Bad debt can be a bottom-line buster
July 1, 1999
Bad debt can be a bottom-line buster
Here’s a quiz to gauge your effectiveness
By Reed Tinsley, CPA
With what seems like a continuous decline in physician reimbursement, it is imperative that practices collect every dollar they are entitled to. But we all know that doesn’t always happen, so mechanisms and systems need to be in place to avoid bad debt situations as much as possible. The following is a bad debt control checklist you can use to assess whether a medical practice is prepared to minimize its bad debts. Any "no" answers should be investigated immediately, followed by recommended solutions.
1. Do written guidelines exist on the collection of self-pay accounts? o yes o no
Every practice should have written guidelines to show its employees how to collect self-pay and patient-pay accounts. Those are accounts for which the patient might not have insurance or the amount shown is the figure the patient owes after his or her insurance has paid.
2. Are collection guidelines reviewed and revised periodically? o yes o no
Medical practice in today’s environment does not remain constant, and neither should the internal policies of a practice. This is especially true of collection policies, which should be reviewed and revised periodically. For example, many practices formerly refused to press patients for payment of their overdue accounts for a variety of reasons; but with insurance reimbursement declining, that type of policy may have to be reconsidered.
3. Are collection guidelines clear, concise, and sufficiently detailed to serve as a working reference to personnel? o yes o no
You want an understandable document that clearly outlines employees’ duties. This not only minimizes training time but provides employees with a guide they can refer to on an ongoing basis.
4. Do business office personnel receive formal training on collection guidelines before beginning work? o yes o no
Upfront training can prevent and even eliminate many of the day-to-day problems that occur within the practice. Don’t just throw employees into the water and assume they can swim. The good practices take time to train their employees as soon as they start work and then on an ongoing basis thereafter.
5. Do employees receive formal training on collection guidelines after any revision or, otherwise, at least annually? o yes o no
Here is the main point about a guideline: Do the employees follow it? Employees are almost always going to tell you that they do, but what are the actual results? Are the guidelines really working? There must be a continuous assessment to ensure they are working and effective.
6. Does management solicit employee suggestions for changes in policies and procedures? o yes o no
The best practices constantly solicit employee feedback. Listen to your employees — they often have good ideas on how to improve various aspects of how the practice operates.
7. Do exceptions to approved guidelines require the approval of management on a case-by-case basis? o yes o no
If a guideline is implemented, it should be followed to the letter. However, there may be situations where the policy cannot or should not be followed. But this is not a decision for employees to make. Exceptions should be reviewed and approved by management before such action is undertaken. Make sure the exception is properly documented.
8. Do self-pay guidelines allow monthly payments on certain accounts? o yes o no
A sound bad debt policy will allow patients to make installment payments on their accounts. Just make sure there is a review mechanism in place to ensure the patients allowed to make payments are actually making them every month.
9. Do self-pay guidelines specify the maximum number of payments that will be accepted?
o yes o no If so, how many?
The installment policy should be fair to both patient and practice. Allowing patients to pay $5 a month until their balance is paid off really creates collection hassles for the practice. Set a reasonable length of time for time for patients to pay off their accounts.
10. Do self-pay guidelines specify the minimum monthly payment amount that will be accepted? o yes o no If so, how much?
The minimum amount to pay should tie in with the maximum allowed length of time patients are allowed to pay off their accounts. Of the two, the maximum number of payments allowed is the most important. Fit and set the payment amount within this guideline.
11. Do collection guidelines specify what action should be taken if a patient misses a payment? o yes o no If so, describe the policy.
The point to be made here is to set a policy and stick to it. If the policy is to turn the patient over to collection if two consecutive payments are missed, then make sure this policy is adhered to. If exceptions are made, make sure they are made with management’s approval.
12. Does management support the collection guidelines, even when a patient complains? o yes o no
It is useless to implement a policy and then have the doctors not follow it. There must be a buy-in to the guidelines by every doctor within the practice. In other words, they must support them. If not, policies and guidelines end up becoming a joke.
Employees also get confused about how to implement policies and guidelines when the doctors and administration tell them different things.
Reed Tinsley, CPA, is shareholder in charge of Horne CPA Group’s Houston office and an editorial advisory board member of Practice Marketing & Management. He can be reached at (713) 975-1000.
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