Practice Management Alert

Let's face it: Bad things happen to good people, and in some cases that bad thing is outstanding debt. And if your billing office doesn't handle bad debt correctly, it could cause serious accounting and public relations problems, not to mention legal headaches.
 
All medical practices should have a bad debt policy laid out in their financial policies and procedures, urges attorney Wayne J. Miller, Esq. with the Compliance Law Group, a health care law firm in Woodland Hills, Cal. "This is important because it sets the financial, reimbursement and business parameters by which the practice may properly 'write off' or waive all or a portion of an account," he explains. Your practice's policy should address each of the following issues:

 

Criteria for "bad" debt. Make sure your policy clearly states the reasons and circumstances under which you would consider a debt to be "bad," Miller instructs. Remember, Medicare and other payers generally do not allow providers to routinely write off debt, so you must have good reason to do so. Justifiable reasons for a write-off include uncollectible accounts and charity care cases. On the other hand, payers frown upon practices that routinely waive patient copays and deductibles. "This practice could result in reimbursement challenges and even fraud and abuse claims," he warns.

 

Collection efforts. Your policy also should outline the exact steps your practice will take to collect a debt before it's written off as uncollectible, Miller continues. Decide how many invoices you'll send, how many calls you'll make, when and if you'll send the account to a collections agency, etc. This is a practice-specific determination, but consultant Marvel Hammer, RN, CPC, CHCO, president of MJH Consulting in Denver, Col., suggests sending three written invoices and then following up with three phone calls.

 

Charity care provisions. Sometimes a debt goes bad because the patient has met the requirements for financial hardship and is legitimately unable to pay. Thus, your policy "should outline as clearly as possible when the practice may extend 'charity care' to patients who have demonstrated financial inability to pay their share of the bill," Miller notes. (See sample policy on providing charity care.)
 
Once you determine a debt is bad and send it to collections, don't forget to indicate that activity with a code on your books, Hammer reminds billers. After all, there's no sense in having a non-collectible account have a negative effect on your accounts receivable, she notes.
 
Also, when you send an account to a collections agency, tack on an extra charge for the patient, Hammer counsels. The agency is going to charge you a percentage, so by adding this charge onto the patient's account, you'll still receive the full payment, she explains. Of course, you must clearly state this rule in the financial policies you provide to patients at their first visit.
 
Tip: Take a close look at your bad debt from time to time as a learning tool, Marvel advises. "Looking at the size of bad debt can give an indication of where you might have a breakdown in the billing process," she explains. For example, if the debts all are fairly small in amount, it could be an indication that your practice isn't collecting patient copays.