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Lesson13: Debt Recovery and Patient Revenue Cycle (Bad Debt Management…
Lesson13: Debt Recovery and Patient Revenue Cycle
Aging report
What?
associated with the company's Accounts Receivable (AR)
accounts receivable: customers who owe money to the company
shows how long invoices from each customer have been outstanding
manage AR: most software produce reports grouping outstanding balances in aging buckets such as 0-30, 31-60, 61-90, 91-120 and more than 120 days outstanding
Bad Debt Management
impact healthcare institution's financial performance
monthly monitoring of the outstanding amounts in AR report
determine which patients need to follow up based on the outstanding amount or client's credibility
determine if can set up form of payment schedule for patients who have been unable to pay
get collection agencies to help (fee --> percentage of invoice or amount collected needs to be given)
other means exhausted: institution might consider filing a claim in small claims court
after all means has been used and proven fruitless: institution will write off the amount as bad debt
Debt Management process workflow:
identify outstanding debts from the generated aging report
select debts that need to follow-up (bills more than 90 days)
double check if payment has already been received (paid via external modes) after aging report generation date
pursue the debts using a suitable method (including external collection agencies)
Means of debt collection: reminder letters or dunning, phone calls, collection agency, small claims tribunal
Dunning letter:
usually first reminder in a friendlier tone (remind them if they have overlooked the outstanding bill)
may lead to PR issues if too harsh (legal actions will be taken against you)
patient may have left due to long waiting time at payment counter with no intention of not paying
usually will be a 2nd and/or final reminder to patient (more stern and even the possibility of legal actions against the patient/organisations)
Steps to debt recovery:
set patient alert in system so that the PSA will be alerted and request for payment from patient on next visit
send SMS/reminder letters to patient
contact patient via phone calls
authorised debt collectors
legal approach
an 'unwilling' form of expenses to the healthcare institution's financial account
Bad debt ratio
overall measure of the possibility of the business incurring bad debts
bad debts/accounts receivable
higher the ratio, greater cost of extending credit
cost of extending credit involves:
administrative cost (labour and direct expenses associated with collection of bad debts)
finance cost (cash flow tied up by these receivables, resulting in borrowing to get operating cash)
risk cost (potential that an invoice will never be paid and must be written off)
Instalment plan
some institutions offer for those who have difficulty paying medical bills
such plans are not publicly made known to patient
business office will work out a payment plan for patient (fixed amount of payment or fixed duration)
may allow them to pay outstanding bills via instalment
discuss financing plan with patient for: one off payment, regular fix instalment payment over a period
usually no interest will be charged for such plans
Waiver
Given under various scenarios:
unable to pay the outstanding after exhausting all options (given as goodwill)
lapse in services due to institution's oversight
waive of professional fee by doctors at the doctor's discretion
clinical trials
Supporting documents (waiver form) is needed, all waivers are subjected to approval, it is a form of expenses (revenue lost) to the healthcare institution's financial account
Patient revenue cycle
What?
taking steps to assure that you get paid for what you do and that you get paid in a timely fashion
begins the moment a patient calls for an appointment
managing patient flow
capturing charges
coding them accurately
submitting bills and claims
offering financial assistance when needed
collecting funds from patients and payers
end of cycle when balance of the patient's account is zero (fully paid or written off)
Various phases?
Scheduling/pre-registration: collection of all registration information, including eligibility, benefits and authorisations, prior to the patient's arrival for inpatient or outpatient procedures
Registration: collection of comprehensive set of data elements required in establishing a Medical Record Number and satisfying regulatory, financial and clinical requirements
Coding: process of transforming descriptions of medical diagnoses and procedures into universal medical code numbers based on International Classification of Diseases (ICD). Singapore uses ICD10AM the latest classifications
Charge capture: documented services are manually or electronically translated into billable fees
Claims processing: billable fees are submitted to the insurance company via online or manual claim form for payment
Payment processing: collecting patient balances, making payment arrangements
Payment posting: posting or applying payments/adjustments to the appropriate accounts, including rejects
Denial management: capturing, monitoring, and rectifying on claim denials from 3rd party payer
3rd party follow up: pursue collections from the 3rd party payer after the initial claim has been filed
Areas of measure
must identify revenue improvement opportunities to increase revenue, maximise reimbursement, and decrease write-offs to realise long-term profitability and at the same time improve patient satisfaction
ongoing process where everyone works together to achieve stated goals that can help improve profitability and patient satisfaction
registration accuracy: measurement of the effectiveness of the patient access process within the revenue cycle
denial management: measures overall effectiveness of the revenue cycle as it reflects the impact of processes across the entire spectrum of functions
cash collected as percentage of patient revenue: works in tandem with the patient revenue percentage measure above and the performance of this measure directly impacts the AR days measures
bad debt expense as a percentage of patient revenue: financial management measure + effectiveness of the revenue cycle from both the perspective of POS activities to patient responsibility account follow up and management
A/R days: reflects impact of the processes across the entire spectrum of functions and is reflective of the ability to convert revenue to cash
A/R greater than 90 days: overall efficiency of the revenue cycle reflecting impact of processes across the entire spectrum of functions and is reflective of current collectability of accounts receivable
Key performance indicators
Debt management:
overall KPI would be using AR days
AR days = AR/Revenue * 30 days
KPI (individual clinics): percentage of walk offs
percentage derived by counting all the walk off for the month divided by the number of outpatient visits
Bill management:
measured billing effectiveness daily based on the discharge date
allowed 3 days for billing from date of discharged
eg. if today is 16/5, ideally patients with discharge dates on 13/5 should be billed
Refund transaction: billed date is used as the indicator (all credit balance must be refund within 21 working days after a bill has been final billed
Payment transaction: all payment received via cheque or cash must be posted within the 1 working day
Fund management: all cases billed to Medifund must be paid within 240 days
Service management: all cases billed to self payer must be paid within 240 days