groups so that 25 percent of the bills go out each week 14.3 The Billing Cycle (1)

12. Guarantor billing—billing system that groups patients’ bills according to the insurance policyholder • Statements are grouped by guarantor and cover all patient accounts that are guaranteed by that individual • Produces fewer bills to track but can become unwieldy when family members have various health plans and/or secondary plans • Patient billing: • Each patient who has a balance receives a mailed patient statement 14.3 The Billing Cycle (2)

13. Collections—all activities related to patient accounts and follow-up • Large practices may have separate collections departments with these typical job functions: • Billing/collections manager—responsible for establishing office policies and enabling collections specialists to successfully perform their jobs • Bookkeeper—records funds coming into and going out of the practice • Collections specialist—staff member with training in proper collections techniques 14.4 Organizing for Effective Collections (1)

14. Collections specialists: • Trained to work directly with the practice’s patients to resolve overdue bills • Study aging reports and follow up on patient accounts that are past due • Act ethically and professionally in contact with patients • Embezzlement—theft of funds by an employee or contractor 14.4 Organizing for Effective Collections (2)

15. Processes and methods used to collect outstanding balances: • Efforts to collect past-due balances are strictly regulated by law and by office policy • Both collections letters and phone calls are integral parts of the collections process (see Figure 14.6) • Collections specialists maintain a professional attitude while being straightforward; they must be prepared for difficult situations and ready to work out credit arrangements and payment plans • Document all collections efforts 14.5 Collection Regulations and Procedures (1)

16. Fair Debt Collection Practices Act (FDCPA) of 1977—laws regulating collection practices Telephone Consumer Protection Act of 1991—law regulating consumer collections to ensure fair and ethical treatment of debtors Collection ratio – average number of days it takes a practice to convert its accounts receivable into cash Patient aging report—report grouping unpaid patients’ bills by the length of time they remain due (divides information into categories based on each statement’s beginning date) 14.5 Collection Regulations and Procedures (2)

17. Two federal laws govern payment arrangements: • 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—law requiring disclosure of finance charges and late fees for payment plans 14.6 Credit Arrangements and Payment Plans (1)

18. Payment plan—patient’s agreement to pay medical bills according to a schedule • Practices have guidelines for appropriate timeframes and minimum payment amounts for payment plans • Prepayment plan—payment arrangement made before medical services are provided • May be used when patients are scheduled to have major, expensive procedures 14.6 Credit Arrangements and Payment Plans (2)

19. Practices use a variety of methods to collect funds from patients who have not paid: • Collection agency—outside firm hired to collect overdue accounts • Credit reporting—analysis of a person’s credit standing during the collections process • Credit bureau—organization that supplies information about consumers’ credit history • Skip trace—process of locating a patient who has an outstanding balance 14.7 Collection Agencies and Credit Reporting (1)

20. Fair Credit Reporting Act (FCRA)—law requiring consumer reporting agencies to have reasonable and fair procedures • Fair and Accurate Credit Transaction Act (FACTA)—law designed to protect the accuracy and privacy of credit reports 14.7 Collection Agencies and Credit Reporting (2)

21. Not all balances due to the practice will be paid • Practices must know when to write off an account • Uncollectible account—money that cannot be collected and must be written off • Bad debt—account deemed uncollectible • 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 14.8 Writing Off Uncollectible Accounts (1)

22. Dismissing patients who do not pay • Document in a certified letter • Include specific information such as contact information for recommended services, etc. • Patient refund—money owed to patients • Needs to be returned to patients when the practice has overcharged a patient for a service • Patients’ refunds or credit balances are handled differently than insurance overpayments, which must be refunded to the payer 14.8 Writing Off Uncollectible Accounts (2)

23. The retention of medical records follows office policy and is also regulated by law • Retention schedule—list of the items from a policy and record governing a practice’s handling, retention, and storage of patients’ medical records • Medical practices must be ready to answer patient requests for information and records and to defend claims that are questioned • Financial records are generally saved according to federal records retention requirements • Medical records must be retained for at least six years under HIPAA *end of presentation* 14.9 Record Retention