FAMILY HEALTH CARE CLINIC, INC.
Policy & Procedure
ACCOUNTS RECEIVABLE POLICY
Policy No.
Effective Date
0006
01/2010
Page
Revised
1
12/2009
The following policies and procedures are presented in a broad format to be used by Family
Health Care Clinic as a guideline for accounts that are considered to be uncollectible; to establish
authoritative approval process for uncollectible accounts to be written off for financial reporting
purposes only; and to establish a system for monitoring accounts receivable.
Accounts Receivable Process Overview and Objectives:
A. Billing Process Overview and Objectives
1. Provide accurate and timely billing for amounts owed to Family Health Care Clinic.
2. Provide a means of tracking accounts receivable.
3. Provide billing capabilities for various types of receivables.
4. Provide the capabilities for monitoring the aging of accounts receivables, creating
customer billings and statements based on the age of the receivable.
5. Provide internal control procedures and accountability.
B. Billing Event Overview and Objectives
1. Recording the billing event will be performed by Family Health Care Clinic. Family
Health Care Clinic will initiate the data entry, obtain approvals and process the billing.
2. Statements are initiated and ordered at the administrative office and sent to the patient on
a monthly basis.
3. Once the receivable has been incurred, a statement is prepared and sent to be debtor
within 30 days.
4. The claims department is responsible for tracking receivables and will keep records of all
correspondences pertaining to the accounts.
5. The front desk staff is responsible for collecting and updating all billing data from the
patient and the Data Entry department will validating the information from each debtor.
6. Each month a report is prepared for accounts that are over 30 days, 60 days, 90 days, 120
days and older. These accounts are reviewed for further action.
Accounts Receivable Policy
1
FAMILY HEALTH CARE CLINIC, INC.
Policy & Procedure
ACCOUNTS RECEIVABLE POLICY
Policy No.
Effective Date
Page
Revised
0006
01/2010
2
12/2009
7. Inform and notify the debtor of additional fees, charges, and cost that may be incurred for
failure to pay a debt (Fee that will be charged for NSF checks).
C. Billing Receipts Overview and objective
1. Family Health Care Clinic receives the money and credits the appropriate patient’s
account.
2. Deposit the money into the appropriate depository account.
3. Timing is critical.
D. Accounting Procedures overview and Objective
1. Maintain proper segregation of duties such as opening the mail, recording the receipt, and
maintaining the accounts receivable records.
2. A monthly Aged Trial Balance of all accounts should be checked and verified that the
amount equals the balance in the General ledger.
3. Obtain all necessary information of the patient in the event of default.
a. Current home and work address and phone number
b. Social Security and/or Federal Employer Identification Number
c. Name of address of nearest relative or guardian
d. Date of Birth
III.
Collection Process overview, Objective and Policy Guidelines:
The following procedures are very general and broad for the purposes of identifying area
of concerns and general concentration.
A. Collection Process Objectives
To identify delinquent accounts
Accounts Receivable Policy
2
FAMILY HEALTH CARE CLINIC, INC.
Policy & Procedure
ACCOUNTS RECEIVABLE POLICY
Policy No.
Effective Date
0006
01/2010
Page
Revised
3
12/2009
1. To pursue delinquent accounts by creating dunning messages on collection letters
that are tailored to the organization’s needs.
2. To provide an update customer account balance for any collection activity:
a) Payment or NSF checks
3. To provide the ability to write off uncollectible accounts with proper authority
and documentation—debt is still owed to Family Health Care Clinic.
4. To maintain internal controls.
B.
Collection Process
1. Begins 30 days or less after the patient debt is recognized.
2. Message appear on the statement to remind the patient of the amount owed to
Family Health Care Clinic, any payments and/or adjustments made since the last
printed statement.
3. With the proper documentation and approval, write off from the financial
statements any account that is deemed uncollectible according to established
procedures. The debt is still owed to the Family Health Care Clinic.
C.
Collection Follow-up Procedures
1. 30 days after original notice, send follow-up billing statement to patient.
2. 60 days after original notice, send third notice to patient.
3. 120-180 days after original notice, patient record is flagged and debt is written off
with the approval of the Chief Financial Officer. The debt is still owed to the
Family Health Care Clinic.
4. When the patient returns for services, the debt is reinstated and the process begins
with step 1 above of section C.
5. If possible, contact past due patients by telephone at anytime during the collection
process to ensure collection.
D.
Allowance for Doubtful Accounts
Accounts Receivable Policy
3
FAMILY HEALTH CARE CLINIC, INC.
Policy & Procedure
ACCOUNTS RECEIVABLE POLICY
Policy No.
Effective Date
0006
01/2010
Page
Revised
4
12/2009
1. An allowance for doubtful accounts is established to ensure that receivables are
not overstated for financial reporting purposes. The allowance for doubtful
accounts for private insurance and private pay is determined based on charges less
than 120 days. All charges exceeding 120 days are adjusted off. Allowance for
doubtful accounts for Medicaid is based on receivable outstanding more than six
months after a period ends. Allowance for doubtful accounts for Medicare is
based of receivables outstanding more than six months after the period ends.
