Question and Answers

We have created a new section in our newsletter to share our questions and answers from our clients or questions we ask of our peer-network for our clients. We hope you find these as helpful! These questions have been shortened and removed de-identified.

Question 1: “I have a question in regards to 501r and the requirement of not asking for payment of prior balances at the time of registration and advice”

Answer 1: The trick comes down to determining “emergency or medically necessary”.

Here are the three ways that I know people are asking for money:

1. Some registration areas you may be able to classify as “non-emergency or medically necessary” with a policy to allow them to request money on past balance.
2. I have heard some facilities are asking the question “is this appointment an emergency, medically necessary, preventive, or just an illness” and if the patient answers is “no” they document, then they ask for the past due balances.
3. Finally, you can ask for money on past due balances if you immediately offer financial assistance application and offer to help them fill it out.

Question 2:
“I have a question on returned mail as it relates to the 501r requirements for ECAs. It has come up recently that a statement was returned and per how we currently Epic working is that if returned mail send to bad debt approval Work-queue.

Per our policy, we have language regarding the guarantor’s responsibility of providing the correct mailing address but don’t specifically refer to it as returned mail as the indicator that we don’t have a correct mailing address. Do you think we are ok to send the accounts to collections upon the first returned mail (per our policy) assuming it is past the 120 days from the first post-discharge statement?”

Background: Americollect has recommended adding, (It is the patient’s obligation to provide a correct mailing address at the time of service or upon moving. If an account does not have a valid address, the determination for “Reasonable Effort” will have been made.) to the billing and collection policy to address statements and final notices that are mail returns.

Answer 2: Yes.
1. You are following your policy.
2. Americollect has built controls in place to ensure that we wouldn’t do ECA (specifically credit bureau reporting) until 120 days after the first statement. We do this by using the Epic data file and extracting the date of patient responsibility, date of last payment, or date of service and correctly add the additional number of days to each one of those accordingly.

Question 3: XYZ Health is also looking at using our collection prediction score to cancel accounts off as presumptively eligible for financial assistance. The question is when to presumptively qualify. Their controller is having issue with writing off the account as bad debt (accounting wise) and then reversing from bad debt and then applying financial assistance to rebuckets for accounting.

Would you mind sharing if you actually reverse the bad debt accounting bucket and then reapply as financial assistance accounting wise. And then a follow-up, what do you do when the “books” have closed for a year?

Answer 3:
Yes, we do just that! The account is originally written off to bad debt. Upon reclassification (per policy definition), the account has a negative transaction posts to bad debt and the balance is moved to charity care on the general ledger. These are not prior period adjustments. They are run through current period as the change is based on current information that was not known at the time of the write off (and in some cases, circumstances have changed, such as the guarantor is deceased).

Here was the background provided as part of a memo/documentation to our controller for our change in policy in 2013. Whether the accounts are processed through the revenue cycle system or just as a general ledger transfer would depend on the age of the accounts.

HFMA Guidance:
Bad debt results from the unwillingness of a patient to pay, whereas charity service is provided to a patient with demonstrated inability to pay. HFMA’s P&P Board Statement 15, Section 4.1 advises that “in some cases, [charity] eligibility is readily apparent, while in other cases, investigation is required to determine eligibility, particularly when the patient has limited ability or willingness to provide needed information.” [Emphasis added]

In cases where the patient never requests financial assistance, or is unwilling/unable to provide the needed financial information, the account defaults to bad debt. However, section 4.3 of the P&P Board Statement states, “Commencement of collection efforts does not alter the patient’s financial status. A provider’s collection efforts, including the use of outside collection agencies, are part of the information collection process and can appropriately result in identification of eligibility for charity care.” [Emphasis added]

Do you need advice or have advice on these topics? Write us at and we will share.

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