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CHAPTER

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

McGraw-Hill

13

Accounts Receivable Follow-up and Collections

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

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

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

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

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

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

Teaching Notes: There are a lot of key terms, but many of them might already be familiar to your students. Give a pop quiz of the terms to see how many students know. Grade the quiz in class and use the results to focus your lecture on terms that most or all students missed.

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

13.1 The Importance of Collections
from 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.

Learning Outcome: 13.1 Explain why it is important to collect overdue balances from patients.

Teaching Notes: Since members of the practice’s staff may be asked to work with patients to aid in collections, have students role-play some customer scenarios in which they try to obtain payment from a past-due patient.

Have students brainstorm some ways a practice could cut down on the number of collections they experience.

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

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.

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

Teaching Notes: Ask students how a clear financial policy will make collecting payments less problematic.

Explain that it is acceptable for a practice’s financial policy to stipulate the addition of finance charges on past-due payments, as long as the finance charge penalty complies with state and federal law.

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

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.

Learning Outcome: 13.3 Describe the procedures followed to identify overdue accounts.

Teaching Notes: Explain that many practices send an outstanding bill to collections after 90 days; the text mentions that some practices send to collections as soon as 30 days out. Why might this be the case? Is there an advantage to sending a bill to collections sooner? Later?

Have students complete Exercises 13.1 and 13.2.

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

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

Learning Outcome: 13.4 Identify the major federal laws that govern the collection process.

Teaching Notes: Go through the best practices for contacting patients on page 647 of the textbook; elicit student feedback on the fairness and completeness of the points.

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

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

Learning Outcome: 13.5 Explain how letters are used in collecting overdue payments.

Teaching Notes: Direct students’ attention to Figure 13.16 in the textbook to showcase an account which has been flagged.

Have students draft a sample collection letter to a patient; use the letter as a springboard into discussion. Is it an advantage or a disadvantage to have MNP generate automatic collection letters? Why?

Have students complete Exercises 13.3 and 13.4.

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

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.

Learning Outcome: 13.6 Explain payment plans.

Teaching Notes: Practices’ payment plans may be regulated by date, frequency of payment, or amount of payment. Usually, the amount of the debt plays a role in figuring out a payment plan.

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

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

Learning Outcome: 13.6 Explain payment plans.

Teaching Notes: Ask students to discuss why it is important to have regulations surrounding payment plans and collections – if a person owes money to a practice, shouldn’t the practice be allowed to set its own policies? Discuss how discrimination might be shown to one of the classes protected under the ECOA.

Have students complete Exercise 13.5.

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

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.

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

Teaching Notes: Ask students why an office staff member would no longer contact a patient whose accounts have been turned over to collections.

Have students complete Exercise 13.6.

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

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

Learning Outcome: 13.8 Describe the procedures for clearing uncollectible balances and small balances from patients’ accounts receivable.

Teaching Notes: Discuss the impact an uncollectible account would have on the financial strength of a practice.

Define each of the situations/terms on Slides 14-15 and provide examples of each; ask students to debate which situations could be most easily addressed or mitigated.

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

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.

Learning Outcome: 13.8 Describe the procedures for clearing uncollectible balances and small balances from patients’ accounts receivable.

Teaching Notes: See notes on Slide 14; have students complete Exercises 13.7, 13.8, and 13.9.

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