E. Disallowances—Disallowances for sliding fee scale and contractual discounts to include
provider discounts from third party payers are adjusted at the time of the of the visit
and/or at the time of payment (insurances, Medicaid, Medicare).
IV.
Write-off of Uncollectible Accounts Process overview, objective and Policy guidelines
A. Write Off Objectives:
1.
An authorization to write-off does not constitute a forgiveness of indebtedness.
2. Patient remains obligated to Family Health Care Clinic.
3. Write-off authorizes Family Health Care Clinic to:
a) Transfer an account to a dormant file.
b) Discontinue incurrent the expense involved in collecting the account.
c) Discounting reporting the amount as a receivable on the General Ledger.
4. To encourage proper write-offs on a fiscal year end basis.
5. Family Health Care Clinic will have the ability to write-off an account from the
financial statement when it is evident that it is uncollectible.
6. To report to the Finance Committee for review and approval write offs because
accounts are deemed uncollectible.
B. Write-off Process:
1. The Accounts Clerk will request a summary of accounts be written off from the Chief
Financial Officer.
Accounts Receivable Policy
4
FAMILY HEALTH CARE CLINIC, INC.
Policy & Procedure
ACCOUNTS RECEIVABLE POLICY
Policy No.
Effective Date
0006
01/2010
Page
Revised
5
12/2009
2. Amounts over $100,000 required additional approval from the Finance Committee of
the Board of Directors.
3. A request of to write off an receivable must include the following information:
a) The name and address of the patient.
b) The age of the account
c) The nature of the amounts owed
d) The collection efforts that have been made
4. Approved write-off must be included in the Quarterly Accounts Receivable Report
and retained in a dormant file and removed from current records.
5. For payments received on the account written-off, only the amount received is reestablished.
C. Write off Criteria
1. The amount is uncollectible.
2. The write-off will not prejudice the position of the organization.
3. All reasonable collection efforts have been exhausted.
4. The patient cannot be located or a discharge of bankruptcy has occurred.
5. The applicable statute of limitations for collection of debt has expired.
6. The patient is deceased
V. Debt intercept or Offset Process Overview, Objective and Policy Guidelines
A. Warrant Interception
1. A patient is receiving a payment from an insurance company, a request is made by the
Patient Information Director to intercept the payment for the past due amount from
the Chief Financial Officer, the amount is applied to the past due amount, and the
difference is sent to the patient.
Accounts Receivable Policy
5
FAMILY HEALTH CARE CLINIC, INC.
Policy & Procedure
ACCOUNTS RECEIVABLE POLICY
Policy No.
Effective Date
Page
Revised
0006
01/2010
6
12/2009
B. Revenue Recapture
A patient making a payment on current charges with write-off, the payment will be
intercepted and applied to the old balance in the amount of the payment. An amount
equal to the payment will be brought forward and the payment applied to this amount.
The current charges will become an outstanding balance unless paid on at the time of the
visit.
D. Employee Balances
a. Every effort will be made to make arrangements for payments with employees. If
this is not achieved, Family Health Care Clinic reserves the right to collect money
owed through payroll deductions through garnishments.
VI. Quarterly Reporting on Accounts Receivable Overview and Policy Guidelines
A. Objectives
1. To establish a report that shows accounts receivable balances and activities during the
quarter.
2. To ensure the quarterly report is consistent and as accurate as possible.
3. To have uniformity of reporting.
B. Procedures for Quarterly Reporting
1. Quarterly Activity
a) Beginning Gross Receivables
b) Adjustments
c) Billings for quarter
d) Collections for quarter
e) Write-offs for quarter
f) Ending Gross Receivables
Accounts Receivable Policy
6
FAMILY HEALTH CARE CLINIC, INC.
Policy & Procedure
ACCOUNTS RECEIVABLE POLICY
Policy No.
Effective Date
Page
Revised
0006
01/2010
7
12/2009
g) (Less) Allowances
h) (Less) Disallowances
i) Collectible Receivables
2. Aging of Receivable
3. Collections Activity for Receivable over 180 days
4. Write-Off Disclosure
5. Comparison of Current Quarter to Prior Quarter
a) Categories of comparison should be Ending Gross Receivables, Authorized
Write-offs, Accounts over 180 days rather than major revenue sources.
b) Explanation given for each comparison variance on the bottom of the page
designated as “Explanation” for each category listing is 6b above.
c) The other columns titled respectively are Current Quarter Receivables, Prior
Quarter Receivables, Increase/Decrease Amount, and Percentage of Change.
6. At this time a comparison is prepared for each quarter
7. Annual Comparison of Receivables would be the same as the current with annual
columns instead of quarterly column.
Accounts Receivable Policy
7