Billing and Collections
LEARNING OBJECTIVES | PROCEDURES |
1. Describe the process of billing and collections. | Process patient bills. |
2. Describe problems that can occur when patients pay by check. | Post a “non-sufficient funds” check. |
3. Explain how to adjust patient accounts for an overpayment and process a refund. | Process a credit balance. |
Process a refund. | |
4. Develop a collection system. | |
5. Identify past due accounts and the actions needed. | Create and examine an accounts receivable aging record. |
6. Describe the information to include in a collection letter. | Write a collection letter. |
7. Identify legal requirements that affect collections for the medical office. | |
8. Describe special circumstances affecting collections in the medical office. | Post a collection agency payment. |
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 only1 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).
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 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).

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