Accounts Receivable

KEY TERMS

Term	Definition
Accepting Assignment	The provider of service agrees or is willing to accept as payment the amount allowed/approved by an insurance company as the maximum amount that will be paid for the claim. After the patient has met the annual deductible, the insurance will pay a percentage of the approved/allowed amount and the patient will have a co-payment.
Accounts Payable	Amounts owed by the practice to creditors for property, supplies, equipment, etc.
Accounts Receivable	A/R. The total amount of money owed to the physician for professional services provided to a patient.
Adjustment	The amount corrected on a patient ledger due to an error or the difference in the amount billed by a practice and the amount allowed by the insurance company for payment of a claim.
Aging Accounts	Analysis of accounts receivable that indicate delinquency of 60, 90, to 120 days.
Appeal	A request sent to an insurance company or other payer asking that a submitted claim be reconsidered for payment or processing.
Assignment	Authorization by a policy holder to allow a third-party payer to pay benefits to a heath care provider.
Collection Ratio	The relationship between the amount of money owed and the amount of money collected.
Conversion Factor	The dollar amount determined by dividing the actual charge of a service or procedure by a relative value.
Co-payment	The amount the insured has to pay toward the amount allowed by the insurance company for services.
Cycle Billing	Breaking the account receivable amounts into portions for billing at a specific date of the month.
Deductible	The amount the insured must pay before the insurance company will begin benefit payments.
Dun/Dunning	A request or message to remind a patient that the account is over due or delinquent.
EOB	Explanation of Benefits. Form accompanying an insurance remittance with a breakdown and explanation of payments for a claim. Also referred to as a remittance advisory (RA).
EOMB	Explanation of Medicare Benefits. Form accompanying an insurance remittance with a breakdown and explanation of payments for a claim.
Fee Schedule	An established price set by a medical practice for professional services.
Inquiry	Checking or tracing a claim sent to an insurance company to determine payment or processing status.
Ledger Card	A record to track patient charges, payments, adjustments, and balances due.
Limiting Charge	Typically applies to Medicare reimbursement. This is the absolute maximum fee a physician may charge a Medicare patient when not accepting assignment on the claim. This fee is set by the Centers for Medicare & Medicaid Services (CMS).
Open Account	Accounts that are subject to charges from time to time.
Posting	A process of transferring account information from a journal to a ledger.
Professional Courtesy	A discount or fee exception given to a patient at the discretion of the physician.
Profile	A list of CPT codes used by a physician with a corresponding fee that is usually calculated and maintained by a third-party payer.
RBRVS	Resource-Based Relative Value Scale. A system of assigning values to CPT codes developed for Medicare to determine reimbursement amounts for services.
Relative Value Unit (RVU)	A method to calculate fees for services. A unit is translated into a dollar value using a conversion factor or dollar multiplier. The assigned value is generally based on three factors: physician work component, overhead practice expense, and malpractice insurance.
Review	Process of looking over a claim to assess payment amounts.
Skip	A patient who owes a balance on the account who has moved without a forwarding address.
Specificity	Using ICD-9-CM codes to the highest degree of certainty. Using fourth and fifth digits, as appropriate, while avoiding over use of the unspecified codes.
Statement	An itemized bill sent to the patient describing professional services provided. A request for payment.
Superbill	A multipurpose billing form to track procedure and diagnosis codes during a patient encounter or visit.
Truth in Lending	An agreement between the patient and the physician regarding monthly installments to pay a bill. A truth in lending statement must be signed when payments exceed a 4-month period.
TWIP	Take What Insurance Pays.
UCR	Usual, Customary, and Reasonable. The reimbursement method that establishes a maximum fee an insurance company will pay for services.
Utilization Review	A process of assessing medical services to assure medical necessity and the appropriateness of treatment.
Withhold Incentive	The percentage of payment held back for a risk account in the HMO program. Withhold arrangements are used to share potential losses or profits with providers of service.

Introduction

Because the reader has achieved a better understanding of insurance carriers, our focus will shift to accounts receivable.

Whether coders have a manual system or a computer, without a basic knowledge of insurance programs, one will not be able to properly credit accounts or collect money from patients.

In this segment, insurance profiles, explanations of benefits (EOB) (remittance advisory), and adjustments or write-offs will be examined.

The following is a quick review of the two types of accounting systems used in medical practices. Regardless of the system used by the practice, the system must accomplish a few basic functions to be effective in ensuring reimbursement.

Insurance Participation

The fundamental aspects of reimbursement consist of learning to read EOB forms and understanding participatory agreements. Perhaps the first issue to be examined is: What does it mean to participate in an insurance program?

The primary element related to this question is that the physician must accept as payment the amount allowed by the insurance company. In other words, the physician must write off the difference of the actual, submitted charge and the insurance carrier’s allowed amount.

EXAMPLE

A doctor bills $40 for a service; however, the carrier only allows $30 for the service. Therefore, the doctor forfeits $10 every time he performs this service for this particular insurance carrier.

The physician’s office must file all insurance claims to the carrier for any services rendered to the patient.

The physician must wait until the carrier makes payment before collecting monies from the patient. The one exception to this rule involves health maintenance organizations (HMOs) and preferred provider organizations (PPOs). With these programs, the patient will have a co-payment based on the individual insurance program. The co-payment amount is usually listed on the back of the insurance card. These co-payments must be collected at the time of the service.

The office is responsible for the timely filing of insurance claims based on carrier determination. Each carrier has a preset time limit during which a claim may be submitted to qualify for payment (e.g., 90 days, 12 months).

The office must write off any incentive pools or withhold amounts per contract agreements. An incentive withhold pool is usually a percentage of the allowed amount that is retained by the carrier to offset operational expenses. Physicians are prohibited from collecting this amount from the patient. However, if the carrier makes a profit during a given time, the carrier will reimburse a portion of the incentive withhold back to the physician.

The physician also agrees to abide by the rules for participation as determined by the insurance carriers. Some of these rules include:

Precertification when necessary

Utilization reviews

Obtaining authorization for service when necessary

Utilizing other physicians who participate with the insurance program

Utilizing hospital and outpatient facilities that participate with the insurance program

Claims Processing Timetable by Carrier

Blue Shield:	6-8 weeks
TRICARE:	3-6 weeks
Commercial:	6-10 weeks
Medicaid:	8-10 weeks
Medicare:
Participating:	19 days
Nonparticipating:	27 days
Electronic:	14 days
Workers’ Compensation:	3-8 weeks